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Euro Test Resistance after Strong Zew Number

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Euro Test Resistance after Strong Zew Number

The Euro continued to benefit on Tuesday rebounding from the breakdown that occurred nearly two weeks ago. Prices continue to press up against resistance, and last week’s softer than expected GDP report did little to help the currency. Investor sentiment in German continues to help boost their equity bourses and the Euro as riskier assets remain in vogue.

German investor confidence hits 4-year high on Monday according to the Zew sentiment survey. The German ZEW climbed to its highest in over four years in November, rising to 54.6 from 52.8 in October and topping consensus of 54. However, the current situation print surprisingly fell. Economic expectations for Germany have been hovering at a high level for months, as a strong equity market has increased confidence.

The yield differential over the last few trading session has also assisted in the rise of the euro. The yield differential has move back to the 10 basis point level after declining on strong US yields.

The EURUSD climbed back toward resistance created from the breakdown trend line that is upward sloping coming in near 1.3530. A close above this level would generate a test of the October highs near 1.38. Support is seen near the November lows near 1.33.

Momentum on the currency pair is solid with the MACD (moving average convergence divergence) index generating a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The MACD moved from negative to positive territory confirming the buy signal. The RSI (relative strength index) which is an oscillator that measures overbought and oversold levels is printing near 50 which is in the middle of the neutral range an reflects consolidation.

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