The currencies started the day mixed today, as better German IFO numbers came out unexpectedly, boosting the already high euro and worse than expected GDP out of UK, showed that recession has been the worse since 1979. The pound saw some heavy selling following the release for those numbers; however the fall was able to be sustained so far as retail sales gave better than expected rise and also a Moody€™s report basically said credit rating is not to be downgraded in UK.
The EUR/USD has been fighting back since early week and the pair held the 1.2930 support level as we said and appreciated more than 250 points since then. The pair found resistance in 1.3270 which was to be expected and only a clear break of the latter level can gives us more strength towards important 1.3330-60. As long as 1.3060 holds for now, we may see further upside forming next week, data dependent of course; however for now 1.3330 is the next level that euro bulls should be aware.
The GBP/USD has been trading very choppily since the release of UK budget back in Wednesday, and although we saw a big slide in the pair after the news, the pound managed to reverse all losses and even continue to rise towards 1.4750. The risk appetite returned yesterday and traders were happy again to buy both the euro and the pound as a result. For now, the pair found a good resistance at 1.4730 and due to the dismal GDP numbers, the recent rally found a temporary halt. As long as the pair continues to trade above 1.45, we may see some range trading in the following days, as investors are still deciding as to which direction to go.
The economic calendar has a few important economic releases today, with German IFO and UK GDP and Retail sales, which all came out earlier. The currencies are now trading in the aftermath of the news, with euro still being strong across the board and pound weakening as the day progress. The fact that retail sales are still resilient to the downside, gives some kind of hope to traders that it is possible that economy may be on the right path to recovery. Later on we have very important numbers out of US, with durable goods orders and also new home sales. It will be interesting to see if we see some kind of improvement in the numbers, but more interesting will be the reaction of traders if better numbers are printed.
Lately we see a constant battle between risk appetite and risk aversion and markets are still under pressure regarding the economic future. So far, futures and equities managed to sustain the upside and it will be interesting to see how DOW JONES will close for the week. Gold is also on the rise again, with China vastly increasing its gold holdings. News that Asian central banks diversify its assets to gold is giving gold bulls more reasons to go long, despite the IMF€™s recent implication they will sell a considerable amount of their gold holdings over the coming months. Is this latest move by the Chinese another way of saying they don€™t want to have the dollar as their main reserve?
With the G7 meeting starting today and progressing in the weekend, let€™s see what the 7 world leaders say about the current situation and if we€™re actually going to hear something new about ways to solve the deepening global recession