It looks like ECB’s rigorous stimulus is starting to pay off. According to a report by ECB, the Euro zone lending to household was growing at an encouraging pace. Last month it expanded by 2.2% which was the highest record in the last 6 year. Though the money circulation parameter declined, there is some hope for the Euro as it looks for a way out from deflation. Perhaps this is an indication of a bottom approached from a consumer perspective. Money circulation parameters are used to project future growth. Inflation expectation from major economies continues to expand. Many analysts expected a broad based Euro zone growth of about 1.2% going forward. Major economies are showing a year over year growth which is easily beating expectations. Spain for example recorded a 3.0% growth last year, Sweden, Germany and Italy-despite bank problems-still recorded positive figures. Raw material and household commodities prices are expected to continue its chart up as a loose monetary policy plays a key role here. Rising energy prices is also a contributing factor. This is keeping Germany’s inflation ahead of the pack which many observers are not comfortable with. Draghi asked for structural reforms to tame the higher than projected inflation in Germany. February’s inflation is expected to breach the 2% target and this gives them a net positive value than its neighbors. This makes the weighed Euro zone inflation numbers to be a little bit higher because of Germany’s economic muscle. As inflation heats up, the only protection investors will have is to shift to Gold. Even though it is not interest earning, it can provide a dependable cushion in times of high inflation and low yields-from both government and corporate securities. Data expected from Australia comes at a time when capital expenditure figures disappointed investors. As a matter of fact, the number of longs from open interest positions was slashed. This means there is a potential shift from the overly bullish Aussie to a short term bear trend. Watch out for Q4 growth data which is expected to bounce to 0.7% from Q3 0.5% contraction.
To the charts now and I will look to offload the Aussie in the meant time. Looking at the Euro economic data is flowing in, some euro support is expected. Looking at the technical indicators, there is an obvious higher highs printed by stochastics indicator moving out from the oversold territory. It will be wise for us to move with the trend and look to go long. Entry should be in the 1 hour or 30 min chart and as the 4 Hr candle close, look to initiate longs with a 1:2 risk reward ratio.
This will mean trading as follows:
Buying: 1.3775
Stop Loss: 1.345
Take Profit: 1.3840
Have a good trading day.

EURAUD 1HR Chart-27.02.2017

Source: Dalmas Ngetich

EURAUD Daily Chart-27.02.2017

Source: Dalmas Ngetich

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