German Factory Orders Surprise, Italian GDP Suggests the Worst Could be Over
German Factory Orders (YoY) for June came in at +4.3 pct. This is above expectations of -0.2 pct.
Italian GDP for the second quarter contracted by 0.2 pct - not as bad as the 0.4 pct contraction analysts had been pencilling in.
The first quarter saw a decline of 0.6 pct in the Italian economy.
Loredana Federico at UniCredit Bank says there are signs the Italian economy is finally stabilising:
"Leaving 2Q13 behind us, survey indicators at the beginning of the third quarter keep sending encouraging signals: in July the manufacturing PMI climbed above the 50 expansion threshold, while the service counterpart came back to 48.7 vs. 45.8 in June.
"While it is still premature and we need to wait the August round of surveys to see if our GDP projection is on track, the ongoing improvement in surveys moves in the right direction and supports our view of a stabilisation in economic activity in 3Q13."
Outlook for the Euro
Turning to the charts we see the EUR/USD continues to trade in very tight 1.3200-1.3300 range having failed at the top end for several days in a row.
RoboForex have issued a Wave analysis of price action in the Euro Dollar exchange rate today, and the picture is telling:
"We may assume that Euro continues forming a large descending zigzag (E) of [B] and its wave B of (E) of [B] is taking the form of a long horizontal correction. If this assumption is correct, this correction may be followed by a descending movement inside the second part of zigzag, wave C of (E) of [B]."
Luc Luyet at MIG Bank confirms that price action is likely to remain choppy, however he is predicting the Euro to enjoy the upper hand:
"EUR/USD is maintaining a general consolidation pattern close to the recent high at 1.3345 (31/07/2013). Provided a foot hold can be maintained above 1.3166 (25/07/2013 low) it is anticipated that we will see an eventual push back over 1.3345. A break back under this key level is required for us to change our current bullish bias.
"The region between 1.3345 and 1.3417 (19/06/2013 high) is expected to offer considerable resistance to bulls. Thus upside potential is likely limited. "
Craig Erlam at Alpari UK says he is a little more bearish on the Euro:
"Rhe weekly chart is looking quite bearish after the pair found resistance from the two descending trend lines, dating back to May 2011 and January this year. With little driving the markets at the moment, this level is unlikely to be broken in the short term. "
"If this euro weakness continues throughout the week, it should result in an evening star formation, which again is bearish, along with a potential cross in overbought territory on the stochastic. The daily chart is also looking bearish, with yesterday’s spinning top also indicating a reversal following the strong euro rally on Friday."
(Please Click to Enlarge). 