EURUSD Rallies to $1.24 as German Unemployment Rate Falls

Text goes here

In this Issue...

Read what our Top Contributors are saying

By Christopher Vecchio, DailyFX.com Currency Analyst

THE TAKEAWAY:German Unemployment Rate > No Jobs Lost, Rate Ticks to New Lows > EURUSD Bullish

While the rest of Europe faces a sovereign debt crisis, one that has diminished the standard of living for her citizens as unemployment rates sky rocket, the German economy looks unscathed. In fact, while some countries face an unemployment rate of 15 percent, 20 percent, or even 25 percent, the German economy just saw its unemployment rate hit a Euro-zone era all-time low, at 6.7 percent in May against a forecasted 6.8 percent rate, according to a Bloomberg News survey. When compared to all available data, the rate is not just the lowest since January 1999, but also as far back as our data goes, which is January 1991.

The unemployment rate was aided by a labor market that has proved resilient amid the decline of employment across the rest of Europe. Economists were predicting that the German economy had lost 7K jobs in May after gaining 19K jobs in April; however, no jobs were lost (or gained). When compared to other major economies, such as the United Kingdom or the United States, the German labor market looks relatively resilient; whose counterparts have unemployment rates of 8.2 percent and 8.1 percent, respectively. When compared to other Euro-zone countries, such as France, Italy, or Spain, the German labor market is that much more impressive; these countries have unemployment rates of 9.4 percent, 24.1 percent, and 8.8 percent, respectively.

EURUSD 1-minute Chart: May 30, 2012

Charts Created using Marketscope - Prepared by Christopher Vecchio

Following the release, the Euro gained across the board, most notably against the safe haven currencies, the Japanese Yen and the US Dollar. The EURJPY appreciated from 97.71 to as high as 97.94, while the EURUSD rallied from 1.2393 to as high as 1.2416, at the time this report was written.

With regards to the EURUSD, we remain bearish given the fundamental outlook for the currency, despite the excessive oversold conditions the pair faces. After setting a fresh 2012 low today at 1.2358, the pair has rebounded approximately 50-pips, setting up a Hammer candlestick on the daily chart. Typically, this price action indicates bulls closed out the session stronger than the bears, signaling a potential shift in momentum. Indeed, shorter-term charts suggest that rallies may advance as high as 1.2460/80, and it would take a significant fundamental catalyst to drive the pair back above 1.2500. As such, with two key US data releases today with quantitative easing expectations - the ADP employment report and the first quarter GDP revision - it's very possible the EURUSD rallies up towards 1.2500 ahead of the US cash equity open.

--- Written by Christopher Vecchio, DailyFX.com Currency Analyst

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Any opinions, news, research, analyses, prices, or other information contained in this email are provided as general market commentary, and do not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The content in this email is subject to change at any time without notice, and is provided for the sole purpose of assisting traders to make independent investment decisions. Dailyfx has taken reasonable measures to ensure the accuracy of the information, however, does not guarantee its accuracy, and will not accept liability for any loss or damage which may arise directly or indirectly from the content or your inability to access the content, for any delay in or failure of the transmission or the receipt of any instruction or notifications sent through this email. Please read the full disclosures here. Additionally, Dailyfx takes your privacy seriously. Please click here to read our privacy policy.

Valuable Resources