German business sentiment is expected to have fallen to a fresh record low of 82.2 following February’s 82.6 reading. It would be the ninth decline in the last ten months as the country’s deepening recession continues to weigh on optimism.
[B]Fundamental Outlook[/B]
German business sentiment is expected to have fallen to a fresh record low of 82.2 following February’s 82.6 reading. It would be the ninth decline in the last ten months as the country’s deepening recession continues to weigh on optimism. The ECB’s failure to take aggressive action similar to the Fed, BoE and BoJ has dimmed hopes that growth will return by 2010. Council member Axel Weber recently stated that “We still have room to cut interest rates further” which could help buoy confidence if expectations rise that further easing is forthcoming. Although the expectations component of the IFO report is expected to improve slightly to 81.5 from 80.9, the current assessment continues to decline. Another decline in the measure of future activity would validate the bearish technical outlook which sees the longer term down trend continuing. Given the recent appreciation in the single currency it may be appropriate to take a short position at this time.
[B]Technical Outlook [/B]
The next big move is most likely down for the EURUSD but it is unclear whether or not the pair will test resistance from the 61.8% retracement at 1.3811 or the 200 day SMA at 1.3890 before rolling over. The longer term trend is still viewed as down since the decline from 1.4723 is an impulse. I will be shorting either close to 1.40 or at lower levels if the pair shows signs of an impulsive decline.
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[I]To discuss this report contact John Rivera, Currency Analyst: [email protected][/I]