Chart of the Day Bullish EURUSD

Bullish EURUSD – EUR: Eurozone inflation fastest in three months: Eurozone all-items HICP inflation clocked at a faster pace of 1.0% YOY in November (Oct: +0.7%) according to flash estimate, its highest since August this year, led by gains in prices of food, tobacco & alcohol (+2.0% vs+1.5%) and services (+1.9% vs + 1.5%). Energy prices slipped for the fourth month (-3.2% vs -3.1%) due to lower global oil prices. Core inflation meanwhile continued its climb for the third straight month, picking up 1.3% YOY (Oct: +1.1%), offering signs of a rebound in the Euro Area inflation but it is unlikely that prices would rise at a significant margin that would lead inflation back to the ECB’s target of “just below 2%” given that the underlying economy remains weak. Unemployment rate was unchanged at 7.5% in October according to the another Eurostat release, a firm sign that labour market is tight but the higher wages costs do not yet seem to have significant effect on inflation. 

USD: The week ahead is a busy one for the US. The Markit US manufacturing PMI will kick off the docket on Monday. Construction spending data for October will also be due, alongside November’s ISM manufacturing print. The ISM non-manufacturing print will be released on Wednesday, together with the latest ADP report. The Markit US services and composite PMIs will also be due. Thursday sees the latest weekly initial jobless claims as well as October trade balance, factory orders and durable goods orders. On Friday, all eyes will be on the US jobs report for November, Bloomberg consensus forecast as of 29 November is for 190k. The unemployment rate is likely to stay at 3.6%. US wage growth may pick up to +0.3%m/m, +3.0%y/y (from 0.2% m/m, 3.0% y/y in October). Wholesale inventories for October and the University of Michigan consumer sentiment index for December are also due. 

From a technical and trading perspective, the EURUSD has retested bids below the pivotal 1.1000 area once again buyers have stepped in supporting the pair. On Friday we witnessed a key reversal day that flipped the daily chart bullish as per the near term volume weighted average price. As 1.1000 continues to attract support there is scope to set a base to target another leg of upside versus the October advance, the equidistant swing objective is now sited at 1.1279. (Note EURUSD seasonality is also supportive for December) A failure below Friday’s low would negate the bullish bias suggesting a deeper decline to test bids sub 1.0950.

 

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