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Euro Holds Support at 1.2700 As Data Proves Positive

Last updated 2/26/2009 4:04 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Top Stories

• RBS to place 462 Billion in UK Insurance plan
• UBS appoints former Credit Swisse chief as CEO
• Equities lower in Asia, higher in Europe
• Oil at 42/bbl as rally continues
• Gold consolidates at $950/oz

Overnight Eco

• NZD Trade Balance better at -197M vs. -450M called
• AUD CB Leading Index -0.90%
• AUD Private Capital Expenditure much better at 6.0% vs. -3.00% expeceted
• NZD NBNZ Business Confidence deteriorated to -41.2 vs. -35.0
• EUR GfK German Consumer Climate improves to 2.6 vs. 2.0
• GBP Nationwide HPI declines to -1.80% vs. -1.30% eyed
• EUR German Prelim CPI n/a
• EUR German Unemployment Change 40K vs. 60K
• EUR M3 Money Supply n/a
• EUR Consumer Confidence n/a

Event Risk on Tap

• USD Durable Goods Orders expected at -2.3%
• USD Unemployment Claims expected at 630K
• USD New Home Sales expected at 330K

Price Action

• USD/JPY runs to wihin a point of 9800 handle
• AUD/USD hovers near 6500 as Private Capital expnditure data supportive
• GBP/USD consolidates near 1.4200 as RBS news and weakn Nationawide data weighs
• EUR/USD holds 1.2700 as German Consumer confidence improves

The euro consolidated near the 1.2700 figure in early European trade boosted by better than expected German Consumer confidence numbers while pound tried to shrug off  RBS news which reported the largest corporate loss in UK history and announced that the government may take up to 95% stake in the company.

German consumer confidence shocked to the upside rising to 2.6 from 2.2 the month prior against expectation of a drop to 2.0.  As we noted earlier, “The German figure also squares with the better than expected Italian consumer confidence numbers reported earlier this week indicating that conditions in the Eurozone as a whole may not be as grim as most analysts had forecast.  On the other hand the data may simply be a bounce in sentiment from grossly negative levels and could plunge once again should labor demand contract sharply.”

To that end the German unemployment report showed an increase of 40K versus market calls of 60K new jobless,  suggesting that at least for now German companies are trying to maintain the workforce. However,the tone of trade in EUR/USD remained cautious as traders continued to be skeptical regarding the regions’ ability to rebound from the current economic slowdown. 1.2800 continues to offer stiff resistance, although tonight’s first hint of positive news may provide a foundation for a turn in sentiment towards the unit.

In UK meanwhile news that RBS will put $462 Billion of assets into  a government insurance plan and cede control of as much 95% of the company to the UK authorities, weighed on the unit for most of early London trade. After staging a rally to 1.4293 in Asia, cable traded down to the 1.4200 handle in post news reaction. The pound was also hampered by very weak Nationwide prices which dropped to -1.80% vs. -1.30% eyed indicating  that  housing values continue to erode.  

Turning to North America the economic focus will be on jobless claims and durable goods orders  with both expected to deteriorate from the period prior.  Yesterday’s late market recovery proved to be helpful to risk currencies, but should today’s data print worse than expected, triggering yet another leg down in equities it could unwind any rebound rally in the EURUSD.

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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.