Euro rises as business optimism increases in Germany
The euro rose today as the market reacted to the mixed economic data from Germany. The second reading of the country’s GDP data showed that the economy contracted by 2.2% in the first quarter. That was in line with what analysts were expecting. Similarly, the economy contracted by 1.9% on a year on year basis. These were the worst numbers since the 2008/9 financial crisis. Another set of data from Ifo showed that the business climate was improving. The business climate rose from 74.2 in April to 79.5 in May. According to Ifo, while companies assessed their current situation as being negative, their expectations for the coming months was slightly positive.
German stocks surged today, driven by positive news by Bayer and Lufthansa. According to Bloomberg, Bayer reached an agreement on the ongoing roundup lawsuit. As part of the agreement, the claimants will receive financial compensation while the company will continue to sell the product in the United States. The company’s shares rose by more than 4%. Lufthansa was another big winner after the company received more than $9 billion from the government. These funds will help it navigate the ongoing crisis that has seen it ground most of its flights.
The price of crude oil was relatively unchanged as investors focused on the developments in Hong Kong. That is after China’s government decided to impose its security laws in the city, bypassing the local legislature. The move was condemned by the United States and other western countries. The risk is that the new move will accelerate the tug of war between the US and China. A prolonged trade war between the two countries would affect global economic growth and the demand of oil.
The EUR/USD is trading at 1.0900, which is higher than Friday’s low of 1.0870. On the hourly chart, the price formed a morning star candle on Friday. It is also above the 50-day and 100-day exponential moving average while the RSI has been on an upward trend. It is also slightly above the 50% Fibonacci retracement level. Therefore, there is a possibility that the price will continue rising as bulls attempt to test the 50-day EMA at 1.0920.
The DAX index rose to an intraday high of €11,310, which was the highest level since March 9. On the daily chart, the price moved above the 50% retracement level and slightly above the previous top of €11,246. Also, the price is above the 100-day and 50-day exponential moving averages while the RSI is approaching the overbought level of 70. The index is likely to continue rallying as bulls target the 61.8% Fibonacci retracement level at €11,650.
The NZD/USD pair was little changed today as investors reacted to a major earthquake in New Zealand. The pair is trading at 0.6095, which is slightly above last week’s low of 0.6080. On the hourly chart, the price is between the 50-day and 100-day exponential moving average. It is also above the 61.8% Fibonacci retracement level. The pair is also forming a bearish pennant pattern, which means that it may resume the downward trend soon.