· The dollar was higher against most of its G10 peers during the European morning Monday, as global risk aversion after the deadly attacks in Paris kept investors in a broad-based search of safety zone. It was lower vs NOK, while it was virtually unchanged against GBP and SEK.
· The euro filled its opening gap against the dollar, but weakened again after comments from the ECB Vice-President Vitor Constancio reaffirmed that further monetary policy options are available if needed. The slowdown in EM economies point to downside risks to euro-area’s inflation. In the meantime, the bloc’s final CPI was revised slightly higher in October from an unchanged reading in the previous month. Although this was a moderate sign of improvement from the previous month, the risk of deflation still persists and investors’ reaction was muted on the news. As we head to the December policy meetings from the ECB and the Fed, expectations of wider monetary policy divergence should keep EUR/USD under selling pressure.
· EUR/JPY traded higher during the European morning Monday, breaking back above the resistance (now turned into support) barrier of 131.60 (S1). This morning’s gap below 131.60 (S1) confirmed a forthcoming lower low on the daily chart and turned the short-term outlook negative in my view. For now however, I see signs that the current rebound may continue for a while. A clear move above 132.05 (R1) is likely to confirm the case and could open the way for another test near the 132.75 (R2) area. Our short-term oscillators support the notion as well. The RSI rebounded and now lies fractionally below its 50 line and could move above it soon. The MACD, although negative, shows signs of bottoming and could cross above its trigger line. As for the broader trend, on the 22nd of October, the rate fell below the upside support line taken from the low of the 14th of April. This has turned the medium-term outlook negative. What is more, the rebound from 130.60 (S2) has confirmed a lower low on the daily chart and as a result, I would treat today’s short-term advance as a corrective move of the medium-term down path.
· Support: 131.60 (S1), 130.60 (S2), 130.00 (S3)
· Resistance: 132.05 (R1), 132.75 (R2), 133.20 (R3)