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Strong German Data Not Helping Euro Avoid 3rd Weekly Loss to Dollar

Site Administrator | June 24, 2011

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The euro rose against the dollar after the Ifo Business Climate report showed business climate for German industry improved for the first time since February. Overall economic sentiment for the month of June advanced to 114.5, stronger than an expected 113.7, and month prior reading of 114.2. Current conditions printed at 123.3, almost 2 points above May’s reading, and 2.3 points higher than forecasts. Business expectations registered a lower reading for a fifth consecutive month at 106.3. The month prior scored at 107.4. Despite an overall better reading than in May, outlooks for further robust demand for German exports are less optimistic.

Initial reaction saw the euro rally 100 points to the 1.4300 level before pulling back towards 1.4230 area. Today, the euro will need to close above the 1.4276 level in order to avoid a third consecutive week of losses. Price action on the daily chart is currently respecting the 50.0 fibonacci retracement (shown in blue) of this weeks high to low move. Downside targets include a test of the 1.4150 area which is the lower line of our red triangle. If breached, immediate support will be found at the psychological 1.40 level.

Yesterday’s the euro received some support from expectations that Greece will pass budget cuts to secure the additional aid needed to avoid a default. This should not give a true to lift to the currency as there is no certainty that these cuts will pass. The key story for the week is dollar bullish. That came from Fed Chairman Ben Bernanke’s press conference where he hinted that we will not likely see another round of quantitative easing. As of this writing, the euro has erased most of its earlier gains from the positive German report.

Market Strategist:  Ed Moya of www.edmoya.comThe euro rose against the dollar after the Ifo Business Climate report showed business climate for German industry improved for the first time since February. Overall economic sentiment for the month of June advanced to 114.5, stronger than an expected 113.7, and month prior reading of 114.2. Current conditions printed at 123.3, almost 2 points above May’s reading, and 2.3 points higher than forecasts. Business expectations registered a lower reading for a fifth consecutive month at 106.3. The month prior scored at 107.4. Despite an overall better reading than in May, outlooks for further robust demand for German exports are less optimistic.

Initial reaction saw the euro rally 100 points to the 1.4300 level before pulling back towards 1.4230 area. Today, the euro will need to close above the 1.4276 level in order to avoid a third consecutive week of losses. Price action on the daily chart is currently respecting the 50.0 fibonacci retracement (shown in blue) of this weeks high to low move. Downside targets include a test of the 1.4150 area which is the lower line of our red triangle. If breached, immediate support will be found at the psychological 1.40 level.

Yesterday’s the euro received some support from expectations that Greece will pass budget cuts to secure the additional aid needed to avoid a default. This should not give a true to lift to the currency as there is no certainty that these cuts will pass. The key story for the week is dollar bullish. That came from Fed Chairman Ben Bernanke’s press conference where he hinted that we will not likely see another round of quantitative easing. As of this writing, the euro has erased most of its earlier gains from the positive German report.

Market Strategist:  Ed Moya of www.edmoya.com