The US President decided to tease the markets once again yesterday through Twitter, saying that he very close to decide on the next Fed chair, without clarifying if Yellen is a possibility.
However, Janet Yellen was at the White House last week. Many reports suggested that the administration wanted to thank her for her service. Yet, she is still a candidate according to many polls, but she has the lowest probability for a second term.
Market Impact
Trump’s tweet has led the market to react rationally, Gold spiked, USD declines, while equities closed the day at the lows, while Tech companies were the biggest loser.
Gold managed to rise above $1280 once again, while it remains well below $1283 solid resistance until this report is released. So far, Gold has been trading within the same range since last week, with no clear signals so far.
At the same time, the US Dollar Index managed to remain below its solid resistance at 94.0 until this report is released, after opening the week on a gap higher.
Yet, there is a solid resistance area that the index will be facing over the next few days, which stands between 93.85 and 94.15, which remains intact since July of this year.
Only a clear breakout above that area, with a weekly close would turn the medium term outlook to bullish. Otherwise, another leg lower would be highly possible back below 93.60’s.
Positive European Data
Earlier this morning, Europe woke up on a positive note from a collection of economic releases, including the Manufacturing and the Services PMI’s in France Germany and the Euro Zone.
These figures keeps on supporting the ECB approach that QE needs to be trimmed in the coming meetings, with a possibility to stop the ongoing QE by the end of this year.
French Manufacturing PMI posted the fourth monthly increase in a row, posting the highest level of this year, and the highest reading 2011.
At the same time, Services PMI advanced for the second month in a row, one we have not seen since last year, posting the highest reading in six months.
In Germany, despite the fact that Manufacturing PMI has slowed to 60.5 down from 60.6, this is still the second highest reading since 2011 and less than the 60.1 anticipated.
Moreover, the Services PMI slowed to 55.2 down from 55.6, but this is also second highest reading of this year.
Watch The Euro Around 1.1725
Ahead of the ECB decision this week, traders are advised to keep an eye on some solid support areas, as there are multiple scenario ahead.
On the daily chart, it seems that the Euro is building a head and shoulders pattern, and currently is at the final stage to break the neckline which stands around 1.1720’s.
A break of which, would clear the way for another leg lower, possibly back to 1.14 on the medium term.
However, this would also need a fundamental catalyst, which might come from the ECB this week. If the ECB decided to keep the current policy unchanged with no trimming of the ongoing QE, sellers are likely to be in control.
On the flip side, if the ECB decided to pull 20B out of its ongoing QE, and promised the market to pull another 20B before the end of this year, this would likely keep the Euro bullish outlook and may test 1.1870 and maybe 1.20 later this week.
Edited by:
Nour Eldeen Al-Hammoury
Market Analyst
