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Euro Consolidates After Weak GDP Report

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Euro Consolidates After Weak GDP Report

Disappointing growth reports were likely available to the ECB prior to their release on Thursday which now sheds light on the surprise rate cut. While German growth slowed, France contracted which brings into question the potential for a recession. Japans growth topped estimate but still reflects lackluster growth.

While German growth slowed, France reported a surprise contraction. Germany’s economy expanded by 0.3% in the third quarter versus the previous quarter, meeting economists’ expectations, but exhibiting a deceleration from the 0.7% pace at which the economy grew in the second quarter. Meanwhile, economic growth in France turned negative, as the country’s economy contracted 0.1% compared to the second quarter.

Eurozone GDP missed expectations. Economic growth in the euro-zone came in at just 0.1% for the third quarter, below expectations and worse than the 0.3% expansion the region registered in the second quarter.

Economic growth slowed in Japan during the Q3, but at 1.9, the economy still expanded faster than economists were expecting. Despite the headline beat, capital expenditure growth printed at just 0.2% for the third quarter, below consensus estimates. Private consumption rose 0.1% while inventories chipped in 0.4%.

Before the release of the GDP number the EURUSD tested resistance near an upward sloping trend line and the 10-day moving average near 1.3460. The EURUSD reflects a classic breakdown that has retested former support and is now poised to move lower. The failure to recapture resistance levels will likely lead to a test of support near the recent lows at 1.33.

Momentum on the currency pair is negative with the MACD (moving average convergence divergence) index printing in negative territory with a negative trajectory. The RSI reversed its upward climb and is printing near 43, which is on the lower end of the neutral range.

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