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Euro Hits Fresh Trend Lows Following Weak German Data and Strong U.S. Jobs Growth
Posted On 08 Dec 2014
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EUR/USD continues to face headwinds, hit a new fresh trend low at 1.2252 in the wake of the sub-forecast German production data and dovish remarks by ECB’s Nowotny, along with the stronger than expected U.S. payrolls report on Friday. Bounces have remained very much subdued and sold into as interest rate differential continue to favor the greenback.
German industrial production rose 0.2% month over month in October, below the consensus forecast for 0.5% and down from a 1.1% quarter over quarter gain in September. The year over year figure came in at 0.8% year over year, up from -0.1% in the previous month. The data is a disappointment in light of the 2.5% jump in manufacturing orders for the same month, although orders often take time to be translated into rising production numbers.
The European Central Banks’s Nowotny said “we see a massive weakening” in the Eurozone economy. He also said that ECB continues to debate a full blown QE. The Austrian central bank head said QE is being discussed but has not been decided yet, while confirming that sovereign bond purchases are the main focus of QE discussions.
US interest rates are higher pushing the yield differential between German and US bonds above 150 basis points following the stronger than expected payroll numbers released in the U.S. on Friday. November nonfarm payrolls added 321k compared to consensus estimates of 220 jobs. Private employment rose by 314k. Prior payrolls were revised higher for October 243k from 214k and were revised to 271k from 256k in September. The jobless rate held steady at 5.8% last month. The workweek ticked up to 34.6 from 34.5. Hourly earnings were up 0.4%. Private-service payrolls rose 266k, with education and health up 38k and retail up 50k.
The Euro sliced through support on robust negative momentum. Support is seen near 1.21, while resistance is seen near the 10-day moving average at 1.2390. The MACD (moving average convergence divergence) index generated a sell signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average crosses below the 9-day moving average of the spread.
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