Euro Strengthens On Record Low Jobless Rate in Germany

Euro Strengthens On Record Low Jobless Rate in Germany

The Euro dollar began the year on a stronger note against the Kiwi dollar. However, the common currency was weakened by the soft PMI data for Italy, France, and Spain, reported Tuesday. Later that day, in the New Zealand dairy auction, the average price of dairy products increased by 2.2%. That aided the strengthening of the Kiwi dollar against the Euro. However, we anticipate the EURNZD pair, which is trading at 1.6920, to begin an uptrend in the days ahead due to the facts presented below.

The average price of dairy products increased to $3,124 per ton in the auction conducted in New Zealand on Tuesday. Correspondingly, the Global Dairy Trade Index (GDT) increased 2.2%. Notably, citing dry season, the world’s biggest dairy processor Fonterra had slashed its milk production estimate last week. It is the second downward revision in as many months. Despite the rise in dairy prices, the Kiwi dollar is not expected to stay bullish. The market was expecting a bounce back in the dairy prices on account of the dry season. Secondly, the market is concerned about the new government’s plan to restrict foreign ownership of properties as it may negatively impact inbound investments. Finally, the addition of employment to the Reserve Bank of New Zealand’s mandate is expected to keep the interest rates low for a considerable period of time. All these factors are expected to keep the Kiwi dollar bearish.

The PMI manufacturing data for Italy, France, and Spain was not impressive. However, the overall Euro zone final manufacturing PMI reading of 60.6 was in line with analysts’ estimates. It was also identical to the previous flash estimate. So, the negative impact on the Euro will be only short-lived.

The Federal Employment Agency of Germany also reported an upbeat unemployment change data yesterday. The number of unemployed people fell by 29,000 in December, compared with analysts’ expectation of a 13,000 decrease. In the previous month, the number of unemployed people declined by 20,000. The unemployment rate stood at 5.5%, unchanged from the previous month and the lowest since German reunification in 1990. The record low unemployment rate reflects the improving Euro zone economy. Thus, we anticipate the EURNZD pair to move northwards in the week ahead.

The EURNZD pair is trading above its 50-period moving average as shown in the price chart below. Further, the RSI indicator’s reading of over 50 confirms the bullishness in the currency cross. Thus, we can expect a rally in the EURNZD pair soon.

EURNZD - Technical Analysis - 4th January 2018

Based on the above analysis, we may go long in the EURNZD pair at 1.6920 levels. To minimise risk, a stop loss order will certainly be placed below 1.6800. An order to book profit will also be placed near 1.7190 levels.

To increase the overall returns, we may purchase a call option offered by a reputable binary broker. The call option should be valid for a week. The trade will be established only if the currency pair is trading near 1.6920.

Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.

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