Forex Analysis – Trade of the Day: EUR/USD 25th September 2014

Germany – Ifo Business Climate

At GMT 8:00 a.m., the Ifo Institute for Economic Research published this month’s German Business Climate index. The Ifo Business Climate figure measures the level of a composite index, which is created by surveying around 7,000 businesses in Germany by asking them to rate the comparative business conditions of now and in six months.

Since the survey has a large sample size compared to similar studies, analysts consider the Ifo Business Climate to be a strong leading indicator of the overall economic optimism in the country.

Last month, the German Ifo Business Climate index came out at 106.3, and this month, the forecast was set slightly lower, at 105.9. Nevertheless, the actual Ifo Business Climate index came out much lower than the market’s expectation, at 104.7.

United States – New Home Sales

At GMT 2:00 p.m., the United States Census Bureau released the New Home Sales figure that measures the annualized number of new family homes sold during the last month.

Since the sale of a new home usually cause an increase in a wide ranging economic activity, such as sales of new furniture, new mortgage for the home, etc.; market analysts always considered the New Home Sales figure to be a leading fundamental indicator of the US economy.

Last month, on a year-over-year basis, total 427,000 new homes were sold in the United States, and this month, the forecast was set even higher, at 432,000. However, the actual figure came out way better than the market’s expectation, at 504,000. This is the first time in a long period that the New Home Sales figure in the United States has crossed the 500,000 level, making one of the prominent economic events of the week.

Trade Recommendation for the EUR/USD

Chart EURUSD, D1, 2014.09.24 21:40 UTC

Since the formation of the Bearish Outside Bar (BEOB) on May 8, the EUR/USD has been trading with a fierce bearish tone. After breaking the lower trend line of the downward sloping equidistant channel on September 4, the market was expecting the EUR/USD to retrace a bit. However, it continued to go down like a falling knife, and found temporary support at the 1.2860 level. Going forward, that support level only lasted for only two weeks, and then the EUR/USD managed to break it as well on September 17.

Yesterday, better than expected US New Home Sales figure has further fueled the market to go short on the pair. Meanwhile, it formed a bearish pin bar as well. Hence, the EUR/USD is likely to go further down towards the next support level at 1.2750 over the next few days. Moreover, worse than expected German Ifo Business Climate index is also supporting this notion. Based on the market condition, if the pair manages to close below the 1.2750 level, it would suggest a PUT in the EUR/USD.

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About our Forex Analyst:  Asif Imtiaz

Asif worked as a prop trader for almost a decade, and later he managed trading operations for one of the largest foreign exchange strategy developers in Europe. Currently, he works as a trading consultant to several brokers and writes on various tech and financial topics. You can reach him at contact@asifimtiaz.com

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Asif Imtiaz

Asif worked as a prop trader for almost a decade, and later he managed trading operations for one of the largest foreign exchange strategy developers in Europe. Currently, he works as a trading consultant to several brokers and writes on various tech and financial topics. You can reach him at contact@asifimtiaz.com

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