Euro Dives As German IFO Misses Forecast

Euro Dives As German IFO Misses Forecast

By: Darryl Frankfort | Where To Trade | On:23-02-2015 15:56
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Key Highlights

  • Euro traded lower during the London session, as the German IFO business climate index came below the market expectation.

  • German IFO business sentiment index released by the CESifo Group rose to 106.8 from 106.7, but it was on the lower side compared to the expectation in February 2015.

  • German IFO expectations rose by 0.5 points from 102 to 102.5 in February 2015, missing the forecast of a rise to 103.00.

  • German IFO current assessment also missed the forecast and registered a decline of 0.4 points to 111.3 whereas the forex market was expecting a gain to 112.7.

  • Asian market was mostly quiet due to the Chinese New Year, but a lot of moves were noted during the London session in which the Euro and the British pound declined.

  • Market focus remains on the release lined up in the US i.e. existing home sales report.

  • AUDUSD pair fell sharply and traded below the 0.7800 support area earlier today.

German IFO Business Climate Index

Today during the London session, there were an important release lined up in the Euro area, as the German IFO business sentiment index was published by the CESifo Group. The forecast was slated for a rise of 1 point from 106.7 to 107.7 in February 2015, compared to the preceding month. However, the outcome was on the lower side, as the German IFO business sentiment index rose only by 0.3 points to 106.8. However, we cannot deny the fact that the German IFO business sentiment index edged higher this month.

Moreover, the IFO expectations also climbed by around 0.5 points to 102.5 from 102.00 in February 2015, but the market was expecting it to climb to 103.00. Furthermore, the IFO current assessment was on the negative side, as it declined from 111.7 to 111.3 whereas the market was expecting an increase from 111.3 to 112.7.

The report mentioned that the six-month business outlook improved and also reached its highest level since August 2014. One of the major drivers this month was the International business. Not to mention, that in wholesaling the business climate deteriorated marginally, as wholesalers were not impressed by the current business situation. Furthermore, in the construction sector the business climate declined slightly, but was still at the elevated levels.

This kind of ignited a downside reaction in the EURUSD pair. It broke the 1.1320 support area to test the 1.1300 level.

Technical Outlook – Euro

The Euro move lower below the 1.1320 support area was critical and suggests that the EURUSD pair might continue to trade lower in the near term. We need to see how the 1.1280 support area behaves moving ahead, as the Euro sellers might be put to test in the near term. A break below the same might take the pair towards the 1.1250 area. On the upside, an immediate resistance can be seen around the 1.1340 level, followed by the 1.1360 level. Any further gains might be limited considering the current forex market sentiment.

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