FX.co ★ Fundamental review for November 1, 2013

EUR/USD.

Last Thursday against the expectations on strong data on Germany which could have stopped the decline of the euro, German data was weak. Retail Sales in Germany is September dropped 0.4% vs. forecast for a 0.5% growth; August’s data was revised from 0.5% to -0.2%. GfK Consumer Confidence in October was 7.0 vs. forecast for 7.3 and 7.1 in the previous month. However, data on Consumer Price index in the Eurozone in October (in the preliminary estimate) was 0.7% vs. 1.1%. That is the inflation dropped and the Swiss bank UBS has made immediately the forecast that the ECB would slash the rate even in November against forecast for trimming in late 2015. JPMorgan and BNP Paribas are expecting the rate will be reduced in December. The ECB had expressed the opinion that it is ready to reduce the rate any time, however, now there are issues the investors should worry about. Finally the unemployment rate in the Eurozone rose 0.2% from 12.0% to 12.2%. Chicago Purchasing Managers Index in October was 65.9 vs. 55.7 in September. The euro dropped 150 points.

Today at 18:00 UTC+4 US ISM Manufacturing in October is published, forecast 55.3 vs. 56.2 in September. However, taking into account strong growth of the Chicago Purchasing Managers index we may assume the growth of the whole index.

The technical corrections of the price are possible, but on the whole we expect decline to the target range 1.3450/80 and then to 1.3385.

GBP/USD.

Yesterday the British pound was not affected by the data from the Eurozone. The currency dropped just 1 point. However, today the British currency may reinforce the decline, as published at 13:30 UTC+4 UK PMI Manufacturing in October is expected to drop from 56.7 to 56.3. At 18:00 UTC+4 ISM Manufacturing PMI in the US in October is revealed, forecast 55.3 vs. 56.2 in September, but we expect the data will be better than forecast and the pound will continue declining.

USD/JPY.

Yesterday in the Bank of Japan report on the economic outlook and inflation was released. It was said that Japan’s GDP for 2014-2015 financial year would grow up to 1.5% (revised from 1.3%), by the end of 2014 inflation will reach target 2%. Meanwhile, bank’s head Harihudo Hiroda underlined that if the target economic figures were not reached, the Central bank would interfere. The bank looks optimistic at the restoration of the global economy. The only risk which considers the bank for the economy is the elevation of sales tax.

However, the major influence on the rate of the yen, which forced it to drop 20 points, was done by the dropping stock market; being under the pressure of the US stock market Nikkei225 lost 0.7% and today it was the same. It is obvious that until the external pressure does not fall, the yen will be in a horizontal trend.

On Monday, it is a holiday in Japan. Next Friday data on foreign assets purchases by the Japanese investors will be published, it will show the balance of the US dollar to the yen.

We expect the decline to the range 97.60/75, in case of its continuation, the test of support of the graphical triangle to the area 97.20 is possible.