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Euro Gyrates Following ECB Decision; Traders Eye Payroll Report

David Becker
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Euro Gyrates Following ECB Decision; Traders Eye Payroll Report

Now that the ECB decision on monetary policy is in the rear view window, traders will focus on Friday US employment report. The preview to this report was a softer than expected ADP private payroll report which showed an increase of 179K compared to the 225K expected by economists. Draghi did what he could to reduce the value of the Euro currency, but following Thursday’s press conference, the EURUSD experience a robust short squeeze which pushed the currency pair into the black for the day.

In economic news on Friday, German April industrial production rose 0.2% month over month, after falling 0.6% month over month in March. A slightly weaker than expected rebound, which left production up 1.9% year over year, down from 2.8% year over year in March. Annual rates continue to decline since reaching a cycle high of 4.9% year over year in January and the decelerating trend ties in with weakening confidence numbers and will fuel concerns that even the German recover is stalling.

Germany posted a trade surplus of EUR 17.7 billion in April, up from EUR 15.0 billion in the previous month. The improvement was mainly due to a 3.0% month over month rise in export, the first improvement since January. Imports meanwhile rose a very modest 0.1% month over month, after falling 1.1% month over month in the previous month. The unadjusted current account surplus declined to EUR 18.4 billion from EUR 19.7 billion in the previous month, with the total for the year to date amounting to EUR 67.0 billion, little changed from the EUR 65 billion in the corresponding period last year. Exports should continue to grow if the currency softens.

Momentum on the currency pair has turned 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) crosses above the 9-day moving average of the spread.

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