SPANISH CRISIS KEEPS EURO UNDER PRESSURE
The main issue for the European markets remains the political situation in Spain where we may see an announcement regarding Catalonia’s independence come through on Monday. A vote for independence may see the euro continue to lose ground against its major trading partners. On the other hand, after the release of the ECB monetary policy meeting minutes it has become clear that the reduction of stimulus measures in the Eurozone in 2018 is highly likely. Positive news from the Eurozone’s retail PMI growth in September to 52.3 against 50.8 in August was not able to offset the negative effects from Spain. Some support for the US dollar came from positive data on the trade balance deficit in the US that in August was only 42.4 billion - this is 0.3 better than forecasted. At the same time, factory orders in the US increased by 1.2% in August against the 1.0% increase expected. Investors are waiting for tomorrow’s labor market data in the US that is likely to result in increased volatility. Strong numbers on non-farm payrolls and unemployment are likely to increase confidence in another rate hike by the Fed in December.
The sterling remains in the bearish trend amid uncertainty linked with the Brexit talks. Statistics on the decline in the number of registered autos by 9.3% to 426,170 in September also strengthened concerns about the prospects of British economic growth.
The WTI price demonstrated positive dynamics following the news about crude oil inventories reduction in the US by 6.0 million barrels compared to an expected decline of only 0.5 million barrels. This news however, didn’t help the Canadian dollar that felt the pinch due to the trade deficit increase in August to 3.4 billion, which is 0.8 billion worse than the average prediction.
The EUR/USD price resumed declining after some consolidation above 1.1750 and in case of passing through the support at 1.1700, the next targets will be 1.1620 and 1.1550. In order to resume positive dynamics, it will be necessary to overcome the 1.1800-1.1825 range and in this case the next goals will be 1.1925 and 1.2000. The RSI on the 15-minute chart is near the oversold zone, which points to an increased chance of upward correction.
The GBP/USD has shown a sharp descending movement and approached the lower limit of the descending channel. Breaking through the support at 1.3150 may become the basis for continued price drops to the 1.3000-1.3050 range. We do not exclude an upward rebound to 1.3250 as the RSI on the 15-minute chart is signalling that the pair is oversold.
The USD/CAD is growing confidently after a long consolidation near 1.2470. Currently the quotes reached resistance at 1.2550 and gaining a foothold above it may be a reason for further increases with immediate goals at 1.2665 and 1.2800. On the other hand, the trend may change to negative in the case of the price fixing below 1.2450.