Why The Euro Rallied After German Data

During the European session today, there were few economic figures from Germany, therefore, volatility was lower, until after the figures are released. However, the reaction to the German figures might be confusing to some traders. In this article, we will explain the reasons behind that move.

German Data Outcomes

How To Read These Figures

Looking at the table above, you can easily spot that there were two figures came in with disappointing outcomes, while only one index showed some sort of improvement which is in line with the market estimates. This is easy.

Despite that, if you search the internet, most of the economic calendars will only show the Ifo Business Climate, because they think that it is not important to show the rest of the numbers. This is totally wrong. It's also possible to say that this is irresponsible.

Trading the FX market or any other market is all about gathering information, in order to determine which side of the trade you will be on.

German Ifo Business Climate and despite today’s decline, it's still near the highest level in more than a year. Moreover, the expectations index would definitely decline given the fact that the EU and the UK partnership is changing after Brexit.

What matters the most is the current conditions index, which posted its 5^th monthly increase in a row and the highest level since 2011. Since the current condition is still encouraging, this means that the ECB is still on the right track to taper QE in April.

 

USD Weakness?

This is also another reason for the Euro rally. If we take a quick look at the US Dollar Index for the past few days, we can spot that the index is trying to hold desperately above 100.0 barrier, which should be watched very carefully in the coming days, as a breakthrough that psychological support, this would clear the way for a deeper declines ahead.

 

Why Is USD Declining?

The Trump effect is here to stay since the new President of the US is calling for producing the products in the states. A stronger dollar would be one of the major headwinds. In order to make this real and to be able to produce the products in the states, they need to stop the US Dollar rally. This is what he probably did last week when he clearly said: “USD is too strong and it's killing us.” Since then, the US Dollar lost around 2%. Will it continue? I believe it might especially if he is seriously thinking to implement his plan.

Levels To Watch