22.11.201313:03 Forex Analysis & Reviews: Fundamental review of the Forex market for November 22, 2013

EUR/USD, GBP/USD.

Yesterday the single currency pair was actively speculating amid PMI indices. Data on PMI in France was published first; both PMI in Manufacturing and Service dropped. Amid the data the index started falling. Germany’s PMI rose moderately, indices in the Eurozone were little lower than expected (Manufacturing PMI 51.5 vs. 51.6, Services PMI 50.9 vs. 51.9). During his speech Mario Draghi gave a hint that the introduction of the negative rate is not expected in the nearest future. The euro grew 43 points.

In the UK data on CBI Industrial Order Expectations in November was 11 vs. -4 in October and forecast for 0. The British pound rose 95 points.

In the US Initial Jobless Claims in the previous week 323K vs. 333K. PMI Manufacturing in the US in November (preliminary reading) rose from 51.8 in October to 54.3, which helped the stock market indices to be on the top. In fact there is still less than a month and there is possibility to trade in either side.

Today at 11:00 UTC+4 Germany’s GDP in the third quarter is published in the final estimate. It is expected to be flat, 0.3%. At 13:00 UTC+4 Ifo Business Climate Index in Germany in November; forecast 107.9 vs. 107.4 in October. Retail Sales in Italy are expected to be better in October, 0.4% vs. 0.0% in August. There is no relevant news for the US for today.

Nevertheless, we do not consider that strong data on Germany and Italy may bring additional optimism to the local situation. Yesterday’s data on Initial Jobless Claims give clear signs of strong Non-farm data in November, we suppose it is about 210,000. In this case three-month average may be 207K vs. 200K. This concern which is rising will restrain the growth of the currencies traded against the US dollar.

Possibly consolidation is not finished, however, in the nearest outlook we expect decline of the euro to 1.3405, and then to the area 1.3345/70; the first target for the British pound is the level of 1.6120, then two areas 1.6060/70 and 1.5985-1.6000. 

USD/JPY.

Yesterday the yen grew 112 points, which was the biggest increase for two months. The main reason was the growth of Nikkei225 for 1.9%. By 7:00 UTC+4 the index added 1.38% and the yen may reach the high of July 8, 101.52. However, the Japanese market has increased following the US market, where Dow Jones is located at the historical highs and the investors are just waiting for the right moment to fixate the profit. Such a case may occur on November 27, when the data on the Durable Goods Orders in October is published; forecast -1.7 vs. growth for 3.7% in September.

At 9:00 UTC+4 Bank of Japan publishes monthly report. The target inflectional level of 2% has not been reached. The majority of Japanese specialists consider that the inflation will reach the local vertex only in the first quarter of the next year, at the level of 0.95%, after that decline to 0.7% will be observed and then the Central bank will be forced to resort to the new cycle of the yen’s devaluation.

Partly, the growth of the Japanese stock market is connected to the instability in Southwest Asia region, first of all Thailand and Indonesia.

We consider that investment-speculative interest to the Japanese market will be kept longer than for the others before possible reduction of the US stimulus program. Respectively, we expect wide range sideway channel 100.40-101.80 (taking into account the desire of the investors to fixate profit) with common pressure to the upside.