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- The US Dollar to Euro exchange rate today (30/11/16): +0.02pct at 0.93944, Best 24hr USD/EUR rate 0.94167.
- The Euro to Dollar exchange rate today: -0.02% at 1.06446, Best 24hr EUR/USD rate 1.06644.
- Credit Suisse Forecast: Sell EUR/USD at $1.07 to target lower levels.
The EUR/USD has trade little changed in 40 pips range of $1.0620-$1.0660 level during the Wednesday morning trading with the end of the month hedge rebalancing playing slightly in favor of EUR. Key driver of the market is the US employment report for November scheduled for Friday this week.
The foreign exchange markets are waiting to see the forerunner of government’s labor market report in today’s ADP jobs report. Other than that ECB’s president Mario Draghi and Fed’s Kaplan are scheduled to speak later in the afternoon.
On the technical front, the Citibank expects the end of the month market re-positioning to result in demand for EUR.
“Signal to buy EURUSD is the only one that exceeds 1 standard deviation this month. Both Euro-Zone bond and equity indices have done fairly badly month-to-date, leading foreigners to buy EUR on top of local investors who also need to buy EUR to increase the value of their foreign equity hedges,” Citibank analysts wrote in the research note on Wednesday.
Reversal in EUR/USD
Wdnesday morning saw the EUR/USD trade down 0.13% at $1,0632 after it extended a reversal pattern in the afternoon trading in London on Tuesday up to $1.0660.
The reversal on EUR/USD was driven by news of the ECB ready to support the Italian bond market after Sunday’s referendum.
According to report from Reuters, the ECB is ready to temporarily step up purchases of Italian government bonds if the outcome of the referendum on Sunday leads to a surge in the country’s bond yields. The report cites four unidentified ECB officials who also noted that the move would not necessarily need Governing Council approval.
Late on Tuesday, the US Federal Reserve bank Governor Jerome Powell (Fed’s permanent voting member) said that the US economy is not far from achieving its dual mandate of stable prices and maximum employment.
“Today, we are not far from achieving those goals,” Powell said At the Economic Club of Indiana in Indianapolis on Tuesday implying the case for US rate hike ‘clearly strengthened’ since early November.
On the US macro data front, the third quarter GDP rose 3.2% in revision compared to 3.0% expected, marking the strongest quarterly rise in two years.
There was also an upward revisions to personal consumption expenditures (PCE), Fed’s preferred gauge of inflation, that rose unrevised 1.4% while core PCE rose 1.7% over the year. This data only confirmed the Fed’s stance of the US economy moving closer towards the targets.
The US market is scheduled to see the key November employment data on Friday with the headline non-farm payroll expected to rise 170K while the unemployment rate is seen steady at 4.9%.
EUR/USD trades with a negative bias ahead of this week’s key economic date release, the US Non-Farm Payrolls
After trading in the negative territory the EUR/USD exchange rate marked a sharp reversal in the afternoon trading in London on Wednesday basically erasing all of the daily losses to trade flat at $1,0610.
According to JP Morgan the broad based US Dollar consolidation is in line with what they expected.
“The short term setup for the broad USD picture continues to suggest some consolidation is due after approaching the next line of key resistance for a number of pairs amid the current overbought setup,” Niall O’Connor, global FX Strategist at JP Morgan noted on Wednesday.
“The sharp reversal for EUR/USD is consistent with this view given the growing risk of a breakdown from the medium term range,” O’Connor pointed out in terms of the EUR/USD exchange rate reversal pattern from daily lows.
EUR/USD fell some 0.40% to trade at $1.0570 after noon in London as upside momentum before the weekend Italian referendum seemed limited.
On the macro data front, the German consumer inflation stole the spotlight ahead of Wednesday’s flash CPI estimate which is expected to show a modest pick up in November.
Market analysts see political risk in Europe pressing the EUR lower, with most of the move already priced in and further downside should therefore be a factor of referendum outcome.
“While there should be a lack of a profound EUR/USD downside today, we nonetheless see modest downside risks to the cross over the remainder of week given the upcoming Italian constitutional referendum. The market caution around the event can be clearly seen in 1-week EUR/USD implied volatility, which spiked materially and exert non-negligible degree of volatility premia,” ING Bank wrote in the Daily FX research on Tuesday, expecting the EUR/USD to hover around the 1.0600 level .
Latest Euro / Dollar / Pound Exchange Rates
The euro conversion rate (against us dollar) is quoted at 1.064 USD/EUR.
