Dollar Mildly Firmer after Mixed Data
Dollar is mildly firmer in early US session despite mixed data. Personal income and spending both rose faster in Nov but fell short of consensus expectation. Meanwhile, the report also show that core inflation is moderating. Headline durable goods order was strong but the details are unexpectedly weak, pointing to further slowdown in manufacturing industry. U of Michigan consumer sentiments came in better than expected at 91.7. All in all, data released today was not enough to push dollar lower and traders are closing positions as holiday approaches.
Durable goods orders rose a larger-than-expected 1.9% in Nov, following an 8.2% drop in Oct. However, the headline number masks a very weak report in details. Ex-transport orders fell 1.1% and orders for capital goods fell 1.4% both declining for a second consecutive months. This is confirming that the manufacturing industry is in a slowdown and will likely contract further next year.
Personal income rose 0.3% in November, spending rose 0.5%, both slightly lower than expectation. PCE core, the fed’s preferred measure of inflation, was flat, with yoy increase moderated from 2.4% to 2.2%. Even though the 2.2% growth is still above Fed’s comfort zone of 2%, it could have well topped at 2.4% in the past few months.
EUR/USD
Daily Pivots: (S1) 1.3140; (P) 1.3176; (R1) 1.3211; More
EUR/USD’s rise from 1.3140 was limited by mentioned 1.3211 resistance. Subsequent fall has turned hourly MACD below signal line, and turned short term outlook neutral. On the upside, a break above 1.3211 resistance will confirm corrective fall from 1.3244 has completed and should bring rally to this high and then retest of 1.3364 resistance. On the downside, even though consolidation might still continue, we’d still expect downside of this correction from 1.3244 to be contained above 1.3105 resistance turned support.
As discussed before, prices action from 1.3362 is treated as correction to rally from 1.2760. Such correction should have completed at 1.3051, after meeting 1.3056/61 target (100% projection of 1.3364 to 1.3129 from 1.3291 at 1.3056, 50% retracement of 1.2760 to 1.3362 at 1.3061). Subsequent rebound from there could represent resumption of the whole rise form 1.2483 but a decisive break above 1.3364 resistance is needed to confirm and bring further rise towards next upside target of 1.3668 (04 high). Otherwise consolidation may still continue to extend.
On the downside, below 1.3105 resistance turned support is needed to turn short term bias back to the downside and indicate correction from 1.3362/64 is still in progress. But even in such case, downside is still expected to be contained above 1.2911/38 support (50% retracement of 1.2483 to 1.3362 at 1.2923, 161.8% projection of 1.3364 to 1.3129 from 1.3291 at 1.2911) and bring another rally.
In the long term picture, the medium term rise from 1.1639 could either be resumption of this multi-year up trend or just part of a larger scale consolidation that started at 1.3668. But neither case is confirmed yet. Nevertheless, medium term outlook remains bullish with EUR/USD saying above 1.2760 support. Decisive break of 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822 will confirm long term up trend has resumed for 1.4 psychological resistance first. On the downside, break of 1.2760 support will turn medium term outlook neutral and argue that whole medium term rally from 1.1639 has possibly completed. Focus will be shifted by to 1.2483 key support and break will confirm this case and bring much deeper decline.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
Shing-Ip Tsui is the founder and CEO of www.ActionForex.com. ActionForex is set up with the aim to empower individual forex traders by providing insightful contents. Analysis reports, live pivot points on majors and crosses, etc are provided with collection of carefully selected educational articles and free trading ebook downloads.