|Tentative||EUR||German Retail Sales m/m||-0.4%|
|All Day||EUR||German Prelim CPI m/m||0.1%|
|08:00||CHF||KOF Economic Barometer||105.8|
|08:00||EUR||Spanish Flash CPI y/y||1.8%|
|08:00||EUR||Spanish Flash GDP q/q||0.9%|
|09:30||GBP||Net Lending to Individuals m/m||5.6B|
|12:30||USD||Core PCE Price Index m/m||0.1%|
|12:30||USD||Personal Spending m/m||0.1%|
Asian markets spiked higher on Friday, driven by the solid corporate earnings coming from the U.S. and by the prospect of more easy money policy from the European Union. Japan’s Nikkei outperformed in the region, with a weaker Yen versus the U.S. dollar helping to lift Japanese exporters. Hong Kong’s Hang Seng bounced back from weakness earlier in the week. Technology shined across the region as Asian investors had the first opportunity to respond to the strong earnings posted by Alphabet, Amazon and Microsoft after the close of U.S. markets Thursday. Australian equity markets bucked the rising trend in the region however, after an Australian court ruling left the country without a majority in its government, causing widespread uncertainty among investors.
European markets were broadly higher on Friday, with Germany’s DAX reaching a new record high for a second consecutive day as a sliding Euro and strong U.S. corporate earnings helped lift equities across much of the region. One country which saw equities moving lower was Spain, where reports that the Catalan Parliament had voted for independence sent the IBEX 35 as much as 2% lower initially. The index ended the day with a 1.5% loss, but the selling could continue as Madrid has invoked Article 155 and has taken over the governance of Catalonia, removing President Carles Puigdemont from office, along with the regional ministers. London also saw equities moving higher as the Pound continued to soften, giving a boost to British exporters.
U.S. markets were broadly higher Friday, with the best gains coming from the technology sector. The strong rally in tech was a result of blowout earnings from tech giants Intel, Microsoft, Amazon and Alphabet after the close Thursday. While all the major indices gained, the Nasdaq was the clear winner as it tacked on 2.2%, outperforming the Dow, which gained just 0.1%, by the widest margin in 15 years. Also helping to propel stocks higher was some solid economic data, with consumer sentiment at its strongest in 13 years, and third quarter GDP coming in at 3%. This gives the Fed more ammo for raising rates at their December meeting, and we expect this to begin being priced into the market today.
The pair looks as if it may have made a bottom on Friday as it traded as low as 0.7621 before turning around to finish the day higher. The resulting candle is a classic hammer, a bullish reversal candle that is formed of a long lower wick and a small body with no upper wick. If it is a reversal the confirmation will come as it crosses above the 0.7700 level, and it should continue from there for an additional 100-125 pips before running into resistance at the 0.7800 to 0.7825 level. There’s a chance we could see gains for the pair early in the session, and into the North American trading session, but keep an eye on the CPI and consumer spending data from the U.S. If it is stronger than expected, we could get a USD rally that would likely take this pair lower regardless of any technical set-ups.
While the pair did manage to close just slightly above the 1.1600 level, it still broke the minor support just above at the 1.1625 level, and that indicates further downside from the pair. In addition, we now have the official declaration of independence from Catalonia, and Spain in turmoil, and this is quite likely to weigh on the Euro during Monday’s trading session. The next minor support level is just below the 1.1400 level, giving this pair a minimum of 200 pips in downside potential easily, and since it is a minor support level we could see additional downside depending on the results of German, Spanish and U.S. economic data to be released Monday.