EUR/USD Forecast: Crashing on concerns about Germany, at bargain price on Black Friday?
|- EUR/USD slips below 1.1400 on weak German data and loses uptrend support
- Positive tones around Brexit, Italy, and China help.
- Holidays and a global shopping spree could lower liquidity.
EUR/USD is below 1.1400, falling off the narrow range. Germany's Purchasing Managers' Indices missed, with Manufacturing dropping to 51.6 points, only slightly above the 50-point threshold that separates expansion from contraction. This is a 32-month low and raises concerns. However, the reaction may be somewhat exaggerated.
Worries about the continent's "locomotive" send the common currency lower, countering an otherwise positive environment.
Earlier, Markit's Flash French PMI for November missed expectations while the Services PMI beat.
The Thanksgiving holiday on Thursday in the US and a holiday in Japan lower liquidity and trading volume. However, news continues flowing and it is mostly supportive of the common currency.
After the European Commission recommended opening a disciplinary procedure against Italy, both sides seem keen to reach an agreement. Some Italian politicians have toned down their rhetoric. Moreover, there are reports that Paolo Savonna, a eurosceptic, will step down. He later denied the reports. The spreads between Italian and the benchmark German bunds are dipping below the psychologically significant level of 300 basis points.
Upbeat rhetoric also comes from China and the US ahead of the summit between Presidents Donald Trump and Xi Jinping next weekend. Trump said that China wants a deal "very badly" while Chinese officials expressed hope for reaching an agreement. On the other hand, the Wall Street Journal reported that the US is discouraging international companies not to buy telecommunications equipment from Huawei amid concerns of espionage.
Brexit remains in the limelight, rocking the pound and also affecting the Euro. The UK and the European Union clinched a draft agreement on the political declaration, a 26-page document which states the intentions about the arrangements after the transition period ends. However, there are a few outstanding issues regarding fisheries and the status of Gibraltar. Spanish PM Pedro Sánchez said his country will not sign the deal if his country's demands are not satisfied. Negotiations continue. More worryingly for Brexit, it seems that PM Theresa May will be unable to muster enough support to approve the accord in parliament. The debate is due in early December.
The US calendar remains sparse after Thanksgiving with only Markit's Flash PMI's due. Comments by Trump and others about China will likely be more meaningful. The greenback suffers from a small dovish twist by Fed officials.
EUR/USD is dipping below the uptrend support line that accompanied it since it hit the trough of 1.1215, the lowest point since June 2017. Is the break real?
The Relative Strength Index (RSI) and Momentum are leaning lower as well. The pair approaches the 50 Simple Moving Average on the four-hour chart.
Support awaits at 1.1355 which supported the pair early in the week. 1.1300 used to be a double bottom and 1.1215 is the 17-month low.
Resistance awaits at 1.1395 which supported the pair late last week. Breaking above the 200 Simple Moving Average which is just above 1.1420 is critical to moving up. 1.1475 was the peak at the wake of this week. 1.1500 is the peak seen in early November.
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