Trading the News: German Unemployment Change
Unemployment in Germany is expected to hold flat after surging 60.0K in May, and a positive development may spark a bullish reaction in EURUSD as it instills an improved outlook for the Euro area.
Signs of a resilient labor market may curb the recent decline un EURUSD as it dampens the threat for a recession, and the European Central Bank (ECB) may stick to the sidelines at the next meeting on July 25 as President Mario Draghi and Co. prepare to launch another round of Targeted Long-Term Refinance Operations (TLTRO) in September.
However, a further pickup in German unemployment may drag on EURUSD as it puts pressure on the ECB to implement a negative interest rate policy (NIRP) for the Main Refinance Rate, its flagship benchmark for borrowing costs.
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Impact that the German Unemployment report had on EUR/USD during the previous print
(1 Hour post event )
(End of Day post event)
05/29/2019 07:55:00 GMT
May 2019 German Unemployment Change
EUR/USD 5-Minute Chart
Unemployment in Germany unexpectedly jumped 60K in May to mark the biggest rise since 2009. A deeper look at the report showed the jobless rate also widening during the same period, with gauge climbing to 5.0% from 4.9% in April.
The Euro was little changed despite the dismal data print, but EURUSD struggled to hold its ground during the North American trade, with the exchange rate closing the day at 1.1131.
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EUR/USD Rate Daily Chart
- Keep in mind, the broader outlook for EURUSD is no longer tilted to the downside as both price and the Relative Strength Index (RSI) break out of the bearish formations from earlier this year.
- In turn, EURUSD stands at risk for a larger correction as it breaks out of the range-bound price action from May following the failed attempt to test the 1.1000 (78.6% expansion) handle, with the exchange rate trading above the 200-Day SMA (1.1350) for the first time since in over a year.
- However, the near-term advance in EURUSD appears to have stalled ahead of the March-high (1.1448) amid the string of failed attempts to close above the Fibonacci overlap around 1.1390 (61.8% retracement) to 1.1400 (50% expansion).
- In turn, a move below 1.1340 (38.2% expansion) raises the risk for a move back towards the 1.1270 (50% expansion) to 1.1290 (61.8% expansion) region, with the next area of interest coming in around 1.1190 (38.2% retracement) to 1.1220 (78.6% retracement).
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--- Written by David Song, Currency Strategist
Follow me on Twitter at @DavidJSong.