EURUSD

10:01, 17 May

Drops Below Key 1.12 Level as Germany’s Economy Rebounds

In the last few days the EURUSD has reversed and eased lower back below the current key level of 1.12 moving to a two week low. In the week prior it attempted to rally higher however the it formed a classic reversal candlestick pattern before easing lower. In doing so, it has continued to achieve lower peaks and lower troughs and now looks poised to threaten the recent trough around 1.11.
The 1.12 level has ably supported the currency pair in the last couple of months however the overall trend has been clearly down with lower peaks from its trading levels above 1.15 to start the year. Now that the 1.12 level has been strongly broken through it is likely to continue to provide resistance.

About a month ago, the EURUSD attempted to climb back above the other current key level of 1.13 and after meeting resistance there for around a week, it was thwarted and sold off reasonably strongly falling to the two year low. In early February the EURUSD was sold off after running into resistance at the other key level of 1.15, and it has maintained its trading range between 1.13 and 1.15 for the most part of the last six months. Again, it is currently looking like it might struggle to return to this range as it pushes lower below 1.13 and 1.12.

On numerous occasions in the last few months the EURUSD has enjoyed rock solid support from the key 1.13 level so it will be interesting to see if it has another rally left, now that it is receiving tough resistance from this level. It is interesting to note that its excursion above 1.15 earlier in the year didn’t last long as it was quickly sold down at those three month highs. The 1.13 level has also become quite significant of late, and even though it has fallen through this level a few times, it was quickly pushed higher through strong buying, however this confidence is now likely gone.

After narrowly avoiding recession late last year, Germany’s economy has rebounded in the first quarter, providing some relief to policy makers in Europe as the outlook continues to darken for global trade.  The better-than-expected figures did little to ease concerns among economists about the rest of the year, however.Lower business sentiment in the world's fourth largest economy faces a variety of risks to include a possible slowdown in key markets to what is happening across in the United Kingdom with Brexit.  Germany announced its latest GDP figures on Wednesday and after months of increasing concern, modest growth of 0.4% in the first quarter was seen as a positive sign that Europe’s largest economy might just weather the global slowdown better than most experts predict.  For the first time in six months, the German economy is growing again, and the figures follow last week’s announcement that exports rose unexpectedly by 1.5% in March.  “The growth in the first quarter of this year is a first sign of light, but it’s no reason to sound the all-clear,” said Peter Altmaier, Germany’s economy minister.International trade conflicts were still unresolved, Mr Altmaier warned.  “We must do everything we can to swiftly find sustainable solutions which enable free trade,” he said, in comments reported by Reuters. “Everyone profits from that.”