Divergent Franco-German Development Sends Euro Seeking $1.1900 Target

With the EUR/USD reaching its near term bearish target of $1.1950 earlier on Tuesday, strong performance of German industrial output dented the move lower temporarily, before the EUR/USD slid to $1.1940, making fresh 2018 lows. After falling past $1.1950 level, 50% Fibonacci retracement of EUR/USD recent upmove at $1.1900 become new target.

German industrial production rose 3.4% over the month in November easily beating the expectations of 1.8% monthly increase. The German industrial production rose 5.6% over the year in November and has had its best year since 2011 in eleven months of 2017.

Moreover, German trade balance extended the surplus to €22.3 billion with exports rising 4.1% m/m in November. This is in sharp contrast with trade balance in France that has reached a deficit of  €5.7 billion in November, up from €4.7 billion deficit expected by market.

The EUR/USD was benefitting last week from the US Treasury yield stagnation and the overall optimism for the European economy, especially after last Friday’s non-farm payroll data came out at 148K missing the expectations of 190K increase.

The net long positioning of the market has also been demonstrated by CFTC report that showed another jump to a new multi-year high in long Euro positions. The FX market discounts the CFTC report and sold the EUR/USD on Monday past psychological support level of $1.2000 to target $1.1950 representing 38.2% Fibonacci retracement of current upmove from $1.1717 to $1.2088. After breaking the $1.1950 Fibonacci support level, the EUR/USD is now targeting $1.1900 level representing 50% Fibonacci retracement of the above mentioned move.

Technical indicators are pointing lower on 15 minutes chart with both the Relative Strength Index and Slow Stochastics approaching the Oversold territory. The Momentum indicator is in negative territory but also points lower..

With EUR/USD returning back above $1.1950, the corrective move on EUR/USD is considered over with $1.2000-$1.2088 targets on the upside.

With momentum built on the downside, $1.1900 representing 50% Fibonacci retracement of current upmove should be the next target.

EURUSD 15 minutes chart