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EUR/USD Pass By The German Trade Balance Data To Trade Above 1.2700

EUR/USD Pass By The German Trade Balance Data To Trade Above 1.2700

Edward Hyon,

Talking Points:

  • German Trade Balance (Aug): 14.1B Actual Vs 17.7B Estimated; 23.5B Prior.
  • German Current Account Balance (Aug): 10.3B Actual Vs 13.8B Estimated; 21.7B Prior.
  • EUR/USD showed Relatively Limited Reaction Following the Release of The Figures.

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The German Trade Balance for the month of August recorded a surplus 14.1 billion euros compared to the prior month’s surplus of 23.5 billion euros. The amount of surplus fell short of market expectations, which called for a surplus of 17.7 billion euros in August. The German trade balance figures are an important gauge into pressures on the value of the Euro as its one of the biggest components of their Balance of Payments. Germany is Euro-region’s largest economy and given Germany’s an export oriented economy, trade figures can give critical insight into their currency flows. Trade surplus fundamentally reflects that the Euro is flowing into the country and vice versa.

After the release of the figures, EUR/USD remained relatively muted as it may not have had much drive in influencing monetary policy decisions. Ahead of the data, the Euro traded higher against the US Dollar to trade firmly above 1.2700 level. This is on the backdrop of a selloff in the US Dollar after the release of the FOMC Minutes, earlier today. The minutes revealed concerns by the FOMC Committee of the growth outlook in the global economy as well as pointing to the recent surge in the US Dollar to have an adverse impact on the domestic economy. Newswires suggest the Bloomberg Dollar Spot Index, which tracks greenback against 10 major currencies, is up almost 6 percent since the start of July. This also translates into a twelve consecutive week rally from the US Dollar.

From a technical panorama, DailyFX Currency Strategist Ilya Spivak mentions near-term support to rest at 1.2703 (November 2012 floor) and support-turned-resistance at 1.2777 (March 2013 bottom). He is short EUR/USD and waits to close out the rest of the position. Meanwhile according to DailyFX Speculative Sentiment Index, the ratio of long to short positions in the EUR/USD stands at -1.11 as 47 percent of FXCM retail traders are long.

EUR/USD 5 Minute Chart

EUR/USD Pass By The German Trade Balance Data To Trade Above 1.2700

Daily Chart - Created Using FXCM Marketscope 2.0, Volume Indicator Available Here

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Edward Hyon, DailyFX Research Team

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