Date: 02 Nov 2018

German Finance Ministry said yesterday that they are closely monitoring potential risks from euro clearing post-Brexit as the European Union (EU) negotiators have floated a tentative Brexit plan to avoid a hard border on the island of Ireland and to give Britain stronger guarantees that a customs border would not be needed along the Irish Sea.

The Italian budget storm still hangs in the air as the European Union (EU) threat to sanction Italy with a substantial fine over its budget proposal. At the same time, an Italian economist has criticized the EU sanctions as a “little thing” in comparison with the economic growth Italy will experience because of the new measures.

The preliminary consumer price index (CPI) in the Eurozone rose to 2.2% year-on-year in October compared to the 2.1% rise registered in September and consistent with analysts’ estimates of 2.2%. It is the highest inflation rate since December 2012 boosted by higher prices of services, energy, processed food, and industrial goods. A high reading anticipates a hawkish attitude by the European Central Bank (ECB), which is seen as positive for the EUR, on the other hand, a low reading is perceived as negative.

The US ADP National Employment Report showed that the private sector employment increased to 227K jobs in October, comparing to the downwardly revised 218K registered in September. A higher than expected reading should be seen as positive for the USD, while a lower than expected reading should be taken as negative for the USD. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally adjusted basis. The data can also be considered as a prelude of tomorrows’ government nonfarm payrolls numbers.

Since the beginning of 2018 until last Thursday close, the EURUSD remains negative with a loss of over 5.0% and ended October underwater with over 2.5% loss. Nonetheless, the weekly stance is relatively flat with a minor gain of 0.04% and on the daily time-frame, the currency pair closed in the green with 0.8% gain. Furthermore, the EURUSD remains in a bearish phase since early October.

On yesterday session, the currency pair skyrocket with a wide range and closed near the high of the day, in addition, managed to close above Wednesdays’ high, which suggests a strong bullish momentum.

The stochastic is showing an oversold market with a reading of 14.57 which potentially indicates that the downward trend might pause for a while, however, these oscillator readings are not necessarily bullish until it breaks above the 20 level.

The MACD histogram (OsMA) indicator is setting higher lows while the price is making lower lows, signs of a potential bullish divergence. In this case, the bullish divergence suggests a possible trend reversal to the upside.

In late September, the single currency did not have the strength to continue pushing upward and stalled at 1.1815 where it began a downward correction that paused for a brief moment until mid-October before resuming its downward trend. On the last day of October, the EURUSD was tested

Year-to-date low at 1.1300 where it found enough support to push it back up on a strong daily rally.

Seems that the current rally as room to enough to manoeuvre up to 1.1555 where it stands the top range of a daily resistance and the 50-day moving average that should act as a dynamic resistance.

 

Watch out today:

On Friday at 12:30 GMT (7:30 AM ET) The US Department of Labor will release the nonfarm payrolls data for October. Analysts are expecting a rise to 190K compared to the previous reading of 134K registered in September. This data represents the number of new jobs created during the previous month, in all non-agricultural business.

 

EUR/USD Daily Candlestick Chart

EUR/USD Daily Candlestick Chart

 

Written by Hugo O’Neill, External Analyst

 

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