Can Germany Save The Euro?
Fundamentals
Germany?s GDP came in at 0.3% in the third quarter, meeting analyst estimates. On an annual basis, price-adjusted GDP rose by 1.8%, or 1.7 % when calendar-adjusted. While being far from jaw-dropping figures, the fact that the growth came from internal growth was encouraging. Being a manufacturing economy, Germany relies heavily on exports, which have been lackluster due to the Chinese slowdown. Germany has benefited from low interest and unemployment rates to grow economically, but will this be enough to stop the Euro slide?
The Federal Reserve seems poised to raise interest rates in December, while ECB President Mario Draghhi has hinted that the ECB will either lower interest rates or increase the pace of its bond-buying program. If this is indeed the case, it would be the first time since 1994 that the Federal Reserve and a European central bank went in opposite directions on interest rates. This does not automatically mean the Euro will drop against the greenback, as traders are expecting both to occur. The focus of traders will instead likely be the language of the Fed. Many traders are expecting a rate hike in December, but the unknown is what the FOMC plans on doing going forward. Is the Committee going to raise rates and then hold steady, or is this the first of a series of consecutive hikes? That is the question traders will be asking themselves.
Technical Notes? – View Today’s Chart
Turning to the chart, we see the December Euro chart drifting lower toward the 1.0500 support level. The 1.0500 support can be seen as significant and could lead to a test of parity. It is interesting to note that the RSI indicator reached a relative low earlier this month, yet prices continue to move lower.This could be seen as potentially bullish.
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