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EUR/USD: Euro edges higher as German consumer confidence improves

H.S. Borji
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The euro edged higher against its US counterpart Friday, but the pair remained range bound despite upbeat German consumer confidence data.

The EURUSD reached an intraday high of 1.2695. It would subsequently consolidate at 1.2672, advancing 0.2 percent. The pair is testing the 1.2677 technical resistance level. Above this, resistance is ascending from 1.2709. On the downside, initial support is likely found at 1.2614.

The euro is wrapping up the week on a high note after declining sharply on Tuesday and Wednesday. The EURUSD is on pace for a weekly loss of 0.6 percent. The pair has declined 1.2 percent since Tuesday’s high of 1.2838.

In economic data, German consumer confidence rose unexpectedly on the heels of stronger income expectations and a greater willingness to spend.

GfK’s forward-looking German consumer climate indicator improved in November, rising to 8.5 from 8.4. A median estimate of economists called for a decline to 8.0.

The gauge of economic expectations declined 0.1 point to 4.3, but continues to be above the long-term average of zero. The barometer of income expectations increased to 46.9 from 43.4 following two consecutive monthly declines. Willingness to buy rose 3.1 points to 45.6, GfK data showed.

The indicator, which is based on monthly interviews with 2,000 consumers, is used to gauge trends in private consumer spending.

“In October, German consumers were evidently less affected by the continued problematic geopolitical situation and the resultant economic slowdown than they had been in the previous month,” GfK said today in a press release. “Following moderate declines in the previous month, both income expectations and the willingness-to-buy improved again, thereby confirming their already high level.”

“The downward trend in the consumer climate has therefore come to an end,” GfK concluded.

Declining consumer confidence is a major concern for the European Central Bank, which is desperately trying to inspire growth in the troubled 18-national currency union. Eurozone growth was flat in the second quarter, as Germany declined 0.2 percent and Italy slipped back into contraction.

The ECB’s next rate decision will be delivered November 6.

In US data, new house sales increased 0.2 percent in September to a seasonally adjusted annual rate of 467,000, the Commerce Department said. The August growth rate was revised downward to 15.3 percent.

Europe’s common currency was little changed against the British pound following in-line UK GDP figures. The EURGBP was range bound between 0.7873 and 0.7902. The pair would subsequently consolidate at 0.7887. According to the technical chart, initial support is located at 0.7867. Resistance is ascending from the 0.7915 level.

The UK economy accelerated 0.7 percent in the third quarter, down from 0.9 percent in the April to June period, the Office for National Statistics reported today. Compared to the third quarter of 2013, UK GDP increased 3 percent, official data showed.

The euro was little changed against the Japanese yen, as the EURJPY consolidated at 136.82. The pair faces initial support at 135.75 and resistance at 137.57.

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