Article by ForexTime
The Euro continues to consolidate in an upward sloping range as the ECB bond buying program started and seems to have had a limited impact. The ECB started its covered bond purchase program Monday, but while officials believe this will have a significant widening of the ECB’s balance sheet, initial volumes are likely to be too small to have a considerable impact. Monday’s start of the program failed to halt the widening of Eurozone spreads.
EUR/USD came off its highs on a report about the ECB, which is apparently preparing to buy corporate bonds. The news pushed the currency pair down nearly 80 pips. ECB reportedly buys Italian bonds in covered bond purchase program. The ECB bought Italian covered bonds on the second day of its new covered bond purchase program. Many market participants and have remained dollar bullish during the correction on the basis that U.S. economic growth will likely be favorable to the greenback into 2015.
The risk on traded helped the Euro remain buoyed, as Chinese GDP came in stronger than expected. China’s economic data alleviated growth fears. GDP slowed to 7.3% year over year growth pace in Q3 from 7.5% in Q2. Industrial production expanded at 8.0% year over year rate in September from 6.9% in August, coming in well above projections. Retail sales expanded at 11.6% year over year clip in September following the 11.9% rate in August, coming in nearly as expected.
The technical picture shows a U shaped bottom as the currency pair attempts to hit higher highs. Support is seen near the 10-day moving average at 1.2735. Resistance is seen near the October highst at 1.2890. Momentum remains positive with the MACD (moving average convergence divergence) index printing in positive territory with an upward sloping trajectory. The RSI (relative strength index) is printing in a tight range, showing a reading of 48, which is in the middle of the neutral range and reflects consolidation.
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