From the desk of Captain Pickard
A combination of weak economic data and slow progress towards a Spanish bailout are still keeping the lid on European equities for now. German industrial activity declined 0.5% between July and August, while UK production is also expected to have shrunk in the eighth month. Against this backdrop, equities are holding up pretty well, in my view. I am expecting Spain to make a formal request to the ECB for assistance before long and this could be the trigger for a fresh round of gains in the FTSE and DAX.
This has been one hell of a rally from the single European currency: nice, strong and confident. Only a couple of times has it even retreated as far as its 13-fourhourly EMA (80.761p). The price is currently overbought on the 4-hour chart, with an RSI reading of 74.3%. I’d therefore allow for another dip to the 13-EMA in advance of a rally to 81.15p and beyond.
I’d buy a bounce from around that 13-EMA.