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The Italian economy squeezed by 0.2% in Q2 2014, contrary to expectations for a  gain of 0.2%. It also shrank in Q1 with -0.1%. Year over year, the euro-zone’s third largest economy softened by 0.3%,  contrary to a gain of 0.1% expected.

EUR/USD  is now lower within the recent low range, at 1.3358.

This publication is important not only  because Italy is the third largest economy in the currency union, but also  because it released its preliminary data before the the other countries did, making it an indicator.

It also has importance in the context of tomorrow’s ECB meeting. Mario Draghi, himself an Italian, might be asked about the growth situation.

You can listen to the ECB preview in our podcast:

This is not the first disappointment from the euro-zone today: German factory orders dropped 3.2% in June, much worse than a rise of 1% expected. This strengthens the notion that the second quarter saw a significant slowdown in economic activity, also at the zone’s locomotive.

EUR/USD dipped below 1.3350 earlier in the day.  Some support awaits at 1.3325 and this is followed by 1.3295, the November 2013 low. Resistance awaits at 1.34. For more, see the EUR to USD prediction.