Weak Sentix Economic Index Keeps Euro Bearish

Weak Sentix Economic Index Keeps Euro Bearish

Despite soft economic performance and increasing divergence with the US interest rates, the Australian dollar has rallied against the Euro for the past one week. The weak German retail sales in March was one of the reasons for the Euro’s decline. Concerns over austerity measures recommended in the German budget also had a negative impact on the Euro as investors are concerned about the impact of such measures on the Eurozone economy. The EURAUD pair which is currently trading at 1.5880 is expected to decline further due to the details given below.

Last week, at the monetary policy meeting, the Reserve Bank of Australia left the policy rates unchanged at 1.50%. The monetary policy statement that accompanied the interest rate decision reaffirmed the Central bank would continue to maintain the current interest rate in the near future.

In other news, the Australian Bureau of Statistics reported a seasonally adjusted trade balance of A$1.53 billion in March 2018. Analysts expected a decline in the balance on goods and services to A$0.68 billion, from the upwardly revised trade balance of A$1.35 billion recorded in the previous month.

The statistical organisation also reported a 2.6% increase in building approvals in March, compared to the previous month. Economists had expected a 1.1% growth.  The building approvals in the previous month were revised higher from -6.2% to -4.2%.

The price of iron ore, number one export commodity of Australia, hit a two week high of $67.26 a tonne for benchmark 62% fines. Almost 90% of Australia’s iron ore shipments reach China. According to Reuters, the utilisation rate at Chinese steel mills increased to 68.92%, the highest since mid-November 2017. While the economic data and upbeat iron prices have turned the Aussie bullish, the Euro is weakening due to soft retail sales data.

According to Eurostat, retail sales grew 0.1% in March and missed economists estimates of a 0.5% increase. Last month, retail sales increased by an upwardly revised 0.3%.

The Sentix economic index for the Euro zone declined for the fourth consecutive time in May to reach 19.2 points, its lowest level since February 2017. Both Situation and expectations index decreased slightly. Last month, the Sentix economic index reading was 19.6. Economists were expecting an improvement in Sentix economic index to 21.20.

After forming a double top pattern, the EURAUD pair has broken the ascending trend line. The stochastic oscillator has entered the bearish zone. Therefore, we are expecting the downtrend to continue.

EURAUD - Technical Analysis - 8th May 2018

In the Forex market, we are planning to go short in the EURAUD pair. The ideal entry and exit levels are 1.5880 and 1.5420. Once we open a short position, a stop loss order would be placed above 1.6020.

Simultaneously, while going short in the Forex market, we may also establish a put option trade through a binary broker. While investing our surplus money, we would select a date around May 15 for the expiry of the contract. The investment may be made only when the currency pair trades near 1.5880 in the Forex market.

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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