German IFO - Rumor of higher number leads to rally, prints higher

This morning of February 23rd at 9:00 GMT (4:00 EST) the IFO figures were released from Germany. There was a rumor of a better number during the early European open and this lead the Euro to gain during the morning leading into the release. There were Middle-Eastern names seen buying the Euro but also some barrier protection at 1.3300 the round figure. The number was indeed higher, but not really by that much, this one is good to trade on a deviation of about +/- 1.2 and we didn't get that much higher than the median analsyst estimates. So this could have been a buy-the-rumour/sell-the-news setup, but actually price managed to continue on up even after the release, despite all the movement before the news. Alot of bidders and once the barrier option broke then further upside was attaing. However 1.3350 the mid-handle was frontrun, barrier protection again perhaps?, or just market-makers protecting the next hedging level....interesting anyhow. Anyhow we had resistance marked from 1.3340-50 so rode it down to 1.3270 as New York opened.

Here is the data:

German IFO - Business Climate
Estimates- Median: +108.8 Average: +109.0 Range: +108.0 to +111.0
Actual: +109.6 Prior: +108.3 No Revision

German IFO - Current Assessment
Estimates- Median: +116.5 Average: +116.5 Range: +115.0 to +118.0
Actual: +117.5 Prior: +116.3 No Revision

German IFO - Expectations
Estimates- Median: +102.0 Average: +102.0 Range: +100.4 to +104.5
Actual: +102.3 Prior: +100.9 No Revision

Here is the 1 minute chart of EURUSD:

and here is the 1 minute chart of EURJPY

German IFO - Higher but little initial reaction

This morning at 9am GMT or 4am EST the IFO figures were released from Germany

Here the figures:

German IFO Business Climate
Estimates: Media 106.0 expected, Average 106.0 , Range 105.0 to 107.3
Actual: 107.2 Prior: 106.6
German IFO Business Expectations
Estimates: Median 97.0 expected, Average 96.8 , Range 94.6 to 97.5
Actual: 98.4, 97.3 prior
German IFO Current Assessment m/m
Estimates: Median 116.0 expected, Average 116.0, Range 115.2 to 117.0
Actual: 116.7 Prior: 116.7

Here is the chart of the EURUSD 10 seconds:

and the EURUSD 1 minute chart:

A rally in the EURUSD and all the risky assets did start about 45 minutes after the release when the results of the Spanish Bond auction came out positive Click Here

The DAX had a much better initial reaction as seen here on the 1 minute chart (this is a spreadbet chart so might be slightly different than EUREX)

German IFO - Good Number but EURUSD still in trouble

This Wednesday morning at 9am GMT (4am EST) the numbers for the German Ifo from the Institute for Economic Research. This consists of 3 numbers the most important of which is the Business Climate Number. It is an index which is based on surveyed manufacturers, builders, wholesalers, and retailers. It is a leading indicator of the economic situation and is highly regarded as historically it has corresponded to how the market has done. Here is the Data:

GERMANY NOV IFO BUSINESS CLIMATE: 109.3 V 107.5E; CURRENT ASSESSMENT:112.3 V 110.4E
- Expectations Survey: 106.3 v 104.7e
- Prior Business Climate revised higher from 107.6 to 107.7
- Prior Expectations Survey revised higher from 105.1 to 105.2

This was a decent deviation higher, actually +1.8 higher than the expected 107.5 , and in the past deviations of this amount have lead to good moves higher on the EURUSD and other Euro forex cross pairs. The Euro has been under alot of pressure the past few weeks with the situation in Ireland opening the old wounds that were caused by the Greek situation just 1 year ago. The markets gave the Euro a break while the Fed's QE2 was in focus, but now that is a done deal this has taken center stage. This week especially the sell-off has intensified, with last week's low being taken out, we recall that the EURUSD did then recover significantly from last wednesday until the end of the week, rallying some +300 pips. Since the market commenced for trading this week the EURUSD has moved down and comments from Merkel yesterday about the Euro being in a crisis did not help. The asian session saw some moderate retracement up for the EURUSD after the step losses seen yesterday. Euro Peripheral Bond spreads again were widening as the London open began and all the euro forex crosses dropped from the start. Concerns are that the debt problem will spread to Portugal, although their problems are different than Ireland, but their economy is small enough that the EuroZone rescue fund should be able to cope with this. The bigger concern is the situation in Spain because they have a much larger economy and this would bring alot of pressure on bail-out fund.

As the included chart shows, the EURUSD spiked up some 10-15 pips from its pre news release price of around 1.3335, but within 1 minute is was back down to this price and quickly moved below it and lower. With the strong negative sentiment and general bad news about the Euro, it was not wise to try and trade with the number when it was positive, in fact when there is a strong Sentiment-based Flow in the market, when there is a number which moves the market in the other direction, it can be a good entry to get back into the Trend. This moved very quick and already being short on some position trades did not get a chance to add here. Spike traders did have a moment to get out within a few pips of entry unless they experienced slippage, but it does help to be aware of the Sentiment-based Price and News Flow and Major Trends in the market even if you just take forex news spike trades.