Currency market. EUROPEAN session review: Euro rose after Draghi’s comments

Data released: 

08:28 GMT Germany Markit Manufacturing PMI (Nov) Preliminar 52.0 52.0 51.7 

08:28 GMT Germany Markit Services PMI (Nov) Preliminar 54.5 53.0 52.9 

08:58 GMT EMU Markit Manufacturing PMI (Nov) Preliminar 51.5 51.5 51.3 

08:58 GMT EMU Markit PMI Composite (Nov) Preliminar 51.5 52.0 51.9 

08:58 GMT EMU Markit Services PMI (Nov) Preliminar 50.9 51.9 51.6 

09:30 GMT UK Public Sector Net Borrowing (Oct) £6.383B £4.000B £8.619B 

10:05 EMU ECB President Draghi's Speech 

11:00 UK CBI Industrial Trends Survey - Orders (MoM) (Nov) 11 0 -4 

The euro and pound rose sharply after EU and UK news. As for UK, CBI Industrial Trends Survey was much more better then expected. As for EU, ECB governor Mario Draghi said that market should not try to infer negative deposit rates. Speaking in Berlin, the ECB governor noted that negative rates were discussed in last policy meeting but there has been no news since then. 

EURO 

In France preliminary purchasing managers index for November showed a contraction in both the services and manufacturing sector. The manufacturing PMI fell to a six-month low of 47.8, while the services reading slid to a fourth-month low at 48.8. 

The story was a bit brighter in Germany and the broader euro zone, however, where the manufacturing PMI climbed to a 29-month high both places. 

EUR/USD rose after Draghi’s comments and set session high at $1.3478. Now support comes at $1.3400/90 (Nov 13 lows) and $1.3300/90 (Nov 7 lows). Initial resistance is around $1.3480 and $1.3580 (Nov 19 highs). Above $1.3600 resistance placed at $1.3620 (61.8% Fibo of the $1.3830 - $1.3300 decline). 

POUND 

The pound rallied toward a daily high of 1.6140 after data showed UK CBI industrial survey rose much more than expected in November. 

Data released also showed UK Public Sector Net Borrowing was at £6.383 billion in October, following £8.619 billion registered in September. Analysts expected £4.000 billion. 

GBP/USD trades below recent highs on $1.6180 (initial resistance) with stronger resistance remains at $1.6200 (phycological level). Initial support is around $1.6070 (Asian lows) and $1.5900/90 (Nov 14 lows) with a break under widens losses to $1.5850 (Nov 12 lows). 

YEN 

Japan’s currency fell after the Bank of Japan kept its pledge to expand the monetary base by as much as 70 trillion yen a year at today’s meeting. 

BOJ’s Kuroda said today that the BOJ won’t hesitate to adjust policy if needed: 

-expects US economy to pick up as downward pressure from fiscal stand-off decreases; 

-BOJ still has steps available to respond to upside, downside risks; 

-want to monitor market moves; 

-Japan’s economy moving in line with forecasts so it’s too early to talk of specific steps; 

-expects Japanese lending to graually increase as QE helps economy improve; 

-outlook for overseas economies is brightening somewhat due to US/EU recoveries; 

-some nations, inc some in Europe may be in disflationery phase; 

-China’s economy likely to sustain stable growth. 

USD/JPY tested Y101. Above resistance comes at Y101.50 (Jul 7 high). Initial support comes at Y100, then - at recent lows on Y99.40, below - near Y99.00 (Oct 17 highs). 

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