German business confidence is expected to have slipped to -8 from -5 in February, as lingering concerns regarding the banking sector and further evidence of a deepening recession weigh on sentiment. Last month saw the biggest jump in 15 years as the index improved by more than 25 points which could set it up for a larger decline.
Fundamental Outlook
German business confidence is expected to have slipped to -8 from -5 in February, as lingering concerns regarding the banking sector and further evidence of a deepening recession weigh on sentiment. Last month saw the biggest jump in 15 years as the index improved by more than 25 points which could set it up for a larger decline. The telecommunication, service and construction sectors saw the biggest boost last month on aggressive easing from the ECB and could see the largest fall in March, as the prospect of further easing declines. A drop in sentiment could derail the Euro’s recent bullish momentum which would conflict with the bullish technical outlook. However, consecutive months of increasing optimism could push the EUR/USD resistance and target 1.33.
Technical Outlook
Now approaching the February high of 1.31, the EURUSD rally is expected to accelerate, ideally with price above 1.2832. As I’ve mentioned in recent weeks, the decline from 1.3333 was a diagonal which completed 5 waves down from 1.4723. Diagonals are usually fully retraced, and quickly. A deeper correction of the decline from 1.4723 could reach 1.38, although that would probably take at least a month. Bulls can move risk to 1.2830 and there is short term support at 1.2950/90.
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To discuss this report contact John Rivera, Currency Analyst: jrivera@fxcm.com
