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EUR/USD is taking the path of least resistance: after it failed to break the tough resistance line of 1.33, the pair begins retreating. Will this turn into an avalanche?

Weak German retail sales remind us that the green shoots in Europe are probably still quite green. Also for the other core country, France, it is too early to celebrate.

  • Germany reported a disappointing drop of 1.5% in retail sales, well below expectations of a 0.1% rise. This plunge comes on top of a lower reading for the previous month: 0.7% instead of 0.8% initially reported.
  • France reported a drop of 0.8% in consumer spending, also below expectations of a 0.8% rise.

Lately, there were quite a few green shoots in the old continent. In Germany, PMIs turned positive, rising above 50. In addition, key business confidence surveys, from IFO, ZEW and GfK held on to positive ground. In France, there has been some optimism for an end to recession, and Spain provided the most encouraging news: a contraction of only 0.1% and a drop in unemployment, from 27.2% to 26.3%.

These figures remind us that the euro-zone is still not out of the woods, and this is without mentioning the debt crisis, which could worsen immediately after the German elections.

EUR/USD encountered the 1.33 line since Friday, but could not make a move higher. Here is an in-depth, fresh technical analysis of the pair, after hitting that wall.