Review: EUR goes it alone
EURUSD: hit the 136 barrier. Stops executed. EUR goes it alone.
Over the past two days, EURUSD has run its own course away from other asset classes. This indicates an increasing probability of a correction. Read more overleaf.Norway: Retail sales marginally positive. No major NOK movement.
China: The official PMI fell to 50.4 (estimate: 51.0; last time: 50.6).
The commodity market – which is typically affected by poor figures from China - has not reacted. The Shanghai equity index is up by 1% this morning and Hang Seng is unchanged.Australia: Australian PMI for industry drop like lead – SELL AUD?
The overnight PMI data from Australia revealed a drop from 44.3 to 40.2 – the lowest level since the summer of 2009.
Australia is definitely among those suffering most from the recent JPY weakening. About 12% of Australian exports go to Japan. If commodity prices begin to fall, AUD will be vulnerable. Selling AUD against EUR and DKK is a good hedge against a currency war.
Australia still has lots of ammunition in the central bank if it wants a weaker currency.
Technically, EURAUD has given a strong buy signal (see the chart in yesterday’s issue).
Today’s events: The most important day of the week:
08.30 Sweden: PMI manufacturing
09.00 Norway: PMI manufacturing
10.28 The UK: PMI manufacturing
14.30 USA: Employment and unemployment
16.00 USA: ISM manufacturing
US employment figures have often turned the trend, for instance in respect of EURUSD. We find it quite likely that we will see a brief correction for EURUSD, but an actual trend reversal is not on the cards (at least not if the figure comes to 150K as we expect), but in the course of 2013, the employment figures are definitely the economic indicator that should attract most attention. The employment figures will indicate the probability of the timing when the Fed will end QE3. When that happens, USD will appreciate strongly.
EURUSD (Neutral to SELL): EURUSD goes it alone on overbought movement
We recommend that investors sell EURUSD with take-profit at 132.00 and stop-loss at 138.35. Adjust stop/loss to entry when we reach 135.50 again.
Investors could consider selling EURGBP (EURJPY) instead of EURUSD. The potential is more or less the same.
As stated yesterday, EURUSD is strongly overbought. For the very short term, there is also divergence between global equities and EURUSD. Lower equity prices will normally lead to a lower EURUSD rate - yet not over the past two days, which have seen divergence between these two.
Often US employment figures have turned the trend. There are, however, not many indications that the figures in isolation will have this effect right now. Nonetheless we assess that risk/reward in connection with selling in the short term is attractive due to the strong RSI divergence, short-term divergence to global equities, short-term divergence to the development of the interest-rate differential, long-term divergence to gold, etc.
Due to the employment figures to be released today, there is a risk of selling already at this time. Better-than-expected figures will favour USD – and vice versa. If the figures are sufficiently poor, the prospects of the time when QE will end will change and hence this be negative for USD.
EURUSD
Resistance and support:
Downside: 134.00. Then 131.88.
Upside: 136-136.50. Then 137.30 and 138.33.
EURPLN (SELL): We recommend investors to SELL EURPLN; S/L at 421.81.
We recommend trade in the range of 402.96-422.12, in which we have traded since July.
Resistance and support:
Downside: 415.05. Then 407.00.
Upside: 419.75-421.75. Then the area at about 434.00.
EURGBP (NEUTRAL): Heavily overbought. If investors did not take a shot at EURUSD, they might want to do it here.
Stop/loss 86.45. Take/profit 82.15.
As stated under EURUSD, the upward movement for EUR is about to be strongly exaggerated. It is exaggerated to such an extent that short-term divergence has been seen between the other asset classes, which per se indicates that EUR now needs further good news to see a further short-term appreciation of EUR. We think a correction is in the offing.
EURGBP
Resistance and support:
Downside: 83.80. Then 81.45.
Upside: 86.35 (point of strong resistance).
Chart: Australien PMI
