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IFO Survey will Drive Price Action

David Becker
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www.iforex.com
IFO Survey will Drive Price Action

Confidence continues to rise in the Euro zone and Wednesdays better than expected PMI release continues to be the focus for traders this AM. On Thursday, IFO will release their business survey, which will go a long way toward determining how confidence businesses are in the current and future economic conditions. A stronger than expected number will likely be the impetus needed for the EURUSD to break above resistance levels.

Eurozone business growth accelerated in April, with the composite flash Purchasing Managers Index climbing to a 35-month high of 54 from 53.1 in March. Manufacturing PMI has increased to 53.3 from 53 and services to 53.1 from 52.2. The growth was driven by Germany, but France, which saw declining activity, offset the gains.

The Eurozone experienced a return to job creation, according to a statement from Markit, suggesting that companies believe that the recovery has legs and is looking increasingly sustainable. On Thursday, the IFO business survey will be released. The Ifo Business Climate Survey is based on approximately 7,000 monthly survey responses from firms in manufacturing, construction, wholesale and retail.

The EURUSD tested resistance near the 10-day moving average but has yet to recapture this level. The next level of target resistance for the currency pair is a downward sloping trend line that connects the highs in March to the Highs in April. The resistance level comes in near 1.3875. Support is seen near an upward sloping trend line that comes in near1.3750.

Momentum on the currency pair is positive as the MACD (moving average convergence divergence) index generated a buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crossed above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal.

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