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Euro Remains Buoyed Despite Weak Retail Sales

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Euro Remains Buoyed Despite Weak Retail Sales

The Euro continued to trade at the top end of the current range despite consumer spending number that could only be considered lackluster. The yield differential between the Germany and the US held steady in both the 10-year space and the 2-year space, as the US has reported disappointing weather related economic data that has kept the greenback lower.

On the economic front in the Eurozone Tuesday, December retail sales came out worse than expected. The 0.3% decline compares with expectations for a flat report. On a year over year basis, the 2.6% plunge follows a 0.2% increase in November. Separately, on the political front, Prime Minister Renzi faces a confidence vote in the Chamber of Deputies.

The 2-year yield differential, which is the driver of the forward curve for the EURUSD currency pair, edged higher toward 15 basis points from 17 basis points, moving in favor of the Euro.


Despite all of the weak European data, the Euro remains at the top end of the current trading range between 1.38 and 1.35. This shows that traders are not willing to let go of long position and are waiting for an impetus that will generate a breakout to the upside. Short term support on the current pair is seen near the 10-day moving average at 1.3710. Short term resistance is seen near the recent highs near 1.3722.

Momentum on the currency pair is strong with the MACD (moving average convergence divergence) index printing in positive territory with an upward sloping trajectory. The index generated a buy signal in mid-February and continues to point to higher prices. The relative strength index (RSI) moved higher with price action reflecting accelerating momentum which printing near 61, which is on the upper end of the neutral range.

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