Euro's Bear-Trend Ending say Analysts as Eurozone GDP Figures Beat Expectations

Above: German GDP data raised eyebrows by beating expectations. Pic (C) Pound Sterling Live 2015.

“While the longer-term trend lower persists, short-term corrective moves are clearly possible if only to relieve the oversold condition that has quickly accumulated in the market.” - Shaun Osborne at TD Securities.

Better-than-expected GDP data out of the Eurozone has seen the euro exchange rate complex (EUR) head higher as markets move through the final trading session of the week.

January's fourth quarter reading comes in at 0.3% vs the 0.2% expected, the prior reading was seen at 0.2%.

January's fourth quarter annual figure rose to 0.9% against the 0.8% expected; the previous reading was seen at 0.8%.

"Reports of the death of the eurozone economy have been greatly exaggerated. GDP figures from across the currency union were much better than expected," says Chris Beauchamp at IG in London.

Beauchamp notes Germany fulfilled its traditional role as the engine of growth, with a quarter-on-quarter improvement of 0.7%, more than double expectations.

The impact on the single currency has been notable with the euro to dollar rate cementing itself above 1.15.

The euro to pound rate has meanwhile edged higher towards 0.7417.

“EURUSD’s sideways shift since late January has served to ease spot out of the strong downtrend in place through the end of 2014 and possibly raises the prospect of a corrective rally in the EUR in the next few weeks,” says Shaun Osborne at TD Securities noting the improved outlook in euro-dollar.

Osborne notes that being broadly and negatively aligned across a range of timeframes, trend momentum studies for EURUSD are shifting to neutral or slightly bullish on the shorter term oscillators.

However, the idea of wide and choppy range trade developing over the next few weeks potentially “fits” with the seasonal trends in EURUSD—sharply lower in January and then sideways into March and possibly a little beyond.

Outlook for Euro Dollar Exchange Rate Sees Potential Recovery

Osborne tells us recent developments suggest markets need to rein back on recent bearishness on the EUR to some degree at least and concede the risk ofa bounce developing above 1.1445/50 to 1.17/1.18 in the next few weeks before the underlying trend lower resumes.

Osborne says:

“EURUSD’s stabilisation around the 50% retracement support derived from the 0.83/1.60 move up at 1.1214 on the monthly chart looks more and more significant the longer spot stays above it.”

While the longer-term trend lower persists, short-term corrective moves are clearly possible if only to relieve the oversold condition that has quickly accumulated in the market after the late 2014 slide in the EUR.

“We remain bearish overall but feel the longer term charts support the impression of a EUR consolidation developing near-term. Major, long-term resistance stands at 1.1783 (23.6% retracement of the 1.40/1.10 drop) and 1.2205/35,” says Osborne.