EUR/USD: 1.2880The weaker than expected German GDP (Q1 GDP 0.1% v 0.3% exp. Previous month of -0.6%, revised down to -0.7%. YoY -1.4%, down from 0.1% prior) did little to help the Euro, sending it down to 1.2887 immediately after the number and in very British fashion, blamed the weakness on the weather! France and Italy both also returned negative readings to maintain the gloomy outlook. The Q1 EU GDP later came in at -0.2%mom, exp -0.1 and at -1% yoy, exp -0.9%), making it 6 quarters in a row of contracting growth which piled further pressure on the downside, pushing it to 1.2842 and into the congestive support that we have previously mentioned, from where it has since made a mild recovery, but still looks very heavy.
The dollar's one way run higher was halted in part by today's US data where the NY empire state manufacturing index unexpectedly fell to -1.43 in May. Industrial production also dropped -0.5% in April. PPI dropped more than expected to 0.6% yoy in April while core PPI was unchanged at 1.7% yoy.
Looking ahead, it is going to be another busy session with CPI data out of both the EU and the US being the highlight. We also get the Jobless claims and Philly Fed Mfg Survey to liven things up.
Technically, the Euro has tested, and so far held, the rising trend support, currently at 1.2855. There is also minor Fibo support just around here; 1.2865 being 76.4%1.2744/1.3243, which is currently holding up. A sustained break down through these levels would head back to the session low and then towards 1.2800, and then to the important neckline that I have recently spoken about now at 1.2775. If that breaks, don't stand in the way, although I suspect that we probably need to do some more work above 1.2800 in the next day or two, to allow the shorter term charts to unwind their growing oversold condition.
The hourly charts are showing a little divergence and if we do see a bit of a squeeze, we could head back to 1.2925 (23.6% of 1.3193/1.2842) and maybe to the 1.2940 session high. Above there would find sellers at the congestion around 1.2975 and then at 1.2990/1.3000. This is where the 200 DMA lies, and so, with the 55 DMA about to cross below it, would prove strong resistance.
The strategy remains unchanged and that is to look for rallies to sell into and for today it would be good to see the 1.2925/40 area, although possibly a bit optimistic. I suspect that 1.2820/1.2920 may provide a guide, but all will depend on the outcome of the data.
Economic data highlights will include:
EU CPI, Trade Balance, US CPI, Building Permits, Jobless Claims, Philly Fed Mfg Survey
