Euro Zone’s preliminary December PMIs in focus

We make a start by noting that China’s slowdown of the retail sales growth rate ends to enhance our worries for the recovery of the Chinese economy given also the intentions of the US President-elect Trump to slap additional tariffs on US imports from China. On the flip side, the tick-up of the relative stability of the industrial output growth rate tended to provide some comfort.  Today we get December’s preliminary PMI figures for the Euro Zone. Should the indicators show further contraction of economic activity in the Euro Zone, we may see the release weighing on EUR. We focus on Germany’s manufacturing sector and on second note France’s services sector, while Euro Zone’s composite PMI figure is to provide a rounder view.

EUR/USD bounced on the 1.0450 (S1) support line thus remaining well between the boundaries set by the 1.0600 (R1) resistance line and the S1. Hence for the time being our sideways motion bias is maintained. The RSI neared the reading of 50, implying an easing of the market’s bearish predisposition for the pair. Yet, we would switch our sideways bias in favour of a bearish outlook in the event of a clear break below the 1.0450 (S1) level, with the next possible target for the bears being the 1.0330 (S2) support line. For a bullish outlook we would require a break above the 1.0600 (R1) level, aiming for the 1.0730 (R2) resistance base.

Other highlights for the day:

In today’s European session, we get the preliminary December PMI figures of the UK. Later on, we get Canada’s House starts for November and the US December preliminary PMI figures. On the monetary front, we note that BoC Governor Tiff Macklem is scheduled to speak, while on a fiscal level, we note that the Canadian government to present the mid-year mini-budget.    

USD/CAD edged higher yesterday aiming for the 1.4270 (R1) resistance line. We maintain our bullish outlook for the pair as long as the upward trendline guiding the pair since the 25^a. of September. Furthermore the RSI indicator is at the reading of 70, implying a strong bullish sentiment for the pair yet at the same time, it may imply that the pair is at overbought levels and may be ripe for a correction lower. Also the price action is nearing the upper Bollinger band sending similar signals. Should the bulls maintain control over the pair as expected, we may see it breaking the 1.4270 (R1) resistance line, paving the way for the 1.4420 (R2) resistance level. A bearish outlook seems remote currently and for it to emerge we would require the pair to break the 1.4110 (S1) support line, break the prementioned upward trendline in a first signal that the upward movement has been interrupted and aim if not reach the 1.3960 (S2) support level. 

As for the rest of the week:

On Tuesday, we get UK’s employment data for October, Germany’s Ifo and ZEW indicators for December, the US retail sales, Canada’s inflation data and the US industrial output all for November. On Wednesday we get Japan’s trade data and chain store sales, UK’s CPI and Eurozone’s HICP rates, all being for November, New Zealand’s GDP rate for Q3 and the highlight of the week, the Fed’s interest rate decision. On Thursday we get the interest rate decisions of BoJ, Riksbank, Norgesbank, CNB and BoE. As for financial releases, we get Germany’s GFK consumer sentiment for January, France’s overall business climate for December, UK’s CBI distributive trades for December, the final US GDP rate for Q3, the US weekly initial jobless claims figure and the US Philly Fed Business index for December, while from New Zealand we get November’s trade data. Finally, on Friday, China’s PBOC is to release its interest rate decision and we note the release of Japan’s November CPI rates, UK’s retail sales for November, the US PCE rates also for November, Canada’s retail sales for October, the Eurozone’s preliminary consumer confidence for December and the final US University of Michigan consumer sentiment for December. 

EUR/USD Daily Chart

• Support: 1.0450 (S1), 1.0330 (S2), 1.0220 (S3)
• Resistance: 1.0600 (R1), 1.0730 (R2), 1.0835 (R3)

USD/CAD  Daily Chart

• Support: 1.4110 (S1), 1.3960 (S2), 1.3820 (S3)
• Resistance: 1.4270 (R1), 1.4420 (R2), 1.4560 (R3)

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