After another record week on US markets and a third successive positive week for European markets last week it’s expected to be normal service resumed as the markets prepare for the restart of official economic data from the US.
It also brings with it the prospect of being able to focus on economic data for market direction, as opposed to political factors, which is always welcome.
We start tomorrow with the release of the delayed US non-farm payrolls data for September. If it had been released on time it would have been used as a useful indicator of the timing of a possible Fed taper if political events and a US government shutdown hadn’t intervened in the meantime.
As it is tomorrow’s numbers look set to be no more than a footnote on the way to next month’s October figures, which could well be skewed by the recent shutdown, and are unlikely to give any clues as to the next steps on Federal Reserve policy on the current pace of asset purchases.
While this week is set to be an important week for the resumption of US government operations, it is no less an important week for the UK economy, as well as the European economy with the release of a number of important economic indicators.
Starting with the UK, expectations are high at the end of this week that Q3 GDP could well come in higher than the final Q2 GDP number with various estimates upwards of 0.8% being bandied about. In the intervening period we also have the latest Bank of England minutes, as well as the latest CBI Business optimism figures for October, which are expected to show a significant jump from the September figure.
It’s also a key week for Europe with the latest German and French flash manufacturing and services PMI numbers for October, while the latest German IFO data for is expected to give a much better indicator of the state of the German economy than last week’s rather inflated ZEW number.
Later this morning the Bundesbank will be publishing its latest monthly report for October which is likely to err on the side of caution, with growth estimates set to remain below the Q2 number of 0.7%.
In September the bank cited fairly strong domestic demand as helping to boost the economy, and while rising consumer confidence is expected to sustain the rebound, a surprise rise in unemployment claims earlier this month could well see some caution creep into the banks assessment.
EURUSD – the euro appears to be finding some resistance near the highs this year at 1.3710, having pulled back from there late last week. With dips continuing to be bought into the risk remains for a break above the 1.3710 level, which would argue for a move towards the 1.4000 level.
The key support area continues to remain at the 1.3450/60 area, with only a break below the 1.3450/60 area which has acted as support this month would signal a move towards the 1.3320/30 level.
GBPUSD – despite a brief dip to 1.5890 last week we’ve seen a sharp rebound back through the 1.6000 area which suggests we could well be set for further sterling gains towards 1.6300. The key resistance on the upside remains at the 1.6325 trend line from the 2009 highs at 1.7045.
EURGBP – the 0.8500 area continues to act as a bit of a barrier with the 200 day MA at 0.8524 behind the highs this month. While below this key barrier the bias remains for a move back towards the 0.8420 area in the short term. A move back below the 0.8420 area retargets the 0.8280 level.
USDJPY – we continue to get price compression between 99.65 trend line resistance from the May highs at 103.75 and the 200 day MA at 97.15. A clear break below the 200 day MA and the lows this month could well trigger further US dollar losses towards the August lows at 95.80.
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