FOREX: Parity Possibilities
A much calmer market early Friday relative to the sharp sell-off suffered by both EUR/USD and GBP/USD yesterday. Post-mortems of the move see most looking to technical breaks of support (we identified 1.2367 in GBP/USD and 1.0335 in EUR/USD), sprawling growth concerns for Europe that could be worsened by Trump's inauguration and political dissatisfaction across mainland Europe and the UK.
- EUR/USD parity again becomes a focus going forward. Options markets now priced an implied probability of 49% for the pair to touch 1.00 in the coming three months (up from 28% a week ago), and a 21% probability (up from 13% a week ago) of the pair closing below parity at end-Q1.
- Given the spot decline, no surprise to see downside interest ratcheting higher in hedging markets: DTCC data shows €2.7bln in puts traded with a strike of 1.00 or below since the turn of the year, with interest noted as low as 0.94 puts.
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SPAIN DATA: Services PMI Expansionary For 15th Consecutive Month
The Spanish November services PMI fell to its lowest since January at 53.1 (vs 54.9 prior), a little below the 53.3 expected. This still marks the 15th consecutive month in expansionary territory, though. As was also noted in Monday’s manufacturing PMI, the recent flooding had a negative impact: “Growth rates did however fall since October, largely due to the adverse impact of flooding in some areas of the country”
Key notes from release:
- “Panellists reported that underlying market demand remained positive, but flooding in some areas of Spain limited gains in both activity and new work”.
- “New export business was slightly lower, dropping for the first time since last February amid evidence of reduced market activity and the negative impact on demand of high prices”.
- “Spanish service providers limited their output price increases during November”
- “That was despite another steep increase in input costs”…“Panellists linked the upturn in operating expenses to a combination of higher supplier charges and increased wages for staff”.
- “This in turn was partially linked to a rise in the demand for workers, with Spanish service companies adding to their staffing levels for a twenty-sixth successive month in November”
- “Finally, looking ahead to the coming 12 months, companies are forecasting an increase in activity from present levels”
MNI: SPAIN NOV SRVCS PMI 53.1 (FCAST 53.3); OCT 54.9
- MNI: SPAIN NOV SRVCS PMI 53.1 (FCAST 53.3); OCT 54.9
SILVER TECHS: Monitoring Resistance At The 50-Day EMA
- RES 4: $35.226 - 61.8% of the 2011 - 2020 major bear leg
- RES 3: $35.167 - 2.00 proj of the Aug 8 - 26 - Sep 6 price swing
- RES 2: $33.125/34.903 - High Nov 1 / High Oct 23 and the bull trigger
- RES 1: $31.149/537 - 50-day EMA / High Nov 19
- PRICE: 30.933@ 08:11 GMT Dec 4
- SUP 1: $29.642 - Low Nov 28
- SUP 2: $28.446 - 76.4% retracement of the Aug 8 - Oct 23 bull cycle
- SUP 3: $27.686 - Low Sep 6
- SUP 4: $26.451 - Low Aug 8
The bear cycle in Silver that started Oct 23 remains in play and the metal continues to trade closer to its latest lows. Price has recently breached the 20- and 50-day EMAs, and traded through a trendline drawn from the Aug 8 low. A resumption of the bear leg would open $28.446, a Fibonacci retracement. Initial firm resistance to watch is $31.149, the 50-day EMA. A clear break of this EMA would highlight a possible reversal.
