The euro partially regained its position against the US dollar and tried to return to the highs of yesterday, but met with resistance in the form of the level of 1.1840. The main support for the pair was provided by data on German GDP, which declined less than previously expected for the 2nd quarter. The revised report once again highlighted the severity of the problem facing the German economy during the coronavirus pandemic. However, judging by the IFO indicators, no one wants to look back and many companies expect that the German economy will show one of the strongest periods of growth in the 3rd quarter. Many indicators that we published in the summer months confirm this fact.

According to the statistics agency Destatis, the contraction of the German economy in the 2nd quarter of 2020 was less sharp than previously reported. Thus, against the background of the quarantine measures introduced, German GDP decreased by 9.7% in the 2nd quarter compared to the previous quarter, while it was previously reported that the economy lost more than 10.1%. Economists had forecast a 10.1% drop in GDP. Compared to the same period of the previous year, German GDP decreased by 11.3%, not by 11.7%, as previously reported. Economists had expected it to fall by 11.7% compared to the 2nd quarter of 2019.

One of the biggest declines was consumption, which sank by 10.9% during the reporting period. However, the worst indicator was the reduction in capital investment by companies in the automotive industry, which fell by 19.6%. Capital investment in construction decreased by 4.2% compared to the 1st quarter.

It is also worth recalling the figures that showed a sharp decline in foreign trade when German exports fell by 20.3% and imports fell by 16.0%. By the way, this drop is much stronger than what was observed during the same period of the economic crisis, wherein the 1st quarter of 2009, German exports fell by 11.0%, and imports – by 5.9%. However, you should understand the difference in the true reasons. Therefore, you do not need to attach serious importance to these figures. As we can see, the market agrees with this.

As noted above, the growth of the euro was also directly related to good data on the business climate index in Germany, which increased business confidence in the pace of economic recovery for August 2020. Many companies expect further growth, which has affected their assessment of the current situation. However, it should be noted that the growth is an expected moment in a V-shaped movement, which was formed after the main phase of the pandemic coronavirus due to the cessation of quarantine measures. But the further recovery and dynamics are more uncertain since the damage caused by COVID-19 has not yet been fully assessed.

According to the Ifo Institute, the Ifo index of business sentiment in Germany in August 2020 rose to 92.6 points against 90.4 points in July. Economists had expected the indicator to grow to 92.0 points. The assessment of current conditions has also improved. The indicator rose to 87.9 points in August from 84.9 points in July. Accordingly, the expectations index rose to 97.5 points against 96.7 points in July.

As for the current technical picture of the EURUSD pair, it has not changed much compared to the morning forecast. Sellers of risky assets need to seek to return the pair to the support level of 1.1785, which will increase pressure on the trading instrument and quickly return it to the lows of last week, which will open the prospect of a larger downward movement to the area of 1.1710. We can talk about the end of the bearish trend, which was formed on August 19, after updating the larger support of 1.1650, from which the upward movement in the euro will surely begin. If the bulls can resist the current pressure from sellers, then it will be possible to talk about partial control from buyers of the euro only after breaking the resistance of 1.1840, which will open a direct path to Friday's highs in the area of 1.1890 and the highs of last week in the area of 1.1960. However, this scenario requires very weak data on the US consumer confidence indicator, which is published in our country by the beginning of the US session. If the report turns out to be better than economists' forecasts, the pressure on risky assets will surely increase again.