EURUSD: markets favour USD, againThe US Presidential elections were the major event during the week for financial markets. Investors were satisfied with the elected candidate as almost all markets ended the week in green. The US Dollar also gained in strength. The FOMC meeting was somehow left in a shadow of the previous event. The Fed cut interest rates by another 25 bps, which was widely expected by markets. As for other macro news posted during the previous week, the ISM Services PMI in October reached the level of 56, which was higher from market expectation of 53,8. Michigan Consumer Sentiment preliminary for November was standing at 73,0, higher from market estimate of 73.
Factory orders in Germany jumped to the level of 4,2% in October, which was significantly higher from market consensus of 1,5% and also from previous month of -5,4%. The HCOB Services PMI for October reached the level of 51,5 in Germany and 51,6 in the EuroZone, where both figures were modestly above market estimates. The Balance of Trade in Germany slowed down in September to the level of 17B Euro, from 21,4B posted for the previous month.
The US Presidential elections in combination with the Fed's another rate cut, pushed USD to the higher grounds, reaching 1,068 against euro at Wednesday trading session. After that, the currency pair reverted to test 1,08 resistance line, however, it ended the week at the level of 1,0718. The RSI is quite close to the oversold market side, however, at the level of 37, there is some space further for the downside, until the clear oversold side is reached. The moving average of 50 days is strongly converging toward the MA200 counterpart, suggesting that the cross might come in the near term.
Markets are currently favouring USD in expectation of the positive future results of the new US administration. Despite the current hype, some risks exist, which are mostly related to the fiscal side of the US economy and eventual inflationary pressures from introduction of tariffs on foreign goods, economists warn. As for the week ahead, the eurusd will spend time testing 1,07, a short term support line, with some probability that the currency pair might head toward the 1,06 support line, where it will end the current cycle. On the opposite side, a potential for a short term reversal holds. There is some probability that the resistance line at 1,08 might be tested for one more time.
Important news to watch during the week ahead are:
EUR: Inflation rate in Germany final for October, ZEW Economic Sentiment Index in November for both Germany and the Euro Zone, GDP Growth rate in the Euro Zone in Q3, second estimate,
USD: Inflation rate in October, Producers Price Index in October, Fed Chair Powell speech, Retail Sales in October, Industrial Production in October
