The EUR/USD price launched lower after Eurostat published the preliminary EU GDP data. The pair dropped to 1.2030, which is 2.5% below the year-to-date high of 1.2348.
EU GDP contracted in Q4
The European economy contracted in the fourth quarter as the region continued to battle the new wave of the pandemic. In total, the region’s economy weakened by 0.7% in the quarter and by 5.1% on a year-on-year basis. The median estimate by economists was for the economy to contract by 1.0% and by 5.4%, respectively. In Italy and Portugal, the economies contracted by 6.6% and 5.4%, respectively.
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These numbers came a day after data by Markit showed that the bloc’s manufacturing PMI did well in January helped by countries like Germany and France. The PMI increased from 54.7 to 54.8.
The story will likely change tomorrow when Markit will publish the services PMI numbers. Economists expect that the services PMI dropped to 45,0 in December because of the lockdowns. In Germany and France, they see the PMIs dropping to 46.8 and 46.5, respectively.
The EUR/USD will also react to the preliminary EU CPI data that will come out tomorrow. The preliminary numbers are expected to show that consumer prices increased by 0.5% while the core CPI rose by 0.2% in January.
Meanwhile, the EUR/USD is also falling because of the overall weaker US dollar as risks in the market rise. Yesterday, data from the US showed that the manufacturing sector held steady in January while construction spending rose by 1.0%. Tomorrow, Automatic Data Processor (ADP) will publish the private-sector payrolls. These numbers will come ahead of the official employment numbers.
EUR/USD technical outlook
In a report yesterday, I points that the EUR/USD was forming a bearish build-up pattern. Today, the pair managed to break-out lower and reached an intraday low of 1.2028, which was its lowest level since December 1. It managed to move below the January low of 1.2052.
On the four-hour chart, the pair declined below the 38.2% Fibonacci retracement level. It is also below the 25-day and 15-day exponential moving averages. Therefore, after the bearish breakout, the pair will likely continue dropping to 1.1917. This is a similar distance between the January 18 low of 1.2052 and the January 22 high of 1.2188. You can learn these technical analysis skills in our free forex courses.
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