Euro Tumbled as ZEW Dropped to 5-Year Low
Euro fell sharply against dollar today, giving up all of the gains made yesterday, as German ZEW investor confidence came in much worse than expected. German ZEW dropped to -5.6 in Aug versus consensus of 11.4, making a new 5 years low. Prior reading was 15.1 in July. Appreciation of Euro, higher interest rate, higher taxes and high oil prices remain the major concern among investors. It will be very difficult for ECB to keep raising rates if economic data continues to deteriorate and confidence remains low. Thursday’s Ifo business confidence will now be even more highly anticipated.
Canadian dollar edged mildly higher today after Jul CPI came in stronger than expected, rising 0.1% mom, 2.5% yoy versus expectation of -0.2% mom, 2.0%yoy. However, BoC is still widely expected to keep rates unchanged on its Sept 6 meeting.
EUR/USD
Daily Pivots: (S1) 1.2830; (P) 1.2884; (R1) 1.2946;
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EUR/USD’s fall from 1.2937 continues and accelerated after disappointing German ZEW. At this point, intraday bias remains on the downside as long as EUR/USD stays below 1.2849 minor resistance and further fall towards 1.2780 support is in favor.
4 hours MACD’s turn below signal line suggest a short term top is formed at 1.2937 already. But a break below 1.2780 support is needed to indicate rise from 1.2695 has completed and put 1.2658 support in focus again. Otherwise risk of another rise remains. But even in case of another rise, one should be cautious as EUR/USD approaches 1.2978 key resistance on sign of loss of momentum.
The bigger picture in EUR/USD remains mixed. Question remains on whether rise from 1.2457 represents resumption of medium term up trend from 1.1639 or merely part of a larger scale consolidation. On the upside, it will take a firm break above 1.2978 cluster resistance to confirm the whole medium term up trend from 1.1639 has resumed. On the downside, a break below 1.2695 low will shift favor back to the case that whole rise from 1.1639 has already ended with three waves up to 1.2978 already and corrective fall from 1.2978 is just part of a larger consolidation which should extend at least a few more weeks with a retest of 1.2457 low before completion.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
Shing-Ip Tsui is the founder and CEO of
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