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4 December Forex daily review

Sergiy Zlyvko
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On Wednesday the trading in the currency market has been uneven. Service PMI index for the EU countries have been mixed. In Spain, Germany and the Eurozone business activity rose. In Italy and France – declined. Single currency has reacted calmly to the statistics and even slightly stronger against the U.S. dollar and the pound, as it bathed in EURGBP cross-rate after the publication of the index of business activity in the service of Great Britain. November PMI index didn’t catch shortly the forecast of 62.1 points and made 60. GBPUSD reacted with falling to the news and then quickly restore 35 points. The euro/dollar rebounded to the level of 1.36.

Eurozone GDP figures for the III quarter coincided with the forecast. Retail sales data in the euro zone was published worse than expected, but it is ignored by the market. After the release of European statistics block, all attention shifted to the American statistics.

The data received at 13.15 GMT from ADP company about the employment in the private sector in the U.S. supported U.S. currency across the market. Increase in the number of jobs according to ADP significantly exceeded expectations and gave a reason to believe that Friday’s figure will be above 200,000.

The number of jobs in the private sector in the U.S. in November rose by 215 thousand vs. 173 thousand. October figure revised upwards from 130 thousand to 184 thousand. This is a significant revision. EURUSD fell by 70 points to 1.3530. GBPUSD fell by 40 points to 1.6325. Later, however, after the publication of the U.S. ISM index, bulls lost all the profits on the dollar.

In November ISM index of business activity in the U.S. service sector fell from October value of 55.4 to 53.9 (forecast 55). In anticipation of payrolls, this is a negative factor for the dollar.

Before the meetings of the ECB and the Bank of England traders decided to temporarily buy Swiss franc and Japanese yen. It remains to wait for M. Draghi press conference as surprises to reduce rates from the Bank of England and the ECB are not expected. Since the beginning of M. Draghi’s the press conference at the same time the reports on U.S. GDP and applications for unemployment benefits are going to be published. So that sharp fluctuations in the currency market are expected in the evening and during the day positions in the cross-rates with the euro and the pound will be aligned. Maybe that payrolls will work today.

With a minimum of 1.3530, euro/dollar rebounded to 1.3605. In Asia bulls attempted to break 1.3605 level. The euro/dollar rose to 1.3615. On Thursday we make one scenario, as important data publication is planned for the evening and it is unknown what kind of surprise the ECB will present. Yesterday’s ISM service with component of employment is ruined bearish momentum. Hourly indicators are in the neutral zone, which means the bulls can safely open hunt stops. I will assume that from current level the rebound in the U.S. session will take place and before payrolls publication EURUSD rate will return to the level of 1.3580.

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