The quarter to quarter GDP for Germany was forecast to be 0.5%, a decline from the previous 1.5%. The number came out to be 0.1%. The market was holding its breath before this data, and after the release gave back EUR's gains from earlier. However, another GDP release comes out for the Eurozone 3 hours after the German GDP, and can serve as a temporal pivot. Much like the German GDP, Eurozone GDP is forecast to be 0.5% lower, 0.3% compared to the previous 0.8%.
Traders do not want to be caught on the wrong side of the market in case of a big surprise from the releases so you see the thin volatility ahead of these event risks. Look for the true nature of the market to show after the Eurozone GDP comes out.
- After the rally in the US session that brought the EUR/USD above 1.4450, the market has consolidated in a small pennant.
- The decline may be just a correction.
- The 1.4370-1.44 level use to be resistance, and can become support against a correction brought about by the German GDP release.
- If this does not hold, the retracement may be deeper, and the next level of support is near 1.43. (Consolidation zone is roughly 1.4320-1.4280)
- Only a break below 1.4240 near 61.8% retracement should invalidate the bullish outlook brought about by the bullish breakout in the US session.
- A return to the upside however targets 1.4450 again, and then the 1.4535-1.4555 highs.
- A bullish market as anticipated from the bullish breakout of a wedge pattern should remain unless we see a break below the 0.8756 low.
- In fact, support for the bullish scenario should be found near 0.8793-0.8785. 50%-61.8% retracement of the latest upswing since today's US session.
- Bullish continuation from this support targets 0.8850-0.8860. Above that we are looking at 0.8970.
- The bearish outlook is the less likely one, but opens up below 0.8750 and first targets 0.8730 in the near term, but also opens up the 0.8643 August low.
- As anticipated, the EUR/JPY paused at 111.00 after a rally in the US session above 110.30.
- After a very narrow consolidation line near 111.00, the market is falling and the 110.30 level will be tested as support.
- The bullish scenario is lost if the market pushes below this AND the 109.50-109.60 pivot area, opening up the lows near 108.30 in the short-term, and then the 2011 and 2010 lows (106.29, and 105.42 respectfully).
- The more likely scenario is that we get a retracement, but a bullish continuation back towards the 111.20 high, then the 112.35 high and finally the 114.17 August high.
- The Swissie has been giving back its gains lately, and the 1.13 level was an important resistance area for EUR/CHF.
- The market did crack this level, but has consolidated around it as well.
- The 4H chart shows the market remaining below the 200SMA.
- Judging from the rally we had since last week (a bullish motive structure), we can expect another rally to follow the current decline.
- There should be strong support near the 1.0760-1.080 zone, near the 1H 200SMA and 50% retracement in the 1H chart.
- The ongoing correction rally outlook has 1.1790 in sight, a pivot seen in the Daily chart.
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Fan Yang CMT
Chief Technical Strategist