EURUSD WEEKLY OUTLOOK COME DEC 2ND-DEC 6TH; BULLISH TREND CONTINUES TOWARDS TECHNICAL RESISTANCE, TARGET 50% FIBONACCI SEQUENCE

FUNDAMENTAL BEAM


EUR/USD advanced for a third week in a row. As we enter the last month of the year, can it reach new highs? The rate decision is the key event of the week. Here is an outlook for these events among others, and an updated technical analysis for EUR/USD.
Eurozone Flash CPI exceeded expectations rising 0.9%, following 0.7% gain in October. Although the growth rate increased, it remained well below the European Central Bank’s (ECB) inflation target of 2% for nine consecutive months. The lowest inflation in almost four years registered in October is quite likely the reason behind the sudden ECB rate cut seen in November. However, the 0.9% gain eases fears that the euro zone is headed for deflation. Will the ECB come up with further accommodative measures on its December 5 meeting?

Here is  summary of key events during the week

1. Manufacturing PMIs: Monday. Manufacturing in the euro zone continued to expand in October following an 18-month recession. According to the Markit Manufacturing Purchasing Managers’ Index struggling economies such as Spain and Italy posted growth; Spain registered 50.9 from 50.7 in September while Italy dropped 0.1 points to 50.7 from 50.8 in the previous month but still indicating expansion. Meanwhile, the Eurozone edged up to 51.3 from 51.1 in September following a 26-month high of 51.4 reached in August. The numbers show a possible turning point for the Eurozone economy. Spain is expected to rise to 51.3, Italy is expected to increase to 51.4 and the Eurozone to remain 51.5.
2. Spanish Unemployment Change: Tuesday, 8:00. Spain’s unemployment continued to rise in October following layoffs of tourist season hires. Despite the relative improvement in economic conditions, unemployment is expected to remain around 25% throughout 2015. The number unemployed edged up by 87,028 people, leaving 4.81 million out of work. The pick-up in Spain’s economy is expected to be mild due to the high unemployment rate which is expected to improve only in the later part of 2014. A rise of 44,300 unemployed is expected.
3. PPI: Tuesday, 10:00. Producer price inflation in the euro area increased less than expected in September with a mild rise of 0.1%. Economists expected a bigger climb of 0.3%. On a yearly base, producer price index dropped 0.9% in September following 0.8% in August. A drop of 0.1% is expected.
4. Services PMIs: Wednesday. The Euro area service sector weakened slightly in October. Eurozone  PMI for the services sector, slipped to 51.6 from 52.2 in September, higher than the preliminary reading of 50.9, but still indicating expansion. Meanwhile, Italian services declined to 50.2 from 52.7 in September and in Spain, services climbed to 49.6 but remained in contraction.  These weak figures led the ECB to cut rates in November to try and boost market activity. Spain is expected to rise to 50.7, Italy to 51.2 and the Eurozone to remain at 50.9.
5. Retail Sales: Wednesday, 10:00. Euro zone retail sales plunged 0.6% in September, amid fragile economic recovery and persistently high unemployment. This reading ws worse than the 0.3% drop expected by analysts and was followed by a 0.5% rise in August. Domestic demand in the euro zone remained subdued after its longest recession since the creation of the euro in 1999.  The European Commission expects a partial rebound in market activity next year, but domestic demand is still fragile. A rise of 0.2% is expected now.
6. Rate decision : Thursday, 12:45, press conference at 13:30. After the surprising rate cut in November, the ECB is likely to leave policy unchanged in December. The rate cut has little impact on the economy and with the hindsight of a few weeks, it had no long lasting effect on the exchange rate: the euro is now stronger than before the move. Nevertheless, and despite fear of deflation, another move now would be problematic for the northern block and especially for the Bundesbank. So, Draghi is likely to emphasize that the ECB is considering more moves in the near future, hinting about setting a negative deposit rate already in January. A hint would hurt the euro, and a negative deposit rate would have a much stronger effect on the euro than cutting the lending rate.
7. French Gov Budget Balance: Friday, 7:45. The French government budget balance narrowed to a seasonally adjusted -80.8 billion in September, from -93.6 billion in the preceding month. France’s credit rating was cut by S&P to AA last month raising antagonism against Hollande’s economic policies. S&P forecasts that French unemployment will remain above 10% through 2016, thanks in part to the country’s exporters losing market share to rivals in Europe with more flexible tax and labor policies.
8. German Factory Orders: Friday, 11:00. German factory orders edged up more than estimated in September, jumping 3.3% compared to a 0.3% fall in the previous month. This rise suggests German economy benefits from the gradual recovery in the Euro-area. Economists expected a gain of 0.6%. Orders picked-up 7.9% from a year ago. Despite, downside risks in the Eurozone,. Economists forecast a stronger recovery in 2014. A drop of 0.4% is projected this time.

TECHNICAL BEAM

EUR/USD for the third week in a row continue advancing on the upside targeting price above the technical resistance previously recorded 25th of October, 2013. Last week following a detailed fundamental and technical analysis; we forecasted a bullish bias market scenario for EUR/USD.
This week again, we foresee a continued bullish bias market price pattern. As market price continues north-east of the chart; our technical analysis reveals market price i pushing towards price target above the technical resistance.
Price target for the daily timeframe is recorded at 50% of the Fibonacci sequence which is approximately 1.39058. Again, if bullish continues strong, we should expect market to move considerably bullish towards the 61.8% Fibonacci sequence with recorded price of 1.43889.

   

NOTE: Price predictions produced by FibonacciPrice&PatternTrader may be affected by unforeseen events like hurricane, earth quake, flood and other natural disasters consequently changing price patterns already predicted. Hence we advice strict adherence to money management techniques.

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