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  • The US Dollar seems to be back on the offensive against its major counterparts, pressuring EUR/USD and NZD/USD lower as USD/JPY consolidates. USD/CHF surges past key resistance. Get your market update from @ddubrovskyFX here:https://t.co/MrLGSp7FYa https://t.co/XS0176LyOg
  • The Japanese Yen remains in focus with strength potential on risk aversion themes to go along with weakness on themes around higher rates. Get your weekly $JPY technical forecast from @JStanleyFX here: https://t.co/l4UICqJzJy https://t.co/dQ2pS0E4fp
  • Google finance-related search interest in 'Evergrande' has almost overtaken 'Covid'. 'Taper' doesn't even register on the scale https://t.co/P6H9sHFVIB
  • Gold prices gain as potential systemic risks out of China's Evergrande Group roil broader markets. Meanwhile, iron ore is ticking higher after a big drop on Monday as China steps up steelmaking curbs. Get your market update from @FxWestwater here:https://t.co/l4kAWDJ2wm https://t.co/b9m5ADIqqb
  • Gold remains higher despite positive Evergrande news out of China. Meanwhile, copper bulls are pushing prices upward as the potential for a housing crisis in China ebbs. Get your market update from @FxWestwater here:https://t.co/TK3MNntBdA https://t.co/14UKjR4w6M
  • GBP/USD has flattened overnight after its strongest rally in a month on Thursday. The British currency has been under pressure recently as an energy crisis has caused a number of gas providers to go bankrupt. Get your market update from @HathornSabin here:https://t.co/3D8s2eIVWv https://t.co/JDGNwKYyOn
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  • Gold could suffer further near-term losses due to rising U.S. Treasury yields and a weak technical picture for price action. Get your weekly gold forecast from @DColmanFX here: https://t.co/g9QvH3L4It https://t.co/Vz98E0Bl9U
  • Gold has been trending lower after failing to clear resistance in the $1835 area earlier this month. Get your $XAUUSD market update from @DColmanFX here:https://t.co/3hm1g3BHgf https://t.co/MdTQKEBCBx
  • Key break here in the 10-year #Treasury yield as it rises to the highest since late June Took out 1.4230 resistance, and the 100-day SMA Eyes now on the 38.2% Fib extension at 1.4775 Also potential falling resistance from March https://t.co/4cI6l210ui
Euro Losses on Italy Referendum Outcome May Be Fleeting

Euro Losses on Italy Referendum Outcome May Be Fleeting

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Euro selling on Italian referendum outcome may lack follow-through
  • British Pound to look past PMIs as Brexit appeal ruling looms ahead
  • US Dollar may rise if services ISM print boosts Fed rate hike outlook

The Euro underperformed in overnight trade after Italians resounding rejected a proposed constitutional change making it easier for a ruling government to remain in power in a referendum over the weekend. Prime Minister Matteo Renzi, who backed the measure, said he would resign following the loss.

The news stoked soured market-wide sentiment, with the anti-risk US Dollar and Japanese Yen trading higher while Asian stocks and S&P 500 futures fell. Financial markets are worried that Mr Renzi’s departure will usher the anti-Euro Five-Star Movement (M5S) into power.

The referendum outcome may be a blessing in disguise for markets trembling at the thought of what may happen if an administration determined to take the Eurozone’s third-largest member out of monetary union. The “no” vote likely means M5S can’t take power without forming a coalition, a move it staunchly opposes.

Near-term uncertainty may keep pressure the single currency for now but follow-through might prove challenging as the ECB rate decision looms ahead. Significant changes to the central bank’s stimulus effort are expected and traders probably won’t want to show strong directional commitment until detail emerge.

The New Zealand Dollar likewise faced selling pressure as Prime Minister John Key unexpectedly announced that he will step down from his post and opt not to contest next year’s election. The markets were caught unprepared for the announcement, triggering a knee-jerk selloff.

Looking ahead, November’s service-sector and composite UK PMI readings headline the European data docket. The outcomes may not generate a significant response from the British Pound however as traders wait for the UK Supreme Court to decide if the government needs Parliament’s approval to trigger Brexit.

