EURUSD Price Remains Fragile After German Industrial Production Slumps
EURUSD Price, Chart and Analysis:
- German industrial production much weaker-than-expected.
- ECB needs to pump the economy, and quick.
The latest German industrial production data highlights the weakness plaguing the eurozone’s historic growth engine. The latest German release will heap pressure on ECB President Mario Draghi to cut interest rates further into negative territory at the September central meeting, as well as detailing additional QE.
German industrial production fell by -1.5% on a month-on-month basis, while on an annualized basis production fell by -5.2%, a multiyear low. Both releases missed expectations.
In June the German Bundesbank lowered their 2019 German GDP forecast to just 0.6% from the 1.6% forecast it made in December 2018, highlighting ongoing trade concerns. The latest German GDP numbers are released next Wednesday.
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The German government bond yield curve, a closely-watched indicator of interest rate and inflation expectations and the eurozone proxy, is now negative all the way out to 30-years, effectively meaning that investors are locking in losses for the right to buy German debt.
The daily EURUSD chart shows Monday’s sharp gains being eroded with further downside all the way back to the 1.1100 level possible. There are a few recent highs between 1.1152 and 1.1162 that may slow any sell-off, while to the upside yesterday’s 3-week high at 1.1250 is unlikely to be tested in the short-term unless the US dollar falls sharply.
EURUSD Daily Price Chart (November 2018 – August 7, 2019)
IG Client Sentiment data shows traders are 55.0% net-long EURUSD, a bearish contrarian bias. However, recent daily and weekly positional changes suggest that EURUSD may soon reverse higher.
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