EUR/USD breaks to a new 9 month low after GDP is very worrying. An no – the Greek crisis is far from over. Next stop – 1.3420.
European GDP figures were very disappointing. Germany’s economy didn’t grow in Q4. This followed weak growth in Q3. According to the initial release, the German economy stalled. This fell short of early expectations for 0.2% growth. There’s a chance that in the final release this figure will be revised to the downside. Fears for a new recession in Europe’s largest country and the economic driver are very bad for the Euro.
French GDP was a positive surprise, rising by 0.%, better than expected. Italy erased the smiles on the faces as it saw a contraction of 0.1%. The bigger blow came from the last release – the all-European figure – Flash GDP showed growth of 0.1%, much lower than 0.4% that was expected.
Let’s look at the market:
The downfall in the Euro began after the first release from Germany as EUR/USD fell from 1.3680 down to 1.3630. It then continued falling, but met the 1.3580 support line, a level seen last week after the American Non-Farm Payrolls.
Now, after all the data is out, EUR/USD fell to 1.3555, below the line. This break has yet to be confirmed. As we’ve seen before, breaks of 50 pips can sometimes be reversed quickly and become false breaks.
Also on other fronts, the Euro is falling: EUR/GBP is below 0.87 – the lowest in two weeks. This has become a volatile pair in recent weeks. After EUR/GBP climbed and went for the 0.8840 line, it failed to break it and fell sharply. EUR/JPY is also falling.
If the break is confirmed, the next target is 1.3420.This is a strong line of support. The next significant line is only at 1.3080. If the break isn’t confirmed, EUR/USD will return to this week’s range – capped by the 1.3750 – 1.3800 region. More technical lines can be found in the EUR/USD forecast.
The Euro enjoyed back wind from the hopes on a positive outcome from the EU Economic Summit. Jean-Claude Trichet shortened his visit to Australia in order to help resolve the issue.
Well, it’s far from over. The European leaders talked about solidarity. This is nice but they made no promise to take action. This means that the crisis is still with us. Note that this crisis is affecting the whole world, and it strengthens the dollar and the yen – risk aversive trading.
All in all – it seems like another bad Friday for the Euro.
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