- EUR/USD has erased a major chunk of gains seen in the six days to May 1.
- German Industrial Production, due at 06:00 GMT, is likely to show record contraction in March.
- German court’s recent ruling on ECB’s QE has emboldened the bears.
EUR/USD fell for the third straight day on Wednesday, reversing nearly 80% of the bounce from 1.0727 to 1.1019 seen in the six trading days to May 1.
The three-day decline has exposed key trendline support located near 1.0760. At press time, the spot is trading in a sideways manner around 1.08.
Focus on German data
The German data due at 06:00 GMT is forecasted to show that Industrial Production declined by 7.5% month-on-month in March, following February’s 0.3% growth.
Note that the IHS Markit’s Purchasing Managers’ Index (PMI) for manufacturing dropped to 45.4 in March, signaling the sharpest drop in manufacturing output since April 2009. Also, German factory orders plunged by 15.6% in March compared with the previous month.
If lead indicators are a guide, the Industrial Production is likely to have suffered a sharp contraction in March. That said, the decline in the activity won’t be a surprise, given March was the month in which the coronavirus pandemic hit Europe, forcing Italy, Spain, Germany, and other nations to halt production lines. The data, therefore, could be turn out to be a non-event for the EUR pairs.
The common currency, however, could take cues from the speech by ECB’ De Guindos, scheduled at 07:00 GMT.
Gains, if any, will likely be short-lived due to Germany’s top court’s recent decision to rule European Central Bank’s bond-buying program illegal and the European nation’s inability to agree to a comprehensive coronavirus stimulus package.
Technical levels
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