SLOW START MONDAY COULD LEAVE INVESTORS ON THE SIDELINES
Monday is expected to be a slow session in the financial markets, with only a few data prints expected. Eager investors can expect a highly active week on the economic calendar beginning Tuesday.
Action on Monday begins at 06:00 GMT with the release of German industrial production. Output in Europe’s largest economy is projected to rise 0.7% in August, following a flat reading the month before.
At 08:30 GMT, Sentix will issue its closely-watched investor confidence index. The monthly reading is expected to come in at 28.5, which is slightly higher than the 28.2 in September.
Earlier in the day, Caixin China reported a drop in Chinese services PMI for the month of September. The headline PMI reading came in at 50.6 on a scale of 1-500 where 50 separates expansion from contraction. That’s down from 52.7 in August. The Composite Output Index was 51.4 in September, the weakest since June.
“The Chinese economy generally held up well in the third quarter,” said Zhengsheng Zhong, director of Macroeconomic Analysis at the CEBM Group. “However, the expansion in both manufacturing and services cooled in September, suggesting downward pressure on economic growth may re-emerge in the fourth quarter.”
In the currency markets, the US dollar index traded slightly lower on Monday. The greenback surged to multi-month highs last week before losing steam on Friday, the day the Labor Department revealed the first monthly drop in nonfarm payrolls in seven years.
The EUR/USD opened higher on Monday, but continued to trade in a firm downward cycle. The pair was last up 0.1% at 1.1741. However, the gains do little to alleviate concerns over the euro’s projected path. The common currency has declined in each of the last four weeks, as a combination of political jitters and a resurgent US dollar pressured the bulls. Immediate support is located at 1.1695. On the opposite side of the ledger the first resistance level is seen at 1.1780.
The British pound rose in Monday’s Asian session, although prices remained capped below 1.31 US. Like the euro, sterling has been in a broad downward consolidation against the dollar for the past three weeks. Cable faces immediate support at the May high of 1.3049. Below that level, investors can expect heavier losses.
The USD/JPY was little changed at the start of the week, a sign that investors were awaiting fresh trading catalysts in the form of economic data. The pair remains firmly pinned to the 112.00-113.00 region. This is not likely to change in the immediate term. Immediate support is located at 112.30. On the other side, the first resistance level is likely to be found at 112.85.