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IFO Beats EUR/USD Rally Rolls On

Last updated 4/24/2009 4:34 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

The IFO survey of business expectations printed much better than expected confirming other data points from the Eurozone this week that showed a possible turn to the upside in the region’s economy. The IFO survey recorded a reading of 83.7 versus consensus expectations of 82.4. More importantly the Current Assessment figures improved to 83.6 from 82.7 the month prior.

Along with the ZEW and the PMI data, the iFO now becomes the third economic release this week to show an improvement in business activity and suggests that the EZ contraction may have hit its nadir in Q1 of 2009. Although the survey remains mired near multi year lows it has clearly stabilized at these levels and the question forward is whether growth will pick up as the year progresses.

For the time being the news has proved to be a salvation to euro bulls as the currency has now rallied more than 300 points off its lows this week. As we noted earlier, sentiment towards the EUR/USD has been extremely negative with the market actually  expecting  further economic contraction in the 16 member union, This week’ s data strongly refuted this bearish thesis, suggesting that much like the rest of the world the EZ economy may be in the process of making a slow turn upward.

Having taken out the 1.3200 handle with vengeance, the EUR/USD now targets stops at the 1.3300 level. However, having risen so strongly already, the pair could come in for some profit taking as the day progresses. Furthermore,  1.3500 still remains as a key area of resistance  and is unlikely to be broken unless the market sees additional positive news from the region.  This week the data from EZ established the fact that the contraction may have bottomed out, but in order for the rally to continue the market will now have to see actual evidence of economic growth.  

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.