Market sentiment was quite positive last week, despite quite a small amount of economic data. U.S. dollar signalled its willingness to rise as it recorded its daily highs during the week, but each time it has returned back to its initial point, indicating that investors remain cautious and are waiting for this week's important economic indicators.
The last week of the month is always relatively calm and this time there was also not much economic data published in the U.S. Consumer Confidence Index was at 125.5 points and remained stable over the past few months. Durable goods orders, excluding military and aviation equipment, increased 1.2% month-on-month, the fastest rise since summer 2018. Sales of new homes totalled 733,000 a year and were at an all-time high, suggesting that the real estate market continues to show signs of recovery. The number of new unemployed applications decreased to 213 thousand.
The main currency pair EUR/USD was also relatively calm and fluctuated around the 1.10 level. Economic data in Europe included preliminary inflation in November, standing at 1.0% per annum and, although on a moderate upswing, remained well below central bank targets. Positive labour market figures were published in Germany, with 16,000 new employees, the first significant improvement after a good six months of stagnation. The German Business Climate Index, Ifo, was 95.0 points, a 3-fold rise, but overall, the index remains at multi-year lows since 2013. EUR/USD has ended the trading week unchanged.
The main Asian pair, USD/JPY, has been trending upward and has moved above its 200-day moving average. The pair ended the trading week at its highest point since May 2019. Economic data in Japan included preliminary industrial volumes changes, which, after a brief rebound last month, returned to negative territory. Industry data showed a drop of -7.4% year-on-year and -4.2% month-on-month. The sector reflects worsening sentiment around the world, although the confidence of the Japanese population is optimistic, which showed a rebound to 38.7 points and was at its highest level since July. USD/JPY pair closed the week appreciating +0.8%.
The British pound rose modestly but remained in the trading channel formed since mid-October. No important economic data was published in the country, and no Brexit news appeared on the political arena either. GBP/USD has ended the week appreciating +0.8%.
This week will begin with important results of manufacturing PMI indices from major economies. No significant data is planned for Tuesday, but service PMI indices will be expected on Wednesday, especially in Europe, which has seen the sharpest slowdown. German industrial orders and European retail sales will be announced on Thursday. On Friday, the focus will shift to U.S. labour market figures.
According to Admiral Markets market sentiment data, 64% of investors have long positions in the EUR/USD pair (increased +1 percentage point compared to last week). In the main Asian pair USD/JPY, 24% of investors have long positions (down -25 percentage points). In GBP/USD, 28% of participants expect a rise (+4 percentage points). This kind of market data is interpreted as contraindicative, therefore appreciation is likely in USD/JPY and GBP/USD pairs and depreciation in EUR/USD. Analysis of positioning data should always be accompanied by fundamental projections and technical analysis.
Sources: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com
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