German economic data suggested ECB’s tightening to arrive soon, buy EUR/USD?

There is no visible resistance between the current level of EUR/USD and 1.20, suggesting the recent gains in euro could continue.

  • Yesterday’s data showed Germany’s flash GDP estimate climbed at the pace of 0.8% in the third quarter, exceeding earlier economists’ expectation of 0.6%. The data bolstered the case for the European Central Bank to begin tightening monetary policy next year.

 

  • On the other side, dollar is struggling with its domestic political issue. Little visible progress on the US tax reform package. With the tax reform yet to evolve into legislation, markets have little appetite to build fresh dollar-buying positions.

 

  • On the technical side, EUR/USD has broken the key resistance level in past two years, suggesting the sentiment in euro has been turning bullish.

 

  • We expect EUR/USD to revisit 1.20 within this month.

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Fullerton Markets Research Team

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