Forex Trading

European markets tomorrow may be looking toward the release of the German IFO series of sentiment surveys. The outlook is expected to be positive for a second straight month after global stock markets erased losses seen in early-2009. As an indicator that leads overall growth by nine-twelve months, IFO's outcome may be heavily favored if it does indeed post an upward move.

Key Overnight Developments

• North Korea Tests Nuclear Weapon, South Korea Reports
• Japan’s All Industry Activity Index Fell in March

Critical Levels



Euro traders saw the the currency gap upward 14 pips against the Dollar to reach a high of 1.4044 before pressure forced the pair down to levels last seen during the second half of Friday’s session. Sterling exhibited similar characteristics despite lacking a gap. Both pairs ultimately established downward trends in the early hours of this week’s trading session.

Asia Session Highlights



Geopolitical tension may have rocked markets in Japan after South Korea’s office of the president reported that North Korea had tested a nuclear weapon. The U.S. Geological Survey reported a 4.7 magnitude earthquake 230 miles north-east of Pyongyang, the North Korean capital. Intraday Japanese stock trading saw the Nikkei fall from a high of 9402.76 to a low of 9331.74 in the 30 minutes following the release of the news.

Japan’s All Industry Activity Index fell 2.4% in March. The figure, which has declined on all but one occasion dating back to October, might not necessarily be indicative of the current economic environment in Japan because of the three month lag between the month’s empirics and its release. In fact, the previous week saw an analyst at Merrill Lynch upgrade the share price outlook for IHI Corp., Japan’s second-largest manufacturer of heavy-machinery, to “buy” from “underperform,” citing an increased demand for such equipment from emerging markets. If such a prediction comes into fruition the Asian country may benefit from a boost in its export sector, which has been battered over the year as a result of dying demand for electronics and vehicles from abroad.

Euro Session: What to Expect



A series of German sentiment survey’s will be released tomorrow. The IFO Business Climate survey is expected to increase for a second consecutive month after having fallen eight of nine sessions prior. A move upward here would be a sign of relaxed pessimism coming off of a stock market rally which saw global equities erase losses seen in the first two months of the year. Because business and investor sentiment generally lead the real economy by at least nine-twelve months, the IFO surveys are seen as a key point of interest for those looking to estimate prospects for growth.

As the largest economy in the Euro-Zone, Germany’s outlook is of utmost importance for the region. With nearly a quarter of all Euro-Zone external exports coming from Germany, the world’s third largest economy, improving sentiment among German business managers may provide foreigners a larger sentiment to invest in the European economy.

Written by Ilya Spivak, Currency Analyst
Article Source - Sentiment May Save Europe as Business Managers Foresee Better Times (Euro Open)