USD to be Quiet Until Friday

UK Manufacturing Production and GDP to Hog the Limelight; USD to be Quiet Until Friday

The greenback gained ground versus all of the G10 currencies, out of the Australian dollar and the New Zealand dollar. The two commodity currencies are under heavy pressure on the back of the falling oil while the single currency was slightly lower versus the majority of the other G10 currencies on Monday and early Tuesday.

The strong U.S. Non-Farm Payrolls report provided support to the USD pairs but failed to push the dollar higher amid China's stock turmoil and the plunging oil prices. The next scheduled significant fundamental update for the greenback is the retail sales due to Friday, until then, no major changes are expected.

Following the ECB announcement of the fresh stimulus measures the first days of December, the EUR/USD pair is traded in a sloping short-term channel between 1.1060 and 1.0710. I would expect the pair to test again the 1.0700 support level and if the bears manage to push the price below the aforementioned level, the paths for further depreciation will open. Alternatively, a break above the 1.0950 will signal further appreciation towards 1.1060.

GBP ahead of significant economic releases
The British Pound rose against the most major currencies on Monday and Tuesday overnight, despite the absence of fundamental news. The “Brexit” campaigns for the referendum that is scheduled to take place later in the year started to concern the investors. The rest of the week contains significant news for the British pound. Today, the industrial and manufacturing production for November will be released followed by NIESR GDP estimate for the three months to November and a speech of the BoE Mark Carney.

Both indicators of production will be closely watched as the sectors are important for the domestic economic growth. The two sectors started to pick up in August, after weakness the sectors faced the first half of 2015 that increased in August. On a yearly basis, the industrial production is expected to grow on the same pace as before at 1.7% in November while the manufacturing production is predicted to reveal a bigger contraction than before, of 0.8% from 0.1% in October. No forecasts are available for the NIESR GDP. However, I would not expect the figure to be extremely different of the last releases which were around 0.5%. Later in the day, the BoE Governor Mark Carney will speak in Paris at a Farewell Symposium, but he is not expected to comment on economic issues.

The GBP/USD pair is traded in a steep downtrend the last month without any reversal indications yet. The pair managed to close the week below the 1.4560 level, making stronger the bearish perspective. Even though the pair may the pair may experience some consolidation in the next days, the bears will continue to be the dominants. After the temporary consolidation, I would expect the pair to drop further towards the next main support level at 1.4200. As long as the greenback gains momentum against the other G10 majors, further declined are ambushing. On the other hand, if we see an extended rally above 1.4950, we could say that the bulls took the upper hand over the trend.

USD/JPY – Technical Outlook
The USD/JPY pair had been in a consolidation between 123.70 and 122.20 in November. A decisive break below the lower boundary of the range was the beginning of a strong sell-off. Even though, the bulls managed to push the price back to test again the 123.70 level, they failed to sustain the price around there. The U.S. dollar depreciated more than 5% the last month and is currently found support slightly above 116.50, where I would expect the pair to rebound towards the resistance level at 120.00 and in a longer-term perspective to head towards 124.00.

U.S. Indices didn’t close with losses
After significant weekly losses, the three U.S. indices managed to close the first trading day of the week without severe losses. The Dow Jones industrial average ended the day positive with gains of 0.32% and the S&P500 0.09% up. The Nasdaq Composite was down 0.12%. The worst performed sector was the energy sector again as the stocks related to energy fell by 2.14% overall. The materials related stocks followed plunging by 1.70%.

Economic Indicators
The UK manufacturing and industrial production for November will have an impact on the GBP cross pairs, as well as the NIESR GDP estimate for the three months to November that will be published later in the day. The industrial and the manufacturing sectors started to pick up in August, after weakness the sectors faced the first half of 2015 that increased in August. On a yearly basis, the industrial production is expected to grow on the same pace as before, at 1.7% in November while the manufacturing production is predicted to reveal a bigger contraction than before, of 0.8% from 0.1% in October.

Later in the day, the BoE governor Mark Carney will speak in Paris at a Farewell Symposium, but he is not expected to comment on economic issues.

Going to U.S., the JOLTS Job Opening in November are expected to increase slightly. The domestic economic optimism for January will be also out. During the night, China will release its detailed trade balance data.