Forex Intraday Round-up: EUR Surrenders Gains against USD and Falls below 1.3100
While in the morning session the EUR/USD touched a seven week high, in intraday trading the pair surrendered its gains and at 12.20 GMT was trading at 1.3070/73, below the psychological level of 1.3100.
The pair’s advancement came to a stall after data from the Eurozone showed that October retail sales declined by 1.2 percent from September and 3.6 percent on a year-on-year basis. The figures came out below Reuters’ median forecasts of 0.1 percent m/m and 0.8 y/y decreases.
Technical analysis by FXstreet.com suggests there could be a strong bearish trend underway. If the pair consolidates below 1.3100 the next level of support will be at 1.3070. From there on support is seen around the 1.3020/30 area with the range expected to be limited and breaks below 1.3000 highly unlikely.
Commerzbank and UBS analysts are bullish on the euro. According to Karen Jones, Head of FICC Technical Analysis at Commerzbank, the EUR/USD remains placed to tackle the 1.3150/80 zone. Above the 1.3180 level resistance is seen at 1.3487 and 1.3519. “The pair is approaching significant resistance at 1.3140/72 – a break above would extend the broader recovery phase to 1.3284. Support lies at 1.3046.” opined Geoffrey Yu, strategist at USB.
The Chartered Institute of Purchasing & Supply and Markit released their services report showing that business activity in the sector contracted from 50.6 to 50.2 in November – the slowest rate in nearly two years. “The survey adds to worrying signs that the economy faces a renewed slide back into contraction after the temporary growth surge seen in the third quarter,” said Chris Williamson, chief economist at Markit.
At 12.45 the GBP/USD pair was trading at 1.6103/05 or 0.01 percent higher than yesterday. The pair was flat through most of the intraday trading session as market participants were in anticipation of George Osborne’s Autumn Statement. He is expected to paint a darker picture for the UK economy and commit to more spending cuts in an effort to uphold his deficit reduction plan.
!m[The GBP Remains Flat Against Ahead of Chancellor Osborne Autumn Statement](/uploads/story/969/thumbs/pic1_inline.png)”The market is anticipating a difficult Autumn Statement but at the level where sterling is priced at the moment the market understands that and therefore we will not see a reaction,” opined Steve Barrow, head of G10 currency research at Standard Bank, as quoted by Reuters.
Lower GDP growth forecasts could open the way to more quantitative easing from the Bank of England, exerting downward pressure on the GBP against most major pairs. At the same time if the fiscal austerity programme becomes too lax, it could negatively affect the British currency as it might drag UK’s triple-A rating down.
Today Reuters reported that Brazil’s real made significant gains against the US dollar after the government reduced the scope of a financial transaction tax on foreign loans, facilitating increased dollar inflows into the country. At 13.00 GMT the USD/BRL was changing at 2.1059/89 or 0.62 percent lower than the previous session.
Over the past few days Brazilian policymakers have been reversing a series of measures, aimed at capping capital inflows to the country, for the sake of curbing the BRL’s recent depreciation trend.