GER30 and EURUSD
The German IFO Index slipped to 101.7, from 101.8 in the previous month. Market expectations had been for a decline to 101.5, so a slightly better than expected result, although the fact that the future expectations index continues to decline indicates that German growth momentum is slipping away. Despite the improvement in manufacturing orders and manufacturing PMI, the IFO reported a decline in manufacturing sentiment to 22.4 from 23.9, while the services reading improved to 26.7 from 26.0. Mixed readings then that confirm that the German economy continues to expand, but also that growth momentum is slowing. With the German economy already experiencing capacity constraints this is inevitable, while ECB’s monetary policy remains too expansionary for the Eurozone’s largest economy.
EURUSD has held in a narrow range -in the upper 1.1600s, even after the release of German IFO and the unexpected acceleration of the Eurozone M3 money supply growth. The pair is near to the midway mark of the broadly sideways range that’s been seen since late May. The relative strength of the US economy and Fed’s tightening course tips the balance of directional risk toward the downside, though President Trump’s verbal interventions in Fed policy and forex rates has made it tactically more challenging for Dollar bulls. EURUSD has Support at 1.1650-1.1670, and Resistance at 1.1705 – 1.1718.
Meanwhile, European stock markets are mostly lower, with the French CAC 40 a notable exception and up 0.28%, while GER30 and UK100 are down -0.06% and -0.16% respectively. They are underperforming ahead of the meeting between the President Trump and European Commission President Juncker, where few are holding out for any breakthrough on their differences on trade.
GER30 fell from this morning’s 12751.40 high level, rejecting the 61.8% Fibonacci retracement level from the June 15 drifT for the 2nd consecutive day. However as reported yesterday:”The positive momentum picture in the medium-term and long-term outlook looks to be retained for a while as the asset creates higher lows since bouncing off the 12,102.00 low, on July 2. “
Therefore as the upchannel remains on track, today’s pullback towards 12640.00, which is the 50% Fib level, suggest a short-lived correction to the downside for the 2 -month rally. A move below the 50% Fib. level could see prices touching the 38.2% Fib level at the 12513.00. level.
However, as long as the asset remains above the upwards trendline (yellow line in the figure below), i.e. above 12500.00, any intraday weakness could be considered as a ” buying the dip opportunity”.
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Andria Pichidi
Market Analyst
HotForex
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