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Strong Producer Price Index Data from Euro Zone

October 2, 2012 in Forex Fundamentals and News

Positive PMI Data from Euro Zone

The Produce Price Index (PPI) Data from Germany came much stronger than previous release. The year on year change in the German PPI came out as 2.7% while the previous released data was 1.6%. The release was better than the consensus also which were for 2.6%. Month on month change in German PPI was 0.9% while the previous change was 0.3% and the expectations were for 0.5%.

There are no important release from U.S. today. Tomorrow is German Bank holiday because of German Unity Day.

EUR/USD remained in the volatile sideways mode below yesterday’s high of 1.2938 and above yesterday’s 1.2876.

Tomorrow’s Economic Releases for EUR/USD:

Tomorrow’s important releases  from both Euro zone and U.S.A.

The main releases are as follows:

A) Euro:

1) Retail Sales data

2) Services PMI

B) U.S. Dollar

1) ADM Employment Change

2) ISM Non Manufacturing PMI

What to Expect from EUR/USD:


1.3000 level’s psychological push and overall uncertainties of Euro zone are at one side and the momentum of recent strong upward movement because of some optimism about the debt rescue plans are on the other side.

EUR/USD Outlook

As far as short-term move is concerned, a break of either of the mentioned low or high of the current range is required to expect any directional move. Any upward move should again find resistance below 1.3000 and a down side break should take EUR/USD towards 1.2757/1.2766 support zone.

EUR/USD Stuck Between Close Resistance and Support Levels

September 25, 2012 in Forex Analysis

EUR/USD is finding resistance exactly at 5-day EMA (green line in the following chart) and support at 22-day EMA (Yellow line). A classical example of supports and resistances.

EUR/USD Daily Chart:

EUR/USD daily chart - September 25 2012


Recent Past:

ECB President Draghi’s rescue plans followed by German Constitutional court’s favorable decision for German standing for the same had boosted the optimisms and had taken EUR/USD above the psychological level of 1.3000 and as high as 1.3172. The pair found strong resistance there, before testing the previous high of May 1st i.e. 1.3284.

What to Expect:

As mentioned above that the currency pair is stuck up between the 22-day EMA support and 5-day EMA resistance, a break of one of these is required to expect further directional movement.

Today the market should be less volatile till the outcomes of ECB President Draghi and German Chancellor Merkel’s meeting about EU situation and then Draghi’s speech at 13:00 GMT. These two events are important and market should be waiting for these two before some  real moves take place.

Overall on one side the recent optimism for the rescue plans for the debt crisis has gone in favor or Euro but on the other side the uncertainties remain about Greece reaching an internal agreement to meet the conditions for the rescue and also because of Spain’s hesitation to come forward with the decision to ask for full rescue.

Yesterday’s reports about German business confidence were also not good and tomorrow (GMT 00:00) we have important Consumer Price Index data coming up from Germany.

Considering all the above during these two days i.e. today and tomorrow the movement of EUR/USD will be mainly dependent on the News from Euro zone as no important data is scheduled to come from US.

Near Term Targets:

If the news from Euro zone about the above mentioned meeting and Draghi’s speech bring pessimism and the current support over 1.2880 breaks then we can expect further consolidation first towards 1.2830 and then possibly towards the 38.2% retracement of the recent upward move i.e. towards 1.2740/1.2760.  Till any strong break below 1.2700 takes place, we would expect the short-term bullish mood to continue. With these supports holding, another break of 1.3000 should take EUR/USD for a test of previous resistance zones of first near 1.3280 and then possibly 1.3380.


ECB’s Crisis Rescue Plans, China’s Economic Releases and German court’s ruling – Push and Pull of Market Sentiments

September 11, 2012 in Forex Fundamentals and News

ECB’s Crisis Rescue Plans and Other Market Updates

ECB president Draghi’s announcement about rescue plans by unlimited bond purchase had made the sentiments not only for Euro but overall market conditions positive but almost immediately after that a very negative data about China’s imports as well as industrial output came. Not only that but the markets are impatiently waiting for the decision of German Federal Constitutional court about German standing for the bailout plans. The ruling is scheduled for September 12th.

Germany is supposed to be the biggest contributor with 27% share for the bailout fund. Well, the negative side does not end here as we have to add the possible failure of Greece reaching a unilateral agreement for the austerity measures/spending cuts to meet the bailout criteria to this list. The meeting about Greece’s plans for the spending cuts is also scheduled for September 12th.

Add all these negative pressures against the initial optimism and what comes out is uncertainties. And uncertainties are generally not healthy. The market volatility has been very low since the trading started yesterday. EUR/USD has seen just 52 pips overall move, in more than 30 hours, since the trading rooms opened yesterday. Not required to add that pressure has been downwards. AUD/USD’s movement span has been slightly more with 63 pips, GBP/USD moved without direction for a total range of 61 pips and same with USD/CHF with the total range of 52 pips and no clear direction. The story is same across the board.

EUR/USD example - low volatility of markets

This pull and push of sentiments is expected to continue till tomorrow i.e. September 12th and not much directional moves are expected till then. There is always a possibility of a sudden spike but if it comes, the expected direction for EUR/USD, AUD/USD, GBP/USD should be on downside and considering the natural correlation for USD/CHF upside.

It is better to be away from the trading desk at such times as it becomes more guess work than analysis at such times.

“When Will the Euro Collapse” Commentary by Mathew Lynn

August 15, 2012 in Forex Articles

Matthew Lynn has a column called Matthew Lynn’s London Eye which is published  in Market Watch, as well as other outlets, usually on a weekly basis.  Lynn, a financial writer, has also written a series of novels.

Today’s article “When will the euro collapse?  It’s already dead…Commentary: It’s just the shell of a real currency” is the most popular story on Market Watch today.  The Alexa rating for Market Watch is 595 Global and 259 US so this opinion is getting wide global coverage.

This article is well worth a read.