German business morale improved more than expected in August as companies remained confident the Euro zone's number one economy is resilient enough to withstand China's slowdown. The Ifo institute's business climate index inched higher to 108.3 this month, up from 108 in July and overshooting the median estimate for a decrease to 107.6. In its August monthly bulletin the Bundesbank said that Germany is set for "solid" growth in the remainder of the year. Robust domestic spending, supported by record-low unemployment and borrowing costs, could provide a shield against weakness in China, German third-biggest trading partner. The Ifo's Current Assessment sub-survey, indicating current conditions in the German economy, booked 114.8 points, compared with the previous month's figure of 113.9. At the same time, the Expectations Index, reflecting companies' projections for the next six months, slid to 102.2, from 102.3.
The Euro zone's biggest economy grew 0.4% in the second quarter, following the 0.3% expansion in the three months through March. The annual gauge on a non-seasonally adjusted basis showed 1.6% growth, after the first quarter saw a revised 1.2% gain. German overseas sales increased 2.2% in the three months through June, while private consumption gained 0.2%, and capital investment contracted 0.4%.
Upcoming fundamentals: EU and US valuable data expected on Thursday
Both the Euro zone and US are going to publish a lot of important statistics today. The French business sentiment indicator is due at 6:45 GMT, while markets are following an important business conference taking place in France and is organised by the Movement of Enterprises of France. Following that, the Spanish second-quarter GDP (7:00 GMT) is estimated to be revised upwards from 2.7% to 3.1% on an annual basis. From another side of the Atlantic, US GDP is likely to be revised to the upside as well, as the second-estimate average projections suggest growth will be upgraded from 2.3% to 3.2%. In addition, markets will be closely watching US pending home sales at 14:00 GMT and personal spending numbers at 12:30 GMT, while world's financial experts and central bank chiefs are heading to Jackson Hole Symposium in Wyoming, US.
EUR/USD confirms support at 1.14
As expected, the EUR/USD cross breached an important support line that was targeted by bears yesterday. Therefore, many crucial technical levels were violated, which increases the risk of a further sell off in the short term. Bears are likely to aim at yesterday's low of 1.1291. However, this level is reinforced by the 23.6% Fibonacci retracement of a 2014-2015 long term downtrend. On the contrary, bulls are still hoping for a recovery with daily indicators pointing upwards, but any rally should be capped by recent highs around 1.1560/80.Daily chart
In the one-hour chart EUR/USD has just neared the lower boundary of the channel up pattern, which is strengthened both by 23.6% retracement and 200-hour SMA at 1.1295/68. Therefore, there is a possibility a recovery will occur as soon as today, while bullish targets remain the same as mentioned earlier at 1.1560/80 (Aug 26-27 highs).
Hourly chart
SWFX sentiment deteriorates, while pending orders climb
The share of bullish positions at OANDA is 42.50% (+6%) at the moment, while SAXO Bank market participants are also remaining strongly pessimistic towards the common currency, with their portion of longs taking up only 37% of all open trades on Thursday.
Spreads (avg,pip) / Trading volume / Volatility
Community members expect Euro to continue rallying this week
As volatility in the equity markets remains uplifted, traders are moving away from the Greenback as Fed meeting approaches. As a result, the advantage of bullish votes increased even more over the past five trading days, up from 63% to almost 73%. Market participants also see the pair higher by Friday of this week, with the mean forecast being placed at 1.1450.
A proponent of a near-term growth, RacerX, suggests that "with increasing skepticism about the Federal Reserve raising interest rates in the middle of next month and the unexpected devaluation of the Yuan, the Euro is looking increasingly attractive."