German industrial production grew by 1.6% and significantly exceeded expectations of a modest 0.6% rise. The Euro disregards this and dips below the critical support line of 1.4282, continuing the move seen earlier. We are getting close to the highly anticipated European rate decision.
For a second day in a row, German figures keep up the Euro. Yesterday, the publication of factory orders surprised with a rise of 2.4%, four times the early estimations, and this sent EUR/USD further away from support, after the big breakout.
And today’s it’s a related figure, with a slightly wider scope: industrial output. The rise of 1.6% comes on top of a strong growth rate last month as well – 2%. This figure was revised to the upside.
Upside revisions are somewhat common in this indicator – this is the fourth consecutive time we’ve seen an upwards revision.
We got another confirmation that Germany is pushing the whole continent forward. Last night, Portugal officially requested aid from the European Union. The gap between the rich and poor EU countries is widening.
This doesn’t help the Euro
Earlier in the day, EUR/USD dropped as traders were cautious towards the ECB rate decision.The move continues, and EUR/USD is currently at 1.4273. The good German figure didn’t help it. Is the market already “selling the fact”?
Support below 1.4282 is close, at 1.4250, but this is only minor support. More significant support is at 1.4160. Looking up above 1.4282, the next peak is fresh, from yesterday – 1.4350. More important resistance is at 1.4450.
For more levels and analysis, see the EUR USD Forecast.
The European Central Bank is expected to raise the rate by 0.25% to 1.25%, but there’s also a chance of a 0.50% hike. In case of getting the expected scenario, the moves of EUR/USD will depend on the press conference at 12:30 GMT. Trichet’s words will be closely watched.
If he talks about progressive normalization or continues to use the code words “strong vigilance”, EUR/USD will move up. Returning to easy wording will send the Euro down.
See the ECB Preview for more. A scenario in which the Euro falls after the press conference is certainly possible.
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