Eur/usd - page 475
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German Growth Normalization in 2Q Confirmed
German growth normalisation confirmed. The second estimate of Germany’s 2Q GDP did not bring any shocking news. Growth came in at 0.4% QoQ, from 0.7% QoQ in 1Q and the main growth drivers were public (+0.6% QoQ) and private (+0.2% QoQ) consumption as well as net exports. Particularly, private consumption has been on the strongest consecutive growth path ever since German reunification. At the same time, however, investments – and not only activity in the construction sector – turned out to be a drag on growth.
Looking ahead, private consumption should remain an important growth driver on the back of low inflation, low interest rates, low unemployment and higher wages. In addition, at least in the short run, the refugee crisis will continue to support domestic demand (as already illustrated by strong public consumption numbers over the five quarters) and the construction sector should rebound quickly after the technical correction on the second quarter. The economy’s Achilles’ heel, however, remains the lack of new investment. To kick-start investment in an ageing economy, some government support is needed. Not only at the national level but also at the European level. In our view, a clear vision for Europe, or at least for the Eurozone, would as so many aspects of the never-ending euro crisis clearly benefit the German economy. It would add to the economy’s attractiveness for international investors. In this regards, it is desirable that on her almost Olympic diplomatic travels over the next days, German chancellor Merkel manages to quickly fill the page that French president Hollande, Italian prime minster Renzi and she herself left blank earlier this week.
On Tuesday the euro recorded another consecutive volatile session against the US dollar, but finally ended in favor of the US currency. If expectations for further depreciation of the euro justify the pair will test the support at $1.1239.
Yesterday the EURUSD initially rose but found enough resistance at the Fibonacci retracement to turn around and closed near the low of the day, although closed within the previous day range, which suggests being slightly on the bearish side of neutral. However the shooting star pattern made yesterday suggests a bearish move today.
The pair is trading well above the 10, 50 and the 200-day moving averages that are acting as dynamic supports.
The key levels to watch are: a daily resistance at 1.1460, a 61.8% Fibonacci retracement at 1.1347 (resistance), the 10-day moving average at 1.1269 (support), a daily support at 1.1237, and the 200-day moving average at 1.1158 (support).
EUR/USD Technical Analysis: Sell Below $1.1268
The EUR/USD currency pair is facing major support at the 200-hour moving average of $1.1268.
The pair has jumped up to $1.1355 and broken the $1.1300 level, but it was trading below that level at noon in London.
On the down side the EUR/USD currency pair is facing a major support at $1.1268 with a break below seen dragging the pair towards the 100-day moving average of $1.1224.
Technically the EUR/USD has formed a temporary top around $1.1370 and any bullishness can be seen only above that level. Any violation above 1.1370 is seen taking the pair towards $1.1450.
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EUR/USD is moving notably lower, marking fresh new low at $1.1245.
Euro Drops Back Below $1.13
The hunt for yield continued on Wednesday, but this time the euro was hit as well, with investors buying the higher-yielding US dollar. The EUR/USD pair was trading at fresh daily lows around $1.1265, 0.35% weaker on the day.
"The US dollar derived modest support yesterday from the release of the much stronger than expected new homes sales report for July. The report revealed that new homes sales surged by 12.4% in July reaching their highest level since October 2007. Renewed upward momentum in the housing market would be encouraging developing which should help the US economy return to more solid growth after its weak performance since late last year," analysts at Bank of Tokyo-Mitsubishi wrote on Wednesday.
US existing home sales for July are due later today and are expected to stay at June's 5.57 million units.
Yesterday's US 2-year bond auction gave a strong signal that the market does not anticipate any hawkishness by the Federal Reserve (Fed) this Friday, when Fed Chair Janet Yellen is due to deliver a speech titled "The Federal Reserve's Monetary Policy Toolkit" at the Kansas City Fed Economic Symposium, in Jackson Hole.
From the euro perspective, German GDP ticked lower to 0.4% in the second quarter, down from 0.7% previously. The yearly change improved notably to 3.1% from 1.5% in the first quarter.
Yesterday the EURUSD fell with a wide range and closed near the low of the day, in addition managed to close below the previous day low, which suggests a strong bearish momentum.
The pair closed below the 10-day moving average that should act now as a dynamic resistance. The currency pair continues to trade well above the 50 and the 200-day moving averages that are acting as dynamic supports.
The key levels to watch are: a daily resistance at 1.1460, a 61.8% Fibonacci retracement at 1.1347 (resistance), the 10-day moving average at 1.1279 (resistance), a daily support at 1.1237, and the 200-day moving average at 1.1160 (support).