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Screenshot of a breaking news alert e-mail from Q2 2017
The German industrial output data for March edged higher with the print coming in at -0.4%. This is much better than the forecast of -0.7%, mainly due to lower energy prices and bolstered global demand. On a less bright side, the German investment good output fell 1.2% from the previous number. All in all, we could say that we had a mixed bag soft data for the German economy and this is not helping the EUR/USD pair which is already struggling. For the EUR/USD to resume its rally we need a strong catalyst. The only important element which traders are focused at the moment is the ECB’s decision around its monetary policy. The European Central Bank’s President, Mario Draghi, is speaking tomorrow and investors are going to look for clues in relation to the bank’s monetary policy.
The pair is still trading above all its important Moving Averages (above its 200,100 & 50 day MA). This confirms that the upward trend is still intact. If we break the 200-day moving average, it is highly likely that we may close the gap which occurred on the heels of the first round of the French presidential election.
Volatility Tanks as Political Fears Ease Off
Everyone is paying attention to the fear index which tanked yesterday on the back of Macron’s victory and yet another record in the US markets. The risk on trade is in full swing and traders are considering the recent pullback in the European market as an opportunity. The CBOE volatility index dropped below the mark of 10 for the first time since February 2007.
It may not be a bad idea to buy some insurance for your portfolio given that the volatility is so cheap. The reason behind that is simple. Macron’s victory does not mean that we are out of the woods just yet. There are still massive challenges ahead of him and the issue of soft and hard Brexit is still very much in play. US Earnings for the Q1 were a little soft and the US GDP growth is nowhere close enough to its previous level – let alone what Trump wants.