UK’s economy pushes back up slightly, as construction and services sectors have improved a bit. That said, production remained more on the flat side overall, which keeps traders closer to reality, that there is still a huge way to go, in order to get the British economy to more stable levels. Certainly, one factor which is not allowing to do that is the ongoing Brexit issue, and as we know, this problem is here to stay for now. UK will release their employment numbers today, which will be carefully monitored by market participants, in order to understand if the British labour market is still resilient to the fluctuations in the domestic economy.
UK was again at centre stage yesterday, with both economic data and political news. First, the UK released its YoY GDP number, together with the preliminary QoQ GDP figure for Q3. Probably all the focus fell on the QoQ reading, which came out below expectation of +0.4%, at +0.3%. But despite the miss by one tenth of a percent, the number was still way better than the previous reading of -0.2%. Traders took that in a positive way and pushed the British pound higher against all of its major counterparts. A rise in the preliminary business investment numbers also helped support GBP on its route higher. That said, the initial push higher by the pound was still not as strong, due to other sets of data, which came out as a slight disappointment. The YoY GDP for Q3 number fell from the previous +1.3% to +1.0%. Manufacturing production on a YoY basis went from the adjusted -1.6% to -1.8%. But the MoM manufacturing production improved, as it rose to -0.4% from the adjusted -0.7%, despite the forecast being at -0.3%. The MoM and YoY industrial production numbers were a bit of a relief, even though they came out below forecasts. The figures were much better than the previous ones, which helped support the pound in its journey higher.
Another boost for GBP came from the UK political side, after Nigel Farage and his party decided to back down from going against the Conservative seats in the upcoming election on December 12th. Mr Farage explained this that going against all seats could create a so-called “hung parliament”, where the winning party would still not receive enough support from the voters to have the majority. But, of course, we have to take everything with a pinch of salt, as these are politicians who are talking. Most likely, Nigel Farage understands that his Brexit Party won’t be able to win during this election, but instead there could be a chance to get closer to power if a coalition would have to be made in the end. And given that his and Jeremy Corbyn’s views are way too far apart, the best option here would be to keep close to the Tories and Boris Johnson. Although two weeks ago, Mr Farage expressed his huge dissatisfaction with Mr Johnson’s Brexit deal, still, the ultimate goal of that plan is closer to the ideology of the Brexit Party. The certain disagreements over the details of the plan can still be debated after the election.
In terms of economic data releases today, UK will once again take the centre stage, as we will be getting its unemployment figures for the month of September. There should not be any surprises, as the number is expected to have remained the same, at 3.9%. Average earnings (including and excluding bonus) are also believed to have stayed the same as previous. In fact, both numbers are believed to show up exactly the same, at +3.8%. If, by any chance, we get some sort of deviation from the forecasts, GBP could move accordingly. The move, probably, would not be a significant one, but if Monday’s positivity spills out into Tuesday as well and the figures come out slightly better, this could give another slight boost to the British pound.
From around mid-October, GBP/CAD is seen hanging around in an ascending triangle pattern. Such formations tend to break to the upside, according to the TA rules, but until we get a clear break through the upper bound of it, we cannot examine higher areas. This is why we will stay neutral, at least for now.
If, eventually, we get a clear break through the upper side of the aforementioned triangle, at 1.7093, this would confirm a forthcoming higher high and more buyers could see it as a good opportunity to join in. If so, the pair could then travel to the 1.7180 hurdle, a break of which might set the stage for a test of the 1.7314 level, marked by the low of April 22nd.
Alternatively, if GBP/CAD breaks the lower side of the previously-discussed pattern and the rate slides below the 1.6875 area, marked by the low of November 8th, this could spook the bulls from the field temporarily and the bears might take control for a while. The pair may then drift to the 1.6812 zone, a break of which might send GBP.CAD to the 1.6725 level, marked by the lows of October 24th, 27th and 29th.
EUR/NZD continues to move inside a short-term rising channel pattern, which started off roughly in the first days of November. This morning, we are seeing a bit of a decline in the rate, but as long as it respects the boundaries of that channel, we will continue aiming slowly to the upside, hence why we will stay somewhat bullish, at least for now.
Although the pair has moved slightly lower, we may see that move as a temporary correction before another leg of buying, because the rate is still within the aforementioned rising channel pattern. If EUR/NZD slides a bit lower, but fails to move below the 1.7360 hurdle and rebounds from it, this might lead the pair to 1.7438 barrier again, a break of which could open the door for some higher areas. One of those resistance areas could be at 1.7466, marked by the high of October 31st.
On the other hand, if the lower bound of that channel gets broken and the rate falls below the 1.7312 hurdle, which is the low of November 11th. This when more sellers could be jumping in on the bandwagon, potentially pushing the pair lower. We will then target the 1.7275 obstacle, a break of which may lead EUR/NZD to the 1.7238 level, marked by the inside swing high of September 11th.
One piece of data that everyone should keep an eye as well, are the German ZEW economic sentiment and conditions readings for the month of November. Although both are still believed to have remained in the negative territory overall, the forecasts state that there is room for some improvement. The expectation is that the sentiment figure has gone up from -22.8 to -13.2, and the conditions one has risen from -25.3 to -22.0. If so, traders might try and push the euro slightly higher. But that could be a temporary occurrence, as the common currency is currently under some selling pressure.
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