- The Euro is trading around 1.1480 after testing the intraday low of 1.1470 on soft Eurozone GDP numbers for the fourth quarter last year.
- The Eurozone growth matched market consensus of 0.2% quarterly rise while decelerating to 1.2% over the year.
- The regional currency surged above 1.1500 after Wednesday’s FOMC meeting that send a dovish message of Fed waiting to see what it do about the rates in future.
The Euro slipped to the intraday low of 1.1470 against the USD on Thursday after preliminary estimates of the fourth quarter 2018 Eurozone GDP matched the market consensus awhile decelerating to 0.2% quarterly and 1.2% annual rise. The GDP growth dimmed Euro’s appeal that rose to early January high of 1.1500 after dovish FOMC statements triggered across the board weakness of the greenback late on Wednesday.
The US Federal Reserve confirmed recent statements from policymakers concerning “patience” call for further Fed rate hikes and signaled continuous balance-sheet normalization process.
While quarterly figure of Eurozone growth during the fourth quarter last year remained unchanged at 0.2%, there are noticeable challenges for the regional economies if looking at a broader scenario. When compared the fourth quarter of last year to a year ago, the Eurozone GDP decelerated from 1.6% in the third quarter to 1.2% in the final quarter last year. As a result, the whole year GDP growth for 2018 turned out as 1.8% compared with the European Central Bank (ECB) prediction of 2.5%.
Italian economy contracted by -0.2% over the quarter in the final quarter of last year technically entering the recession whereas Spanish economic growth rose past market forecast by 0.7% Q/Q.
Softer growth in the Eurozone and recession in some of its parts, the ECB is facing a policy challenge.
“The persistence in the growth decline indicates that there is more to it than one-offs with downside risks persisting early in 2019 as well,” ING analysts wrote in a market comment after the GDP report was made public. The bank further elaborated that “Given the weakness in surveys about eurozone growth in January as well, it is likely that the 2019 growth forecast will see a substantial downgrade in March when the new staff projections are released.”
EUR/USD: 4-Hour chart
Failure to sustain break above 1.1500 comprising 23.6% Fibonacci Retracement of recent upside, together with downward sloping 14-period relative strength index, seems dragging the EUR/USD towards 1.1450 horizontal-line that encompassed highs before yesterday’s surge. Given the pair’s refrain to respect the 1.1450 support, an ascending trend-line near 1.1425 becomes important to watch.
Alternatively, the 1.1530 and the 1.1570 are likely following resistances that the pair needs to cross after surpassing the 1.1500 level. Should prices rally beyond 1.1570, the 1.1610 can entertain the buyers.
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