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Eurozone ESI Stronger than forecasts

Market Analysis

EURCHF, H4 & Daily

German HICP inflation steady at 1.8% y/y in September, according to preliminary data. The national CPI rate also held steady at 1.8% y/y, despite the fact that energy and food price inflation accelerated sharply. Reported earlier the Spanish headline rate fell back to 1.9 y/y in September from 2.0% y/y in the previous month and the  overall Eurozone HICP rate seems that it will equally remain unchanged in September, thus adding little to the ongoing debate at the ECB about the “recalibration” of policy parameters for 2018. Earlier,  Eurozone ESI economic confidence higher than expected at 113.0, up from 111.9 in the previous month. Industrial confidence rose to 6.6 from 5.0, while the services sector reading improved to 15.3 from 15.1 and consumer confidence was confirmed at -1.2, also up from the previous month. Together with the strong PMI readings, the data adds to signs that the recovery continued to strengthen in Q3, which backs the ECB’s move towards a slightly less accommodative policy stance and a reduction in monthly QE purchases next year, although there doesn’t seem to be a firm majority yet for a commitment to an end date for QE.

EURUSD’s rebound looks to have stalled around 1.1770, gains above which have been repeated beat back down. EURCHF on the other hand, lifted 30 pips near 1.1460 today breaking the 20-period Moving average in both 4-hour and Daily charts at 1.1454 and 1.1459 respectively. The long legged Gravestove doji candle on Wednesday along with the bullish movement above the 50-Day MA and 20 Day MA was sufficient to prompt a LONG position at 1.1461, with targets in 2 timeframes (i.e. 4-hour and Daily repectively).

Target 1 (4-hour)  is the 38.2 Fibonacci retracement level and 14 period ATR at 1.1490. The Target 2 is at 1.1500  which is around the 50.0 Fibonacci level  and the confluence of 200-period MA in hourly chart and 50-period MA in 4-hour chart. The Parabolic SAR remains negative , however Stochastic turned positive earlier. This position gets along with the higher time frame trend.

Meanwhile, a consolidation is possible at current levels as the pair remain in the middle of the Bollinger band , while the RSI at 52 is neutral to positive. A breach and break of the recent fractal low at 1.1400 which is also our support level and the 50-Day MA will negate this position.

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Andria Pichidi

Market Analyst


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