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Market Review October 1st, 2014

October 1st, 2014
 
 

The Euro is continuing to decline. Despite an inflation revision from 0.3% to 0.4% last month, the September figure was again at 0.3%. Moreover, the base inflation dropped from last month’s 0.9% to 0.7% (the figure doesn’t take to account price dynamics for food and energy).

 

Since inflation remains at a five year minimum, it’s putting more pressure on the ECB. During the week the regulator has to determine parameters for future programs of asset purchasing. If agreements on securities guarantees with the biggest EU capitals are not reached, then only the most reliable ones will be included in the program. In such case it will reflect negatively on its effectiveness.

 

At the same time, it will become an additional driver for the downgrade of the Euro. Overall unemployment has remained at 11.5% in the EU, but in Italy the figure among youth has set a new negative record of 44.2%. Since the state is in a recession, continuing escalation in the labor market suggests that the beginning of recovery is still far away, especially if authorities continue to do nothing. 

 

But as British and American experiments show, without additional liquidity the situation won’t be changed easily. The last statistical data suggests an increase of the British GDP by 0.9%. In Europe such dynamics remain a dream. 

 

A recent survey of companies shows a continuous weakening of business activity in the third quarter, which might also reflect negatively on inflation. The only available positive thing is retail increase by 2.5% in Germany and 0.7% in France. But it is worth mentioning that a month earlier the two figures were in the red zone, and stable inflation bares risk that consumers will support significant spending in hope for even bigger prices downgrading.

TECHNICAL ANALYSIS

EUR/USD

The Euro pattern doesn’t bring any surprises. Next goal on the downside will be 1.2500. The bigger picture of the chart suggests slowdown of the trend. Before 1.2135 there is no serious support seen.

USD/JPY

Resistance at 110 still prevails. Nevertheless there is no strong retracement seen. Most likely the currency will attempt to break above once more, so that is the challenge for today.

 

GBP/USD

The Pound has dropped down. At current level there is an important support capable of reversing the trend. The inability to do so will push the rate further down.

ECONOMIC CALENDAR

All Day    Holiday  Hong Kong – National Day

All Day    Holiday  China – National Day

01:00    CNY  Manufacturing PMI (Sep)   

01:30    AUD  Retail Sales (MoM) (Aug) 

03:00    IDR  Core Inflation (YoY) (Sep) 

07:15    EUR  Spanish Manufacturing PMI (Sep) 

07:30    CHF  SVME PMI (Sep)   

07:45    EUR  Italian Manufacturing PMI (Sep)   

07:50    EUR  French Manufacturing PMI (Sep) 

07:55    EUR  German Manufacturing PMI (Sep) 

08:00    EUR  Manufacturing PMI (Sep)   

08:30    GBP  Manufacturing PMI (Sep) 

12:15    USD  ADP Nonfarm Employment Change (Sep)    

14:00    USD  ISM Manufacturing Employment (Sep)    

14:00    USD  ISM Manufacturing PMI (Sep)