Big increase of Factory Orders in Germany

In Germany there was a big increase of Factory Orders at 3.3%, what obviously will reflect on the rest German data. But European statistics is still not so impressive. The fall of retail sales turned out to be deeper than expected; it has dropped by 0.6%. Basically this dynamics is quite logical against the background of growing unemployment.

Last year Mario Draghi made his famous announcement, where he expressed the readiness to do everything in order to stabilize situation in the Euro zone. A lot of market participants were concerned, that eventually it could negatively reflect on inflation. Now the situation is the opposite: inflation is declining and approaching critical levels, and here the ECB can start acting in the framework of its mandate.

According to official numbers inflation in Europe by results of September constituted 0.7% in the yearly count. At that in Spain things are even worse: over there inflation dropped to 0.5%. In some segments there was a dip of prices. Anyway the Eurozone is not Japan, which is why deflation risks can carry new crisis features. With a weak economic growth the decline of prices can put peripheral states at verge of default.

Earlier a lot expected that after Bundestag election the ECB would soon start another program of 3 year banks’ crediting, aka LTRO. But October drop of inflation made things bewildering, and now there is a question on the agenda, how regulator will stimulate the real sector of economy. Besides there was a concern, that history would repeat, when banks used those credits to buy obligations of Euro states, rates were going down and governments just didn’t do anything.

At that a lot will depend on words of Draghi on the press conference. To be more precise a lot will depend on the character of inflation: whether this phonomenon is temporary or we see a stable trend. Even if rate downgrade is not going to happen, we still might see further fall of the pair EURUSD. And everybody will be happy, because expensive Euro has caused enough problems to German exporters already.

 

TECHINCAL ANALYSIS

 

EUR/USD

The Euro has rebounded from the support area at 1.3440-50. If it is able to stay above that level, it will be able to advance further up in the direction of 1.3550. Resistance is at 1.3525-30. Meetings of the ECB and BOE are at focus. Their decisions on interest rates are crucial for the pattern of the pair.

 

USD/JPY

The pair is under some pressure below resistance at 98.80. A break above it could push the pair up. Otherwise a break below 98.4 can weaken it, dragging the pair to 97.80 and subsequently further down.

 

GBP/USD

The Pound is currently in the phase of correction. Thus temporary weakness could push it to 1.6060 and perhaps even lower if the latter line is broken on the downside.

 

ECONOMIC CALENDAR

 

00:30         AUD               Employment Change

00:30         AUD               Full Employment Change

00:30         AUD               Unemployment Rate

06:45         CHF               SECO Consumer Climate

09:50         EUR               Spanish 10-Year Obligacion Auction

11:00         BRL               Brazilian CPI (YoY)

11:00         EUR               German Industrial Production (MoM)

12:00         GBP               BoE QE Total

12:00         GBP               Interest Rate Decision

12:45         EUR               Interest Rate Decision

13:30         EUR               ECB Press Conference

13:30         USD               Continuing Jobless Claims

13:30         USD               GDP (QoQ)

13:30         USD               GDP Price Index (QoQ)

13:30         USD               Initial Jobless Claims

13:30         USD               Real Consumer Spending

14:00         MXN              Mexican CPI (YoY)

18:30         USD               FOMC Member Dudley Speaks

18:50         USD               FOMC Member Stein Speaks

19:00         EUR               ECB President Draghi Speaks