Expert commentary
“Commodity prices will continue to escalate”
– Gunther Rehme
In continuation of our Friday’s topic on commodity markets, Dukascopy has interviewed another expert in the financial markets field, Günther Rehme, Assistant Professor of Economics at Technical University Darmstadt, Germany. During the talk the Porfessor has provided the forecasts for the commodity markets and recommendations for the investors.
Read full report here.
Fundamental market overview
EUR
Spanish 10-year national bond yield peaked back breaking 6% first time in 3 months, reaching 6.07%. Premium required by investors to provide financing for Spain exceeds price demanded from Germany by 4.25 percentage points. According to Nick Stamenkovic, RIA Capital in Edinburgh, economist, it seems investors are changing their direction towards Spain.
USD
In October retail sales in US increased by 0.5% or 0.2 percentage points more than predicted. The main contribution to growth came from demand for motor vehicles and iPhones. In electronics industry purchases experienced most rapid growth since 2009. According to Millan Mulraine, TD Securities senior strategist in New York, an increase in retail sales is indicating that consumers do not expect economy to fall in recession.
GBP
According to data released, UK inflation in October eased more than expected reaching 5% or 0.1% percentage point below forecast. Mervyn King, Governor of Bank of England said that inflation is likely to keep slowing down in upcoming months, however, its pace and extent is hard to predict. King pointed out that Bank of England purchases bonds for a second month in a row to stimulate recovery and is ready to respond to any changes in economy associated with inflation.
JPY
Japan decided to join US-Pacific free trade negotiations, and this decision was highly welcomed by US President Barack Obama. He said on a speech that this partnership would deepen economic bonds between the two countries and improve the overall cooperation within the region.
CHF
Official SNB exchange rate for EUR/CHF is at CHF 1.2398 today; 3-month LIBOR CHF remains at 0.05% (within target range of 0.00-0.25). Yields for 10-year Swiss Confederation bonds declined to 0.90% today. SMI stock index has gained 0.01% since opening bell, and is currently fluctuating around 5664 points.
Read the morning report here.
Market expectations
EUR/USD
Daily maximum: 1.3640
Daily minimum: 1.3512
The single European currency moved lower today after the German ZEW Economic Sentiment index has been released at -55.2 versus estimated -51.8, suggesting that the German economy might slow down in the short-term. This potential outcome spook investors, who pushed the pair lower to 1.3512, leaving the market mean at 1.3664 intact.
Therefore, support 1 at 1.3540 has been breached, suggesting the next support lines at 1.3456 and 1.3238 might be tested next, whereas the resistance (1.3758; 1.3892; 1.4410) levels stood firmly today. The daily trading outlook is strongly bearish.
EUR/JPY
Daily maximum: 105.56
Daily minimum: 103.99
The pair moved lower today after disappointing data from Europe has been released and the Japanese national economy returned to growth in the third quarter this year, thus EUR/JPY breached the market mean at 105.37 while moving downwards.
Resistance (106.23; 107.44; 109.38) levels remained intact today, while a breach of support 1 at 104.29 paves the way to support 2 (103.55) and 3 (101.60), respectively. Meanwhile the daily market stance is strongly bearish.
GBP/USD
Daily maximum: 1.5931
Daily minimum: 1.5813
GBP/USD slipped today after lower than expected CPI and RPI data release, suggesting the economic recovery is still fragile. The market mean at 1.5945 remained untapped.
While resistance (1.6023; 1.6167; 1.6378) lines might be tested if bullish reversal occurs, a pierced support 1 at 1.5821 exposes support 2 at 1.5745 and support 3 at 1.5534 to be tested next. Meanwhile, the daily market bias is bearish.
USD/JPY
Daily maximum: 77.48
Daily minimum: 76.91
After the market mean at 77.05 has been touched, the Japanese yen eased today as the national economy posted a positive growth in the third quarter.
A breach of resistance 1 at 77.29 clears the way to the last two resistance levels: 77.50 and 77.96 respectively; none of the support (76.84; 76.60; 76.14) levels has been breached. The daily outlook is strongly bearish.
USD/CHF
Daily maximum: 0.9177
Daily minimum: 0.9082
The American dollar added to gains today versus the Swiss Franc after strong CPI data, suggesting household gaining higher income which allows them to spend more. As a result, the market mean at 0.9056 remained untapped.
All support (0.9000; 0.8915; 0.8784) levels were not hit today, at the same time only the third resistance level at 0.9308 might be tested by bullish investors. The daily trading signals remain strongly bullish.
Daily highs and lows are calculated till 16:00 GMT.
Read the morning report here.
Most important events of the day
U.S. retail sales rose broadly in October, suggesting the economy started the fourth quarter with some vigor, and the first drop in wholesale prices in four months pointed to subsiding inflation pressures.
Japanese regulators appear to be trying to regain the trust of investors unnerved by a scandal engulfing Olympus, with a formula that would punish the executives responsible harshly but let the once-proud firm stay listed on the stock market.