EUR/USD: 1.3355 The combination of weak flash EU GDP data and the possibility of an interest rate cut to further attempt to boost the EU economy was enough to send the Euro sharply lower today, breaking the important 1.3360 support and currently sitting near its lows.
The EU GDP figure was -0.6% qq (f/c -0.4%), while the annual figure of -0.9% yy was the weakest in 4 years. Both Germany and France reported worse than expected data, increasing the doubts of any sustainable recovery through 2013. Adding further pressure, were comments from the ECB's Constancio who suggested the possibility of negative deposit rates and helped to send the Euro to its lows at 1.3315.
We now await the statement from the G20 meeting currently underway in Moscow, where the hot topic is of "currency wars". I'm not sure when the final statement is due, sometime on Saturday I suspect, but it could make for a wild ride in Asia on Monday morning, so I would not have too much risk on as we head into the weekend.
Technically, it has to be said, the Euro looks rather sick and the talk of negative rates would not appear to allow too much room for much of a recovery in the near term. The shorter term charts appear to be forming a bearish flag, with a target at around 1.3250, however the hourly charts are oversold and the Euro will probably not do an awful lot in the absence of any major data today as we await the outcome of the G20.
The 4 hourlies and the dailies though, are heading increasingly lower and if we do take out 1.3300 today, then 1.3250 may not be too far away. A break of this would see a choppy decline towards the rising trendline, currently at 1.3170.
A return to Euro strength will find sellers at the previous support at 1.3360, which is not too far away. Above this would return towards 1.3385 and then 1.3400, a break of which would head towards yesterdays 1.3450 area. It does not seem likely that we are going back above here before the weekend, but if wrong, look for 1.3520 and 1.3570 to see sellers.
I would imagine that we might be in for a choppy day in a range above 1.3300 today, with the chances of a rocky ride on Monday. Look for 1.3300/80 to cover it, and be square by the end of the NY session, the highlight of which will be the Industrial Production data and the Reuters/Michigan Consumer Sentiment Index.
