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Euro Reverses as Geopolitical Tensions Brew

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Euro Reverses as Geopolitical Tensions Brew

The Euro moved higher on Thursday, in early trade but turned tail in the US afternoon as geopolitical tension took hold. The breakout seen earlier in the session turned into a fake out as the currency pair moved below resistance. As reports surfaced that Russian troops were massing near the Ukrainian border, the dollar gain traction along with the Yen.

European data was stronger than expected which should give the ECB so room to maneuver. Spain reported a much better than expected 0.5% rise in retail sales in January on Thursday. The consensus was for a 0.8% decline, following the 1.0% decline in December. French inflation ticked up to 1.1% year over year in February from 0.8% in January.

Chinese data that show a distinct loss of momentum, which would have knocked riskier assets lower earlier in the week. The period covers both January and February as an effort to smooth the Lunar New Year holiday distortions. Retail sales increased 11.8% year over year, while the consensus was for 13.5%. Industrial production rose 8.6%, while the market expected 9.5%. Fixed investment rose 17.9% while the consensus forecast called for a 19.4% increase.

chart-euro-reverses-geopolitical-tensions-brew.png

The Euro broke out but reversed and closed below resistance levels. Support is now seen were resistance used to be at 1.39. Momentum is strong as the MACD (moving average convergence divergence) index prints in positive territory with and upward sloping trajectory. The RSI moved higher with price action reflecting accelerating positive momentum, but it is now printing at 70 which is in overbought territory and could signal a correction in the near future.

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