EURO steamrolled after PMI plunges to 10-month low
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The Euro was battered on Friday as firm US activity data and weak European PMI data added more dark clouds to the single currency, already reeling from German politics and expected trade tensions with the US and China.
The US data lifted Wall Street. The S&P 500 rose by 0.35%, the Nasdaq gained 0.16%, and the Dow Jones soared by 0.97%. In currency markets, the dollar index (DXY) closed 0.43% higher at 107.49, having touched 108.00 intraday.
Most of the DXY gains were at the expense of the Euro. EUR/USD closed 0.53% lower at 1.0418 on Friday. Despite being oversold on its RSI, the chart still makes grim reading. EUR/USD remains solidly locked in its daily down channel, initially targeting 1.0200. Only a daily close above 1.0700 changes the medium/long-term picture.
The Euro faces another test of its mettle today as the German November IFO survey is released. Markets have itchy trigger fingers right now, and a weak number (below 85.0) is likely to spur more waves of selling.
On Wednesday and Thursday, Asia's calendar features rate decisions from the Reserve Bank of New Zealand (RBNZ) and the Bank of Korea (BOK). Markets price the RBNZ at a 0.50% cut, with the BOK remaining unchanged.
Following the US FOMC Minutes on Tuesday, Wednesday is a big day for US data, featuring Durable Goods, Q3 GDP estimates, Personal Income and Expenditure, and the PCE Price Index for October. The latter are the Fed's favourite inflation measures and may give a strong clue about rates, or not, by the Fed in December.
US markets are closed on Thursday for Thanksgiving, but Eurozone Business Climate and Economic Sentiment surveys will keep pressure on the Euro. Friday's German Retail Sales data is unlikely to lighten the mood, although a strong showing from the US Black Friday sales could lift Wall Street and the greenback.
Wednesday's RBNZ rate decision could see fireworks on the New Zealand Dollar. Markets are pricing in New Zealand rates falling below Australian ones this week, and with a weak economy, AUD/NZD soared through resistance at 1.1140 on Friday.
The breakout of the ascending wedge suggests a technical target of 1.1600.
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Likewise, NZD/USD is equally bearish. Kiwi finally closed below support at 0.5870 on Friday, completing a long-term wedge pattern targeting 0.5500 in the coming weeks.
Most of the fireworks will come from the US data Wednesday.
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