Third quarter GDP for Germany fell 0.5 percent, worse than analysts estimates following a 0.4 percent decline in the second quarter. The economy entered in a recession after two consecutive quarters decline. Euro was under pressure but as always the supply and demand forces dictated the results:
Euro supply side:
- possibility of more rate cuts after weak GDP number
Euro demand side:
- equity indexes such as DAX rebounded later betting that more rate cuts are now in horizon and it could stimulate the economy.
Yen supply side:
- possibility of intervention by the Bank of Japan rose after earlier actions by the Australian counterparts that bought the Aussie to support the currency.
- rebound in equity markets after heavy losses in recent days
Yen demand side: -
As the charts show, selling eurusd might be a better option than eurjpy considering the downside risks to the Japanese yen. My position (sell eurjpy) resulted in 2.5 percent loss which was closed after the price broke its MA26, signaling a reversal may be likely.
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