German Ifo surprises EURGBP to 9000 and even 9100

EURGBP, Daily                    

The German July Ifo index unexpectedly jumped to 116.0 from 115.2. Expectations had been for a slight correction in the headline reading, especially after yesterday’s disappointing PMI readings, but in the event the Ifo reading was a positive surprise, sending Bund futures further down. Still, the breakdown showed that the overall improvement was entirely due to a sharp rise in the current conditions indicator, while the more forward looking expectations index stagnated. So the message is not unlike that of the PMIs, which showed ongoing robust growth, but a slowdown in the pace of expansion. Still, the recovery clearly remains intact, tying in with Mersch’s increasingly optimistic message on the Eurozone economy, which the ECB is now more optimistic will also bring inflation back to target.

I opened a long position on the EURGBP at 0.8932 with target 1 at the recent fractal high and psychological 0.9002, target 2 is another psychological round number and October 2016 high at 0.9100. Expectations are for a well bid EUR as we run through the summer.  A break down through the 20 day moving average and a sustained move in the lower half of the Bollinger band will negate the move higher. RSI is positive (61) and rising and the parabolic SAR remains positive.  There may be some be some further retrace from my entry, of Thursdays (July 20) strong up candle, but sentiment remains EUR positive.


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Stuart Cowell

Senior Market Analyst


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