The common currency traded marginally higher last week and extending the gains this week, too, amid weak local macro data. It has managed to hold near its crucial support of 1.0990 levels.

As said earlier, the support zone has held firm, still keeping momentum in favor of the dip-buying strategy. Market sentiment has improved on US-China trade developments.

“An agreement in the trade conflict between the USA and China is appearing more likely too,” ZEW President Professor Achim Wambach said.

UBS said, “There were “constructive” US-China trade discussions on Saturday. Apparently, some members of the US administration actually work on a Saturday or at least take phone calls. This is not enough to excite markets. There is an assumption of a Phase 1 deal – the timing and the scale are what matter now.”

We are more constructive bearish on the USD than bullish on the euro. This factor eventually supports the euro to perform better into the year-end against the USD.

Data review: Economic data prints in the eurozone were mixed

According to the official release, the ZEW Indicator of Economic Sentiment for Germany has increased substantially in November 2019. Currently, the index is standing at minus 2.1 points; the indicator climbed 20.7 points compared to the previous month, ZEW reported.

In September 2019 compared with August 2019, seasonally adjusted industrial production rose by 0.1% in the euro area.

The other data the euro area annual inflation rate was 0.7% in October 2019, down from 0.8% in September, according to the euro stat.

Data preview:

This week’s economic calendar is light at the beginning of the week. There is nothing to excite the common currency traders in terms of data releases. However, things rapidly pickup from Thursday with ECB minutes and Flash Manufacturing and Services PMI on Friday. Traders also focus on ECB President Christine Lagarde’s speech at the European Banking Congress in Frankfurt.

Scotia Bank said, “ECB President Lagarde will be speaking after the PMIs. She will also have in hand fresh Q3 German GDP revisions from the day before that still pose the risk of tipping into a technical recession, and that will inform assessments of the quality of growth drivers. Germany’s first-round release of GDP figures only reports top-line growth and leaves the details until later.”

TECHNICAL OVERVIEW

The week ahead, the common currency seems to be in a consolidation phase after developed a multi-top formation that began in mid-Oct. The key level within which the price is trading is 1.0925-1.1200.

Immediate resistance located at 1.1100 above here focus shifts to 20MA (Weekly) is at 1.1210, which, along with 1.1200, is acting as a key resistance level. On the downside, a break below the 1.0990 level may trigger losses towards 1.0950 before 1.0925.

The daily indicators given a mixed outlook as the stochastics improves, however, look set for a buy signal, especially the RSI is recovering.

 

View: Upside risk for November

It is important to always keep in mind the risks involved in trading with leveraged instruments.

A question? Let us help!

A KTM Analyst is ready to assist you, click on the comment section below