Heavy Euro

A torrent of month-end data releases have been coming in, most notable of which has been warmer than expected inflation data in flash estimates for November out of the Eurozone, and the biggest fall in two years of in Japan’s industrial production, which contracted 4.2% m/m, much worse than the median forecast for a 2.1% decline. Slower car sales as a consequence of Japan’s recent sales tax hike was blamed, and this followed data yesterday showing a precipitous 14.4% dive in October retail sales.

EURUSD has remained heavy, despite warmer-than-expected inflation data out of the Eurozone, which saw the aggregate figure lift to 1.0% y/y in the flash estimate for November from 0.7% y/y in October.

Eurozone unemployment fell back to 7.5% in October, from 7.6% in September, which in turn was revised up from 7.5% reported initially. German unemployment also unexpectedly declined, while final French Q3 GDP was unexpectedly revised up, to 1.4% annual growth from the 1.3% preliminary estimate.

The data might failed to draw out the bulls, but the it’s month-end with US on holidays kicked bulls out, and EURUSD has seen dipping back below 1.1000 in the latest oscillation below Wednesday's 2-week low at 1.0992. 

On the Dollar side of the balance, Wednesday’s batch of above-forecast US data, has given the Greenback a fundamental underpinning, fitting of Fed Chair Powell’s “glass half full” characterisation of the economy. The fresh souring in relations between the US and China, with the latter threatening as yet unspecified “counter measures” after President Trump signed off on the Hong Kong Human Rights bill, is arguably a Dollar positive, too, in the sense that the world’s reserve currency has benefited during phases of risk aversion in global markets, which attracts demand for US Treasuries.

Negative yielding Bunds has been an added factor weighing on EURUSD as stated on yesterday’s post. Meanwhile, EURJPY retains a bullish view after breaking above the 2-week Resistance at the 20-day SMA on Wednesday. The pair holds for a third day in the upper BB pattern with next resistance at 120.75 and 121.00. Support holds at 120.30 (61.8% Fib. level).