The Greenback Gains Traction After Weak German GDP
The dollar gain strength on the heels of the better than expected US retail sales data which is likely to feed through into 4th quarter GDP. Yields in the US found support near 2.82% and rose for most of Wednesday’s trading session giving the greenback a bid. The Euro was also under some pressure after Germany released a worse than expected GDP report.
Germany’s GDP growth eased to 0.4% in 2013 from 0.7% in 2012 and missed consensus of 0.5%. The German economy, which is export, led and relies on many of its European trading partners, suffered from the continuing recession in some European countries and from restrained growth of the global economy. According to the Federal Statistics Office, Strong domestic demand could offset those factors only to a limited extent.
China total financing in December, was flat, though new yuan loans slowed to 483 billion. Reserves were $3.82 trillion at the end of the year, up from $3.66 trillion at the end of Q3. The $157 billion increase in Q4 follows the $166 billion gain in Q3.
The combination of higher US yields, and a weaker than expected German GDP, pushed the yield differential in favor of the US dollar driving the EURUSD lower. Prices moved through the 10-day moving average near 1.3630 and are poised to test trend line support near 1.36.
Momentum on the currency pair is flat with the MACD (moving average convergence divergence) index printing in positive territory with a downward sloping trajectory. The MACD generated a sell signal in early January and continues to point to lower future prices in the currency pair. The relative strength index (RSI) moved lower with price action, but continues to print near 46, which is in the middle of the neutral range.
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