Thin trading conditions and economic reports led to a “roller-coaster” type trading session in the Euro on Tuesday. The European single currency rallied on a better than expected German jobs report, topped on strong U.S. Consumer Confidence data then, after trading sideways throughout the mid-session, drifted lower into the close following the release of the Fed minutes.
The Euro gained strength overnight after it was reported that Germany’s jobless numbers fell less than economist estimates. The market reacted as if the number was bullish instead of just slightly lower than the pre-report guess. Technically the Euro found support last night slightly in front of last week’s bottom at 1.2587. It rallied when U.S. stocks opened higher and sentiment shifted toward risk.
At 9 am CDT the Euro topped following a better than expected Consumer Confidence Report. The actual number of 53.5 blew out the consensus figure of 50.0. The surprise nature of this number drove investors back into the Dollar. At this point the Euro broke from 1.2742 to 1.2680 before settling into a trading range.
After a quick rally to 1.2701, the EUR USD began to break following the release of the Fed’s Minutes from its last FOMC meeting. This market broke hard into 1.2661 as the report indicated that the Fed is ready to take appropriate action should the U.S. economy deteriorate “appreciably.” The willingness of the Fed to consider taking additional steps to provide more support if the economy weakens further drove traders into the safety of the lower-yielding currencies, thus weakening the Euro.
Technically the Euro is in a downtrend, but the recent sideways action has this market poised to move sharply in either direction. A break to the downside is likely to run stops under the last swing bottom at 1.2587 all the way to the Fibonacci level at 1.2433.
A breakout over 1.2779 will change the main trend to up and could ignite the start of a rally to 1.2960.
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