David Morrison  |  11/02/2019 10:45

Last week saw the release of yet more dismal economic data from Euro zone. German factory orders registered their largest decline since 2012 while Industrial Production also fell. This has kept the downside pressure on the Euro and at the start of this week the euro-US dollar fell to within a few ticks of support around 1.1300.

In the chart below, we can compare how the Euro responded to data disappointments back in 2012 with today. The white bars represent the upside/downside data surprises and the yellow bars show the euro-USD. In 2012 a succession of negative data releases saw the euro-USD fall back to 1.2000-1.2200. However, the euro subsequently rallied to 1.3500 in the next 6 months as the data improved. The question now is whether we’ll see a similar recovery this time round. But the chart suggests that the data could continue to show weakness for some time before it improves again. 



Last week the Aussie Dollar fell sharply following a monetary policy meeting from the Reserve Bank of Australia. As expected, the Cash rate was left unchanged at 1.5%. However, the accompanying statement from RBA governor Philip Lowe was far more dovish than forecast, considering recent positive economic data. Investors had believed that the RBA’s next move would be for a rate hike. However, governor Lowe stated that the rate hike/rate cut probabilities were now evenly balanced. 

On Tuesday we have speeches from Bank of England governor Mark Carney and Fed Chairman Jerome Powell. On Wednesday we have a monetary policy meeting from the Reserve Bank of New Zealand, along with inflation data from both the UK and US. Thursday sees the release of China’s trade balance and fourth quarter GDP for Germany and the Euro zone. There are fears that German GDP may be negative for the second successive quarter meaning that it will join Italy in a technical recession. Thursday also brings US Retail Sales and we have UK Retail Sales on Friday. 

Gold fell back on Monday thanks to the stronger dollar and some positive risk sentiment. But it remains in an up-trend and continues to consolidate above $1,300. Should we see further uncertainty over the economic outlook then the next upside target comes in around 1326. Support comes in around 1,297 to 1,300

Here’s hoping you have a profitable trading week!