Flash euro area GDP numbers and ECB policy meeting grab the attention this week. But we believe this week’s EBC meeting will be uneventful.
All the eyes on the December ECB meeting. Since the beginning of Q4, most central banks are becoming increasingly hawkish except the European Central Bank. So, we are focusing more on the ECB.
Danske Bank said, “there will be plenty of speculation regarding the end of the PSPP and some form of increasing the PSPP purchase. We expect ECB to flag risks to the outlook and as such not deviate from the current baseline and send new policy signals already now but wait for a new projections round in December”.
Data-wise, last week’s Eurozone flash PMIs hit a five-month low. “September’s flash eurozone PMI highlighted an unwelcome combination of sharply slower economic growth and steeply rising prices.” IHS Markit reported. By sector-wise, service clearly outperformed manufacturing for a second month running.
Growth slowed especially sharply in Germany, down to the lowest since February, and slipped to the weakest since April in France. The rest of the region as a whole also recorded the slowest expansion since April, as per the IHS Markit report.
When preparing this, the euro is trading at 1.1600, the lowest level since July 2020, and trading below all moving averages on the daily chart except 20MA.
The immediate support is available at 1.1500- 1.1485; its 50.0fib reaction below here 1.1280 exists, which is it’s 61.8fib and 161.8fe. Flipside, 1.1640-1.1660, and 1.1700-1.1720 are the key resistances to watch if the price increases. We still favor the sell-on-rise strategy, aiming for 161.8fe, at 1.1280 with a stop loss at 1.19000 on a weekly closing basis.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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