The European main figures as well as the stock index are strengthened by better-than-expected business signals from Germany and by less-than-expected GDP contraction in the second quarter. There were discussions that investors welcomed the phone calls between the US and China. But judging by the decline in China and Hong Kong stocks, that may not be the reason. Meanwhile, commodity currencies are just mixed. On the other hand, the Yen is generally trading lower, followed by the Dollar by a distance.
Technically, the Yen cross defense defends support levels in the short term well and maintains bullish term in the long run. The focus will now turn to 126.75 resistance in EUR / JPY and 140.20 resistance in GBP / JPY. Break that will resume recently. AUD / JPY’s focus is also back on 76.86 resistance with today’s rebound. Break will resume larger increase from 59.89.
In Europe, the FTSE is currently up 0.14%. The DAX has risen 0.76%. CAC has increased by 1.06%. The German 10-year yield is up 0.0470 at -0.414. Earlier in Asia, the Nikkei rose 1.35%. Hong Kong HSI fell -0.26%. China Shanghai SSE fell -0.36%. Singapore Strait Times rose 0.80%. Japan’s 10-year JGB yield increased 0.0102 to 0.034.
The USTR said progress has been made in implementing trade agreements between the United States and China
US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin finally held a “regularly scheduled call” with Chinese Deputy Prime Minister Liu He to review developments in the implementation of the Phase 1 trade agreement.
The USTR said in a statement that the parties took steps that China has taken to “implement structural changes” for greater protection of IP rights, “remove barriers” for US companies in financial services and agriculture, eliminate forced transfer of technology. China’s purchases of US goods were also discussed. It added, “both sides are seeing progress and are committed to taking the necessary steps to ensure the success of the agreement.”
The Chinese Ministry of Commerce also confirmed that the two sides had a “constructive dialogue on strengthening the coordination of the macroeconomic policies of the two countries”. Both sides “agreed to create the conditions and atmosphere to continue to push forward the implementation of phase one of the China-US Economic and Trade Agreement”.
The German Ifo rose to 92.6 on its way to recovery
The German Ifo Business Climates rose to 92.6 in August, up from 90.5, above expectations to 92.0. The current rating index rose to 87.9, up from 84.5, above expectations to 87.0. The expectations index rose to 97.5, up from 97.0, losing expectations of 98.1.
Ifo said, “companies rated their current business situation significantly more positively than last month. Their expectations were also a little more optimistic. The German economy is heading for recovery. ”
Looking at some details, improved services marked, improved to 7.8, up from 2.1. Service providers are certainly happier. Manufacturing rose to -5.4, up from -12.1, but remained negative as “many industrial companies still consider their current business to be poor”. Upward trend in trading ”flat noticeable, just edged higher up to -4.8, up from -5.1. Construction rose from -2.5 to 0.0.
Germany’s Q2 GDP decline ended with -9.7% qoq, revised up from -10.1% qoq. The single-digit decline was a pleasant surprise, but it is still much larger than the -4.7% qoq recorded in Q1 2009 during the financial crisis. It is also the sharpest contraction since quarterly calculations started back in 1970.
The UK employment balance fell to its lowest level since 2009
The British CBI realized that the sales balance fell to -6% in the year to August, falling from July’s 4%. They are expected to fall further next month at a faster rate of -17%. The employment balance in the retail trade fell sharply by -45%, the sharpest pace since February 2009. The quarter is expected to fall faster by -52%.
Alpesh Paleja, CBI Lead Economist, said: “The pour plan has proven effective in isolating workers and businesses in some of the hardest hit sectors during the pandemic, but these findings reinforce fears that many job losses have been delayed rather than avoided.
Indeed, the latest study shows that trade conditions for the retail sector remain tough, even against the backdrop of slowly returning business. Businesses will be on guard to deplete household incomes and the risk of further local closures that could potentially hit them in the pocket for the second time.
EUR / USD Mid-day Outlook
Daily pivots: (S1) 1.1764; (P) 1.1807; (R1) 1.1830; More… ..
EUR / USD is recovering mildly today but remains well within the range of 1.1711 / 1965. Intraday bias remains neutral for the time being. As long as 1.1711 support holds, further increase is, to put it mildly, beneficial. On the upside, a break of 1.1965 will extend the entire rise from 1.0635. However, given the bearish divergence state in the 4 hour MACD, break of 1.1711 should confirm short-term topping. Intraday bias will be returned to the disadvantage in the 55 day EMA (now at 1.1561).
In the bigger picture, the decline from 1.2555 (high in 2018) has already ended at 1.0635. Ladder shape 1.0635 is seen as the third leg of the pattern from 1.0339 (low in 2017). Further increase in rally should be seen to cluster resistance at 1.2555 next, (38.2% retracement of 1.6039 to 1.0339 at 1.2516). This will remain the preferred case as long as the 1.1422 resistance turned support holds.
Update of economic indicators
|06:00||EUR||Germany GDP Q / Q Q2 F||-9.70%||-10.10%||-10.10%|
|08:00||EUR||Germany IFO Business Climate Aug||92.6||92||90.5|
|08:00||EUR||Germany IFO Current assessment aug||87.9||87||84.5|
|08:00||EUR||Germany IFO expectations aug||97.5||98.1||97|
|10:00||British pound||CBI Realized sale Aug||-6%||8%||4%|
|13:00||USD||S & P / CS Composite-20 HPI Y / Y Jun||4.00%||3.70%|
|13:00||USD||House price index M / M jun||0.30%||-0.30%|
|14:00||USD||Consumer confidence August||93.2||92.6|
|14:00||USD||Enjoy home sales Christmas||775K||776K|