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The Week Ahead for the EUR 20th-24th September
This week started with the announcement of the Basel
III agreement. Under the new minimum capital requirements banks are required to
hold top-quality capital totaling 7% of their risky assets, but not before 2019.
Markets reacted with relief as the long lead-in time eased fears of a rush to
raise capital. The second big thing was Bank of Japan's intervention in the
currency market for the first time since 2004. In Euroland, during the past
week data has been disappointing suggesting that growth is now slowing. The
German ZEW expectations disappointed badly by declining to -4.3 in September
from 14 in August. Similarly, the sudden stop in European industrial production
growth in July, after the decrease of 0.2% in June, is alarming. On Friday, the
Euro oscillated in a range of more than a cent against the dollar on the final
trading day of the week amid fears about the Irish banking sector.
Next week In Europe, markets will focus on the
important confidence indicators PMI and Ifo, which are expected to show a
notable decline reflecting the ongoing economic slowdown. Here’s an outlook for
this week’s events, and an updated technical analysis for EUR/USD.
Monday, September 20
No major market moving events for the Euro.
Tuesday, September 21
No major market moving events for the Euro.
Wednesday, September 22
The value of the new orders that European manufacturers received for the
month of July will be published by the Eurostat. After last month surprising
rise in orders, 2.5%, the figure is set to decline 1.4% m/m in July following a
2.5% m/m strong increase in June. The drop will be the worst in the last six
months.
Also on Wednesday, a highly regarded survey coming
from the small nation of Belgium,
will reflect the situation of the Euro-zone’s economies. This survey is highly
respected due its course and large sample size. The score unexpectedly improved
from -6.1 to -5.1 in August and is likely to be even better this time, with a
forecasted -4.9. The less negative score means that businesses are now less
pessimistic.
Thursday, September 23
Between 2:00 to 3:00 EST, the earliest purchasing
managers’ indices for the manufacturing and services sectors will be released
by France, then Germany and then for the entire continent. These crowded releases usually shake the
currency. All the scores are above 50, meaning economic expansion, and they are
all predicted to drop slightly down. The PMI new orders indices give an
indication of how sharp the European slowdown will be. Markets are likely to
see further declines in the coming months, before they begin to rise again late
this year or early next year. Manufacturing PMIs are also set to decline more
than services PMIs.
German Flash Manufacturing PMI is predicted to
decrease from 58.2 to 57.8 points. On the other hand, the services sector is
somewhat lagging behind, in Europe’s largest
economy, and it’s predicted to go increase slightly from 57.3 to 57.2 points.
France, Europe’s
second-largest economy enjoys a super strong services sector, according to PMI.
However, the high score of 60.4 will probably shrink to 60.1. The Manufacturing
sector is expected to drop from 55.0 to 55.1 points.
Finally, the all-European Flash PMI will be published.
The services sector is expected to decrease by 0.4 points, passing from 55.9 to
55.5, and the manufacturing sector will probably see another small decrease
from 55.1 to 54.6 points. Note that all the numbers are above the critical line
of 50 – marking economic expansion.
Friday, September 24
At the end of the week, the Ifo research institute
will publish a closely watched report on German business climate. In the survey
more than 7,000 businesses are polled about their expectations for the next
months. Unlike the ZEW survey, the Ifo report has been on the rise almost each
month in the past year and a positive surprise was also recorded in July when
score passed from 101.8 to 106.2 point mark. A small drop can be expected this
time, letting slightly down the Euro. Consensus forecast: 106.3. Previous:
106.70.
The
Technical View
In
last weeks technical view we had an overall bearish view (which turned out to
be wrong), however we talked about the 1.2921-1.2931 area saying that “bullish strength in this area
especially through the 1.2921-1.2931 area will help break the bearish technical
structure.” That is certainly
what we got! A very strong move through that broke the medium term down trend
and took the market higher.
The 1.2921-1.2931
area has no become an importan support zone and we anticipate that if some
selling does come into the market that this is the area where the bulls are
likely to make a stand.
What’s Important?
The German Ifo will
be the big individual Euro news release of the week, with the slew of PMI
releases also likely to have a an impact.
Key Words
PMI, German Ifo,
1.2921-1.2931 Support
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of Support and Resistance Trading
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DOW weekly chart shows key resistance around 10,700
http://stockmarket618.wordpress.com
Yes, I'll take the supersized nothing burger smothered in government cheese, and for my sides I'd like extra bailout beans and fraud fries.
Do you take credit cards?
Chart: ES
Appears that an AB=CD sell signal was triggered and a down channel has formed. Good luck!
http://www.screencast.com/t/NWZjMDBm
http://99ercharts.blogspot.com
What about the Irish bond auction tomorrow?
A great question if the capital formation process had any integrity - the ECB will not allow this auction to fail - Moody's decision reinforces that the bailouts will continue
Yes, unfortunately I have to agree with your comments.