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Euro Drops to Support Following Weak French Confidence Report

David Becker
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The Euro dropped on Tuesday following weak economic data and brought last Thursday’s post-ECB low at 1.3503 back into scope. The euro was also weak against the yen and sterling. Sterling benefitted from stronger than expected U.K. production data. Stronger than expected Italian Industrial Production, was offset by weaker than expected French confidence data.

Italian industrial production rose 0.7% month over month in April, stronger than expected and with March numbers revised up to -0.4% month over month from -0.5% month over month reported initially. The working day adjusted annual rate jumped to 1.6% year over year from -0.1% year over year in the previous month. The IP is an encouraging signs that the Italian economy is recovering after the 0.1% q/q contraction in overall activity in the first quarter.

French April industrial production rose 0.3% month over month, after falling 0.4% month over month in the previous month. The annual rate dropped to -2.0% year over year from -0.5% year over year. Manufacturing production was also up 0.3% month over month, after -0.4% month over month in March. The later timing of Easter this year is likely to have impacted the annual rate in April, although May Bank of France business confidence, released earlier, also declined, highlighting that the French economy remains weak.

The EURUSD tumbled toward support near 1.35. Resistance is seen near the 10-day moving average at 1.3608. Momentum is turning negative as the MACD (moving average convergence divergence) index is generating a sell signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread. The index moved from positive to negative territory confirming the sell signal. The RSI moved lower with price action reflecting accelerating negative momentum while printing near 33, which is on the lower end of the neutral range.

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