Two Trades To Watch: EUR/USD, FTSE

Charts (1)

EUR/USD rises ahead of German IFO data

The EUR/USD is edging higher towards 1.22 on a broadly upbeat market tone and weaker US Dollar (UDN) ahead of German IFO business sentiment data.

German IFO Expectations is expected to rise to 93.2 in January, up from 92.8 in December.

A stronger than forecast reading would add to the above forecast manufacturing PMI released on Friday and point to a continued recovery in the Eurozone’s largest economy despite resurgent covid cases and tighter lockdown restrictions. This could propel the Euro (FXE) towards 1.22.

ECB Christine Lagarde is also due to speak, which could inject further volatility into the pair.

Hopes of additional US stimulus keeps tone surrounding USD soft. However, skepticism over Biden’s ability to push the package through poses downside risk to the pair.

EUR/USD technical analysis

After breaking out of the descending channel pattern late last week, EUR/USD rose to a 10 day high of 1.22 but lacked follow through. Today the pair is trading quietly in consolidation ahead of the data release at 1.2180.

Bulls could wait for a break above 1.22, the 100 sma and round number before taking a position. A break above this level could open the door to 1.2235 (high 13th Jan) and a break through here could see the pair push on beyond 1.23 resuming the ongoing longer term upward trend.

On the flip side 1.2130 (50 sma) offers immediate resistance ahead of 1.21. A brsk below this level could see 1.2050 come into play before the key 1.20 psychological level.

FTSE rises cautiously on US stimulus hopes & ahead of big US earnings week

The FTSE is edging cautiously higher on US stimulus optimism. Hopes are rising that $1.9 trillion covid stimulus package be pushed through Congress in the coming weeks. This is lifting risk sentiment making riskier assets like stocks more attractive. The deal would also be a boost for London listed companies that do business with the US.

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