The GBP/USD pair fell to an intraday low of 1.5045, before ending the day on a weak note at 1.5054. The economic calendar in the UK and US was empty and hence pair was the mercy of the overall demand for the US dollars, which spiked in Europe as traders priced-in an increased possibility of the Fed liftoff following Friday’s upbeat NFP report.
Awaits UK industrial and manufacturing production data
UK industrial and manufacturing output numbers is scheduled for release today at 09.30GMT. Both, the industrial production and manufacturing production, are expected to stall in October. In annualised terms a minor improvement is expected.
Manufacturing accounts for about a tenth of the economy. Of late, both manufacturing and service sector PMIs have cooled significantly. However, the manufacturing PMI had spiked in October an acceleration in output growth and an increase in new orders. The headline figure in October was the best since June 2014. Hence, there is a possibility of a better-than-expected manufacturing production number hitting the wires today.
Technicals – Increased odds of a bullish move
Sterling’s 250-pip rally from Wednesday’s bottom, followed by a minor 100-120 pip correction (stalling near 50% fib retracement of the 250-pip rally at 1.5027 in Asia today) indicates the GBP bulls may make a comeback in Europe and take the pair higher to 1.51-1.5115 (50% of 1.5336-1.4895). A break higher could see the pair test 1.5159 (Thursday’s high). On the other hand, only a break below 1.5027 (50% of 1.4895-1.5159) would shift risk in favour of a break below 1.50 and re-test of 1.4957 (76.4% Of 1.4895-1.5159).
EUR/USD Analysis: China-led risk off could support EUR
The EUR/USD pair dipped to an intraday low of 1.0796 on Monday as the USD advanced across the board as Friday’s upbeat NFP convinced markets that the Fed would rate rates at its December 16th meeting. The rally in the European stocks also added to the bearish pressure on the EUR in Europe. However, the sharp drop in crude prices to fresh multi-year lows and the resulting losses in the US equities helped the EUR/USD pair trim losses to close at 1.0837. The pair now trades at 1.0855 levels.
Weak China could rattle European stocks and support EUR
The Asian stock markets turned risk averse after the data in China showed exports fell by a more-than-expected 6.8% in November from a year earlier, their fifth straight month of decline. However, the drop in exports will not be cause for a risk-off in Europe.
The European economies need healthy consumption in China, but, the import side in China is equally weak. Imports fell 8.7% and that is expected to rattle the European equities. The commodities rout has already deepened following China data and that could weigh over the mining heavy UK’s FTSE. The German economy (with its 10% of total exports exposure to China) is equally vulnerable. DAX could weaken as well. The risk aversion in the markets could see the EUR/USD strengthen.
Technicals – Bullish above 1.0808
Euro’s recovery above 1.0808 (July 20 low) on Monday has opened doors for a re-test of 1.0890 (38.2% of 1.1495-1.0517). A failure to take out the same would open doors for a re-test of 1.0808 levels. On the other hand, a break above 1.0890 would expose 50-DMA at 1.0960. Overall, the pair could re-test 1.0808 levels today,followed by a rebound, leading to a break above 1.0890 and re-test of 50-DMA at 1.0960.
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