Euro Remains Bullish Against USD, UK GDP Ahead - 25.10.2013

The common currency maintained its ground overnight against the US dollar near resistance at 1.3821, pushing to continue it’s up trend. Euro-zone initial Manufacturing PMI reports for October were below expectations although still above previous readings while Services PMI has disappointed projections and failed previous month figures as well. Despite that the EURUSD remains mildly bullish, partly underpinned by positive quarterly Spanish GDP growth for the first time after 2-years.

Furthermore, the greenback is still under selling pressure due to concerns over the 2013 US economic growth amid 16-day shutdown as well as on asset tapering moved to March 2014. Pressure intensified yesterday after US Jobless Claims stood at 350K the previous week above estimates of 343K, coupled by a weaker expansion than projected for Flash Manufacturing PMI. All that held the US dollar index at key support zone around 79 just a step away from 15-month low that could open the way for a new downside wave. In our opinion given the technical importance of the support area around 79 we would expect some consolidation there.

During Asian session Japan released its inflation with the National CPI on annual terms rising to 1.1% up from 0.9% and beating estimates also at 0.9%, indicating that aggressive monetary policy is achieving its target and further easing steps are getting less likely. National CPI excluding food and energy stood at 0.0% up from previous at -0.1% and Tokyo CPI for October rose to 0.6% from previous month at 0.5%. As a result the Japanese yen strengthened with the USDJPY inching below 97.00 suggesting the downtrend persists, increasing chances for lower values like support at 96.55.

Elsewhere, the USDCAD established a new positive structure by breaching recently created reversal pattern’s neckline at 1.0418, due to less hawkish monetary policy report by BoC still weighing on the Canadian dollar. The GBPUSD holds tight slightly below 1.6259 ready to advance to 10-month high by a trigger event. Looking ahead, eyes focus on German Ifo, British preliminary GDP and later on we expect Durable Goods Orders.