The German economy is expected to have lost another 64,000 jobs in May which would mark the seventh straight monthly decline. The export driven economy has been crippled by the credit crunch which has sapped global demand.
[B]May 28[/B]
[B]German Unemployment Change (MAY)(GMT 07:55: 03:55 EDT)[/B]
[B][/B]
[B]Expected: 64K[/B]
[B][/B]
[B]Previous: 58K[/B]
[B]Fundamental Outlook[/B]
The German economy is expected to have lost another 64,000 jobs in May which would mark the seventh straight monthly decline. The export driven economy has been crippled by the credit crunch which has sapped global demand. Companies have been forced to layoff workers in an effort to cut costs which has negatively impacted domestic growth. The unemployment rate is forecasted to rise to 8.4% which would be the highest since December, 2007. Considering that the labor gauge reached as high as 12.1% in 2005, we could see the number of out of work Germans continue to increase. The county’s slumping growth has continued to put downward pressure on prices which fell 0.1% in May. This will continue to eat into profit margins and force managers into tough decisions which could result in more cost cutting measures. The fall in prices sunk the Euro and we could see a similar reaction with a weak labor report which could validate the technical theory that a top is in place. Therefore, a jump in unemployment and a negative Euro reaction would justify a short EUR/USD trade.
[B]Technical Outlook [/B]
The EURUSD rally from 1.2886 is in 5 waves. Wave 5 slightly exceeded the 1-3 line Friday and price has pulled back and a top could be in place. Coming below 1.3858 would signal that a top is in place. Until then, additional strength is possible.
For More Technical Analysis Visit the Daily Technical Report
To discuss this report contact John Rivera, Currency Analyst: <[email protected]>