Euro wavers as ECB consider more stimulus
The euro was little changed in overnight trading after the ECB published the minutes of its previous meeting. The minutes showed that the bank was considering more stimulus to support the economy. The potential stimulus would include allocating more funds to the quantitative easing program. However, some members of the committee indicated that they were becoming unhappy with more easing citing, “possible non-linearities, side effects and diminishing returns in an environment of high uncertainty.” Later today, the euro will react to business and consumer confidence data released by the European Commission. It will also react to the Swedish GDP and the preliminary French inflation data.
The Japanese yen strengthened in early trading even after weak inflation data from the country. According to the statistics agency, consumer prices in Tokyo dropped by 0.7% in November, lower than the previous month’s contraction of 0.3%. Core consumer price also declined by 0.7%, lower than the previous drop of 0.5%. These numbers mean that Japan is experiencing a substantially long period of deflation at a time when the Bank of Japan is buying unlimited bonds to support the economy.
The Australian dollar wavered in early trading after China released strong industrial profit data. According to the country’s statistics office, industrial profits increased by 0.7% in October, which is further evidence that corporate China is firing on all cylinders. The profits had declined by 2.4% in the previous month. From January to October, profits increased by 28.2%, which is impressive considering the prevailing environment. These numbers are important for Australia since China is its biggest market. Elsewhere, we will receive the national house price index data from the UK and the Norwegian unemployment change data.
The EUR/USD is in a tight range today as traders reflect on the ECB minutes. It is trading at 1.1915, which is in the same range it has been this week. The price remains slightly above the dynamic support of the 25-day moving average. It is also slightly above the ascending yellow trendline while the accumulation and distribution indicator has continued rising. Therefore, for today, the pair will likely remain at the current range.
The AUD/USD pair is little changed today as traders reflect on strong economic data from China. It is trading at 0.7365, where it has been for the past few days. It is also slightly above the 25-day moving average while the signal and histogram of the MACD are close to the neutral level. Similarly, volatility, as measured by the average true range (ATR) has continued falling. Therefore, the pair is likely to end the week at the current range and potentially break-out next week.
The USD/JPY price declined to a low of 104.03. On the hourly chart, the price moved below the 15-day and 25-day exponential moving averages. The price also moved below the descending channel pattern in a victory for the bears. Also, oscillators, like the Relative Vigour Index (RVI) has continued to decline. Therefore, the pair will likely continue moving lower, with the next target being at 103.50.