The bad news continues to hammer the single currency in the second part of the week, as shown by the Bundesbank revision of its growth forecasts for the leading eurozone economy. In fact, the lender sees economic activity in Germany expanding 0.7% in the present year and a meager 0.4% in 2013. The news have confirmed what was already obvious but nobody was daring to say: the euro crisis has started to dent the solidity of the German fundamentals, despite the resilience of its manufacturing sector as demonstrated by the late results out of the factory orders.
… Kiss 1.3000 good bye
Against the vast majority of opinions, the ECB was eventually the euro's executioner on Thursday. Although the monetary policy remained unchanged, the subsequent press conference by President M.Draghi pushed the EUR/USD off the cliff, free falling from highs in levels just shy of 1.3090 to today's lows below 1.2920. The ace in Draghi's sleeve was pointing southwards rather than extending the late rally.
However, euro bulls are not giving up. There is still one big chance lying ahead in order to take over the markets and deal with unfinished business: today's NFP. According to Richard Lee, Contributing Analyst at FXstreet.com, "A higher than expected figure would bolster notions of economic stability in the U.S., allowing for potentially better figures when the 4th quarter is all said and done". The expert adds that this case scenario would support further strength in the greenback, adding even more bearishness to the euro context.
From a technical perspective, expert Karen Jones at Commerzbank suggests "EUR/USD has sold off to its 38.2% retracement of the recent leg higher at 1.2948 and we expect to see this hold the initial test and prompt a rebound. Rallies will find initial resistance at 1.3017/23 and will ideally remain contained by the 1.3127 recent high".
… Monday's docket
Risk trends will be put to the test right before Monday's session kicks in, as Chinese inflation figures and Japanese GDP for the third quarter will be in the limelight on Sunday night. Germany trade balance results will follow, ahead of French industrial output and a key 5-year auction in Spain. The Sentix index in the euro bloc will close the docket, expected to 'improve' to -17.0 in December from -18.8
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