Europe unemployment set to post another record
By Michael Hewson (Senior Market Analyst at CMC Markets UK)
Today?s market focus returns to Europe with the release of the latest November unemployment data for the region. The contrast with Friday?s improving US employment data is likely to be quite stark with expectations of a rise to 11.8%, from 11.7% and another record high.
With record levels of unemployment is it is unlikely that the most recent consumer confidence numbers will show any signs of improvement either, expected to remain unchanged for December at -26.6.
With consumer confidence so low it won?t be too much of a surprise to see retail sales for November also on the slide with expectations of a year on year decline of 2.1%, a slight improvement from a 3.6% decline in October.
This continued deterioration in economic data is being carried out against a fiercely fought election campaign in Italy where an increasingly euro sceptic Silvio Berlusconi has sought a pact with the right wing Northern League with a view to creating a blocking vote to the more reformist and pro euro elements in the Italian Senate.
While current opinion polls show that these combined parties remain some way behind in the polls, the continued deterioration in Italian economic data could well close that gap.
With that in mind the last thing current poll leader Pier-Luigi Bersani needs is for the Italian unemployment rate to keep moving higher; however this seems more likely than not with November unemployment expected to rise to 11.2%. Italian youth unemployment is also expected to continue to remain elevated, currently running at around 35%.
Concerns about the health of the German economy could well be reinforced by the latest Factory Orders data for November which are expected to show a month on month decline of 1.5%, after October?s strong showing of a rise of 3.9%.
In the UK the state of the retail sector is expected to once again be in focus with the release of the latest British Chamber of commerce retail sales numbers for December. Following on from yesterday?s excellent annual new car sales data, the latest BDO High street tracker figures and the positive trading updates from House of Fraser yesterday and John Lewis and Next last week, the rise of 0.3% while not better than November?s 0.4% rise, was nonetheless helped by a strong showing in on-line sales.
EURUSD ? despite a retest of the 1.3000 area yesterday the euro was unable to break lower suggesting we could well see a retest of the 1.3170 area. The current pullback needs to get back above 1.3170 to retarget the 1.3300 area.
The long term support line from the 1.2045 lows at 1.2960, remains the key level on the downside while a move below 1.2950 targets the 100 day MA at 1.2920 and below that the 200 day MA at 1.2780.
GBPUSD ? the failure to break below the 1.6000 level has once again precipitated a pullback with the 1.6180 level the main obstacle to a retest of the 1.6310 area. A break below the 1.6000 level is needed to target major trend line support at 1.5945 from the 1.5270 lows, the 200 day MA at 1.5900, as well as 1.5660.
EURGBP ? the current rebound appears to be heading for a retest of the 0.8170 level, a break of which has the potential to retarget the December highs at 0.8225.
The long term trend line support at 0.8075 from the 0.7755 lows remains a key level, a break of which could well signal further losses towards the November lows at 0.7960.
USDJPY ? the current pullback from the 88.40 highs needs to hold above the 87.40 level and 61.8% retracement of the down move from the 2010 highs at 95 to the lows at 75.30 for the current uptrend to remain intact towards the 90.00 level.
Only a move below 87.30 argues for a deeper corrective move towards the 200 week MA at the 85.00 level.
Equity market calls
FTSE100 is expected to open 5 points lower at 6,060
DAX is expected to open 22 points lower at 7,711
CAC40 is expected to open 6 points lower at 3,699