Euro Hold Supoprt Following Solid GDP Report
The EURUSD stagnated on Friday, and was unable to hold the momentum seen on Thursday. This comes despite a stronger than expected Q4 GDP report that beat economists’ expectations. The robust momentum in US treasury yields is keeping a bid under the greenback, which has led to headwinds the Euro is facing.
Eurozone Q4 GDP came in stronger than expected at 0.3% quarter over quarter, versus 0.2% quarter over quarter expected and up from 0.2% quarter over quarter in Q3. The annual rate lifted slightly to 0.9% from 0.8%. Germany and Spain were the outperformers with quarterly growth rates of 0.7%, while France and Italy continue to underperform, highlighting the lack of structural reforms, which are helping Spain to regain competitiveness. Germany also risks falling behind in the reform process though, with growth to a large extent driven by the low interest rate environment, which is driving construction growth and domestic demand, but also harbors the risk of an asset price bubble.
Italian GDP stagnated in Q4 last year. The Italian economy is slowly emerging from recession, but continues to underperform with political instability hampering the reform process and any improvement in competitiveness, although the government is actively striving to improve the political framework.
The technicals are slightly favorable to the EURUSD in the short term, as price action as stalled and the currency pair is holding above the 10-day moving average near 1.1367. Stronger support is seen near the lows at 1.1280. Resistance is seen near the recent highs at 1.1525. Momentum is positive with the MACD (moving average convergence divergence) index printing in positive territory with an upward sloping trajectory.
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