Euro Halted to Rise but Still in up Steam Amid GDP Climbs

On Tuesday Euro halted the rising trend from the record high since the beginning of 2015, with 0.35 percent drop to close up at 1.18001. Thanks to solid economic situation of euro-area, euro is still in a developing ascending price channel.

The euro-zone economy expanded apace in the second quarter, revealed by release of Gross domestic product and joblessness situation yesterday. Gross domestic product (GDP) in the 19-country region increased 0.6 percent in three recent months, after 0.5 percent rise in the first quarter of this year. According to statistics from Bloomberg, Germany and Belgium were the only nations that suffered economic slide among main countries in euro-area.

Economic confidence sustains among investors after figures of unemployment and manufacturing output have signalled the economy was gaining steam, underpinning expectations that price pressure would finally begin to build according to the European Central Bank. German unemployment change in July declined around 9,000, beating the forecast of 5,000 drop, while its unemployment rate remains unchanged at 5.7 percent.

Based on solid strength of euro-area economy and gradual rise of price pressure, policy makers are preparing for a debate about the future path of current quantitative easing in the Autumn, which has reduced financing costs for firms and households, thus stimulating demand and boosting economic growth. ECB President Mario Draghi also agreed with that by expressing confidence that the solid, broad-based recovery will extend into the second half, with a healing labor market and a closing output gap fueling a sustained inflation pickup.

“Monetary policy should remain firmly accommodative,” the Washington-based lender wrote in a report published last week. ““The improving near-term outlook is clouded by significant downside risks, especially in the medium and long term.”

Technically the EUR/USD is consolidating in a developing ascending price channel. This cannel as depicted below, has been created by connecting a series of swing highs and lows beginning with July 5th’s price action. In the event that the EUR/USD edges lower, traders should first watch for the pair to breakout beneath the lower channel line. Alternatively if prices reverse higher, the EUR/USD must first break above Monday’s high of 1.18442, then test the ascending channel line near 1.18942.

Chart 1: EURUSD Daily

After breaking higher to both key resistances of August 24th’s high of 1.17111 in 2015 and 1.17292 (38.2% retracement), traders may look for a further rise due to capacious room before 1.21614 (50.0% retracement) which is regarded as a key resistance.

Chart 2: EURUSD Daily – Fibonacci retracement