The administration is appealing a High Court decision that held Prime Minister May can’t unilaterally trigger Article 50 of the Lisbon Treaty formally initiating the UK exit from the EU. Markets see a need to go through Parliament as likely to yield a “soft” rupture that keeps access to the single market vs. the “hard” alternative.

Sterling is likely to rise if the Supreme Court rules against the government and upholds the prior verdict. A decision granting the appeal will probably produce the opposite result. The decision is due by Thursday, with the UK unit likely to struggle to find lasting momentum in the interim.

Later in the day, the US ISM Non-manufacturing Composite reading enters the spotlight. A pickup in service sector activity growth is expected. A strong result in line with a recent string of upside surprises on US data outcomes may further steepen the projected Fed rate hike cycle and boost the greenback.

See the schedule of upcoming webinars and join us LIVE to follow the financial markets!

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

22:30

AUD

AiG Perf of Services Index (NOV)

51.1

-

50.5

23:50

JPY

Loans & Discounts Corp (YoY) (OCT)

2.29%

-

2.11%

0:00

AUD

Melbourne Institute Inflation (MoM) (NOV)

0.1%

-

0.2%

0:00

AUD

Melbourne Institute Inflation (YoY) (NOV)

1.5%

-

1.5%

0:00

NZD

ANZ Commodity Price (NOV)

2.7%

-

0.7%

0:01

GBP

BRC Shop Price Index (YoY) (NOV)

-1.7%

-

-1.7%

0:30

AUD

ANZ Job Advertisements (MoM) (NOV)

1.7%

-

1.0%

0:30

JPY

Nikkei Japan PMI Services (NOV)

51.8

-

50.5

0:30

JPY

Nikkei Japan PMI Composite (NOV)

52.0

-

51.3

0:30

AUD

Inventories SA (QoQ) (3Q)

0.8%

0.3%

0.2%

0:30

AUD

Company Operating Profit (QoQ) (3Q)

1.0%

3.0%

6.5%

1:45

CNY

Caixin China PMI Services (NOV)

53.1

-

52.4

1:45

CNY

Caixin China PMI Composite (NOV)

52.9

-

52.9

5:00

JPY

Consumer Confidence Index (NOV)

40.9

42.8

42.3

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

8:45

EUR

Markit/ADACI Italy Services PMI (NOV)

51.6

51.0

Low

8:45

EUR

Markit/ADACI Italy Composite PMI (NOV)

51.6

51.1

Low

8:50

EUR

Markit France Services PMI (NOV F)

52.6

52.6

Low

8:50

EUR

Markit France Composite PMI (NOV F)

52.3

52.3

Low

8:55

EUR

Markit Germany Services PMI (NOV F)

55.0

55.0

Medium

8:55

EUR

Markit/BME Germany Composite PMI (NOV F)

54.9

54.9

Medium

9:00

GBP

New Car Registrations (YoY) (NOV)

-

1.4%

Low

9:00

CHF

Total Sight Deposits

-

527.6b

Low

9:00

CHF

Domestic Sight Deposits

-

463.0b

Low

9:00

EUR

Markit Eurozone Services PMI (NOV F)

54.1

54.1

Medium

9:00

EUR

Markit Eurozone Composite PMI (NOV F)

54.1

54.1

Medium

9:30

GBP

Official Reserves Changes (NOV)

-

-$1156m

Low

9:30

GBP

Markit/CIPS UK Services PMI (NOV)

54.0

54.5

Medium

9:30

GBP

Markit/CIPS UK Composite PMI (NOV)

54.6

54.8

Medium

9:30

EUR

Eurozone Sentix Investor Confidence (DEC)

14.3

13.1

Low

10:00

EUR

Eurozone Retail Sales (MoM) (OCT)

0.8%

-0.2%

Medium

10:00

EUR

Eurozone Retail Sales (YoY) (OCT)

1.7%

1.1%

Medium

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.0532

1.0596

1.0630

1.0660

1.0694

1.0724

1.0788

GBP/USD

1.2343

1.2511

1.2620

1.2679

1.2788

1.2847

1.3015

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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