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Euro Consolidates Ahead of ECB Meeting

David Becker
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Euro Consolidates Ahead of ECB Meeting

The Euro was little changed Wednesday ahead of Thursday’s all-important ECB meeting. Traders seemed to have discounted weak economic data and everything seems to be riding on either a full blown QE program or nothing. A short squeeze might be in the cards and with the RSI (relative strength index) printing in oversold territory this could be the path of least resistance.

In economic news, Eurozone retail sales declined 0.4% month over month in July, in line with expectations. The June figure was revised down to 0.3% month over month from 0.4% month over month reported initially and the annual rate dropped to 0.8% year over year from 1.9% year over year in the previous month. The labor market may be stabilizing, but consumer confidence has taken a hit amid reports of a generally weakening growth outlook and the tensions with Russia that threaten to derail the German economy. The drop in sales at the start of the third quarter adds to signs that overall growth will remain modest in the second half of the year.

Eurozone final Aug services PMI revised down to 53.1 from 53.5 reported initially, with the composite reading revised down to 52.5 from 52.8. Both readings remain above the 50 point no change mark, indicating ongoing expansion, but Italian and French numbers have already fallen below the 50 point mark and the German readings also come off as concerns about the impact of the tensions with Russia intensify.

The EURUSD edged higher and is trading near 1.3145, but has yet to test the September 2013 lows at 1.31. Resistance is seen near the 10-day moving average at 1.3178. Momentum remains negative with the MACD (moving average convergence divergence) index printing in negative territory with a downward sloping trajectory.

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