Monday started in a continuous mode of the previous weeks’ price action. The single European currency broke technical support of 1.1300 versus the greenback, charting new lows in 2018. It felt like the downtrend for EUR/USD is going to accelerate as the static horizontal support held the bears from further achievements several times this Autumn. The daily trading momentum was one-way directional without any significant economic data on cards. The only exception was Italian Industrial Production which showed a slightly lower decline than it’s been forecasted by economists. The main driver though was the demand for USD CALL options across the board.
Tuesday started with German Inflation reports. Consumer Price index in the leading European economy was flat in October compared to the previous months, matching the analysts’ expectations of 0.2% growth on monthly basis and 2.5% yearly. French Non-Farm Payrolls slowed down in October while Eurozone ZEW economic expectations index dropped to its worst reading in seven months at -22.0. All of those reports were negative for EUR/USD and the prediction was to continue the downtrend. However, CALL option buyers stepped in with the heavy volume and the second trading session in the week was extremely volatile. Most of the financial assets were changing their directions throughout the whole day. The British reports were also negative for the sterling. Claimant Count change failed to meet the market expectations while the Unemployment rate rose in October to 4.1%. The negative fundamental outlook was multiplied by a lot of headlines about the Brexit topic. Some of them were optimistic, promising the deal with the EU in the nearest future. The others were negative, underlying the complexity of the negotiations. Anyway. The market reacted with buying PUT options for almost all of the sterling pairs. The U.S. economic calendar was not that busy with just some of the FOMC members speaking. Traders struggled to find a clear direction though.
Wednesday was the key day for the market sentiment to change. That all started with the Gross Domestic Product in Japan. The third largest economy in the world faced a faster-than-expected decline in the GDP growth on monthly basis (-1.2% versus -1.0% expected) and flat reading yearly (-0.3%, in line). The rest of the secondary components of that report were also negative which drove USD/JPY lower as traders were buying PUT options on safe-haven flows. Australian Wage Price index was flat (0.6%), however, AUD/USD was trading on a CALL options mode after China released stronger-than-expected Industrial production report (5.9% versus 5.8% forecasted), Fixed Assets Investments growth (5.7% yearly) and steady unemployment. The only disappointment was the retail sales report in China. But the overall impression was optimistic about the second largest economy worldwide. German Gross Domestic Product, in contrast, disappointed European investors missing the market consensus of 1.3% growth on yearly basis (the report showed 1.1% growth). French and Spanish CPI was in line with the expectations, so the overall sentiment in EUR/USD was determined by the demand for the greenback. Traders were expecting the CPI report in the U.S. in order to understand the intentions of the Federal Reserve. Meanwhile, British CPI came in with a weak reading of 2.4%, missing the forecast. Although, GBP/USD CALL options were in demand due to positive news from the Brexit front. British Prime Minister Theresa May announced the deal with EU till November 25. On the other side of the Atlantic, the U.S. Consumer Price Index showed a lower-than-expected growth in October, pushing too hawkish traders back on earth. The demand for PUT options in the U.S. dollar was dominant among traders as Jerome Powell hosted a press conference where he put further rate hikes in doubt.
Thursday was the breakthrough-day for Aussie and Kiwi. Both commodity currencies accelerated gains versus the greenback after the Australian economy published a strong employment report, confirming that things aren’t as bad as previously thought. RBA Assistant Governor Debelle was also hawkish on the economic outlook, supporting the demand for CALL options for both currencies. The British pound has reversed completely after two negative events have changed the markets’ sentiment. First, the Brexit Secretary Dominic Raab resigned, stating that the deal conditions arent’ acceptable for British voters. Second, Retail Sales in the UK plunged in October. A modest monthly growth of 0.2% was forecasted, but all of a sudden, the report appeared to be in red (-0.5%). Traders were buying PUT options for GBP/USD despite the greenback’s weakness across the board. Euro bulls took the market under control as EU trade balance showed a modest improvement in October. Retail Sales report in the United States was strong enough to support buyers of CALL options for stock indices and the risk appetite surged globally. The demand for PUT options in the USD currency pairs was also on the rise. Crude oil inventories did not help the price of oil to find any local bottom and it kept falling.
Friday was also active with ECB President Mario Draghi starting the trading day. Hos speech together with robust inflation report in the Eurozone helped CALL options buyers to save the growing pace in EUR/USD. The Canadian dollar has been strengthening on positive Manufacturing Sales and Foreign Securities Purchases. Traders did not forget about the Bank of Canada’s hawkish tone recently and USD/CAD fell off the locally high levels at 1.3267. The next week’s reports will show how far can the regulator go with the tightening cycle. The only U.S. report on Friday was the Industrial production which came in with a mixed reading, However, traders kept buying PUT options for the world reserve currency.