FX markets see the euro vs pound exchange rate converting at 0.853.
FX markets see the euro vs swiss franc exchange rate converting at 1.08.
The euro conversion rate (against japanese yen) is quoted at 120.521 JPY/EUR.
NB: the forex rates mentioned above, revised as of 30th Nov 2016, are inter-bank prices that will require a margin from your bank. Foreign exchange brokers can save up to 5% on international payments in comparison to the banks.
EUR/USD traded down 0.20% at around $1.0600 region against the US Dollar on Tuesday morning in London after failing to break above Monday’s daily best conversion of $1.0670.
The foreign exchange markets are focusing on Friday’s US employment report for month of November that is likely to confirm strong job creation in the US and build up the case of the US Federal Reserve hiking rates this December.
The current EUR/USD downtrend is driven by widening Europe-US interest rate differentials and the political risk in Europe as the uncertainty over the outcome of Italian constitutional referendum increases.
From the technical point of view, the euro is heading lower towards $1.04 region against the US dollar.
“The calendar this week is highlighted by the release of November’s US jobs report on Friday, which is likely to cement a Federal Reserve December rate hike and the Italian constitutional referendum on Friday, which could be a ‘No’ and lead to higher political uncertainty in Italy. This cocktail does not bode well for EUR/USD, which we still see falling to 1.04 on 3M,” analysts from Danske bank wrote in a note on Tuesday.
Sell EUR/USD at $1.07 to target lower levels
Technical analysts claim that the EUR/USD needs to trade back above $1.0642 in order to build potential for higher levels at around $1.0750 – a consolidation region where selling is expected to show.
“This leaves it in a consolidation range for now, with near-term resistance pegged to $1.0642, ahead of $1.0742/60 which we expect to cap for a turn lower. Near-term support shows at $1.0564, with a break below $1.0524/18 needed to suggest a medium-term “triangle” continuation pattern, for a test of the 2015 low at $1.0458,” analysts from Credit Suisse noted on Tuesday.
The EUR/USD is seen by many falling further down towards $1.0200 and even with euro to dollar exchange rate correcting higher to $1.0750, strong selling pressure is envisaged given the fundamental reasons that include interest rate differentials and the economy’s performance.
“Whilst we would allow for a fresh hold here, we favor an eventual break lower which should then see a resumption of the core downtrend for $1.0199/96. Above $1.0760 is needed to warn of a recovery back for price and 38.2% retracement of the November sell-off at $1.0816/17. Strong selling is expected to emerge here,” Credit Suisse analysts predicted further.
The US Economy to Create 170K New Jobs in November
The US economic calendar is highlighted by the November Employment report due this Friday with some 105 thousand new jobs created according to median forecast on market analysts and forecasters.
Strong reading in non-farm payrolls is expected to keep the US Federal Reserve on for a December hike.
“Nonfarm payrolls are expected to rise 175K. The increase in payrolls, combined with the ongoing improvement in wages, should boost household income and keep consumption on track. We also believe payrolls growth at these levels is sufficient to keep the Fed on track for a December rate hike,” Barclays wrote in macro research note on Tuesday.
Political Risk in Europe and ECB
Italy’s Referendum on Constitutional Reforms will be held on Sunday and this is the main political risk event in Europe near-term weighing on EUR.
“In Europe, markets are increasingly turning to the upcoming political agenda. The next key events are on 4 December with the Italian constitutional referendum and the Austrian presidential election,” analysts from BNP Paribas wrote in a research note on Tuesday.
The Governing Council of the European Central Bank scheduled for December 8 is though expected to deliver some monetary tightening with some analysts expecting tapering of current asset purchasing program by up to 20 billion EUR.
“The improving data and weaker levels of the EUR are likely to encourage the ECB to cut the current run rate of EUR 80bn a month to EUR 60bn for six months from March at its December meeting. While EUR real yields are not expected to rise in this scenario, this should be a factor leading to some caution for EUR shorts heading into that meeting,” PNB Paribas further noted.
Key EUR, USD Economic Events to Watch
The USD-impacting events in the next seven days include the ADP Non-Farm Employment Change (Source), the Core PCE Price Index (Source), the Personal Spending, the Personal Income, the Chicago PMI (Source), the Pending Home Sales (Source), the Crude Oil Inventories (Source and the Beige Book.
The EUR-impacting events in the next seven days include the German Retail Sales (Source), the CPI Flash Estimate (Source and the Core CPI Flash Estimate.