EUR/USD: 1.3067
It was all about the disappointing GDP figure from China and the increasing concern over the debt situation in Spain on Friday that saw the dollar reverse Thursday’s losses. It made good gains that saw the Euro finish lower for the second week in a row and perched precariously above the 1.3035 support. The 5th successive quarterly drop in the Chinese GDP did not help on Friday, and with Europe being Chinas biggest export market, it doesn't look as though things are going to turn around too much in the months ahead as Europe edges towards recession.
Spanish bond yields climbed back to 5.99% at the end of the week and Spain is currently very much the focus as it was revealed that the ECB’s lending to the Bank of Spain surged to a record high €316 billion in March. On top of this, the upcoming Greek and French elections offer plenty of scope for a further deterioration in the outlook for the EU, and with the ongoing concerns over Italy and Portugal, things are beginning to look rather ominous for the next chapter of the never ending crisis in the EU. The Euro would already be a lot lower had it not been for the softer US data that we have recently seen, headlined by last week’s Non Farm Payroll numbers, but it is beginning to look as if it is building up for a decent move in coming sessions .
Technically though, we haven’t actually progressed a great deal, with the Euro being only 30 points lower from this time last week. The downside supports remain unchanged at 1.3035, 1.3000 and 1.2970. If we do see the lower of these, then I suspect we are going to continue eventually towards the 16 Jan low of 1.2623.
Although last week’s rally was a little stronger than I anticipated, I suspect it is now completed, but a return to 1.3160, would see the possibility of a move towards the downtrend line, currently at 1.3290. I think this is unlikely, although the daily indicators are pretty flat, so it could be that we have another week of choppy, directionless trade ahead of us, but, in reading the weekend UK press, it looks to me as though the Euro will do well to hold its ground in the week ahead.
Economic Highlights for the coming week will be:
US Retail Sales (Mon)
EU CPI, German ZEW Survey (Tues)
German PPI, German IFO Business Survey (Fri).
