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EURUSD Tests 1.34, Disregards Weak Eurozone Growth Figures

H.S. Borji
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EURUSD Tests 1.34, Disregards Weak Eurozone Growth Figures

The euro advanced against its US counterpart Thursday, as investors shrugged off troubling Eurozone growth figures amid a faster than expected rise in US jobless claims.

The EURUSD advanced 0.25 percent to 1.3396, easing off an intraday high of 1.3406. Initial support is likely found at 1.3333 and resistance at 1.3407.

The pair’s upside is expected to remain limited amid signs the Eurozone recovery was stalling. The pair’s first major resistance test will likely be 1.3433, the high of August 8.

Economic growth in the 18-nation currency bloc was flat in the second quarter, as Germany unexpectedly contracted and France failed to generate momentum.

Eurozone gross domestic product was unchanged in the second quarter, following a 0.2 percent advance in the first three months of the year, the European Commission’s statistics branch reported today. Economists forecast a gain of 0.1 percent.

Year-over-year, the Eurozone economy advanced 0.7 percent, in line with forecasts.

Germany, which represents close to one-third of the region’s gross domestic product, contracted in the second quarter.

Germany’s economy shrank 0.2 percent between April and June, following a healthy 0.7 percent advance in the first quarter, the Federal Statistics Office reported today. Economists forecast zero growth.

France stagnated again in the second quarter, official data showed. Economists expected the Eurozone’s second largest economy to edge up 0.1 percent between April and June.

The Portuguese economy advanced 0.7 percent, following a 0.6 percent drop between in the first quarter, official data showed.

Today’s figures suggest the Eurozone was beginning to crumble under the pressure of an escalating sanctions war between the West and Russia over Ukraine. Russia last week responded to the European Union’s sanctions by imposing import bans on Western food products.

At the same time, the currency region faces the real risk of deflation. Eurozone consumer price growth is trending at a five-year low, placing more pressure on the European Central Bank to adopt added stimulus measures like quantitative easing.
The ECB left monetary policy unchanged at last week’s meetings.

In US data, jobless claims increased 21,000 to 311,000 in the week ended August 9, the Labor Department reported today. Economists forecast a gain of 5,000 to 295,000.

Continuing jobless claims increased 25,000 to 2.544 million in the week ended August 2, official data showed.

The euro posted gains across the board on Thursday. The common currency advanced against the British pound, as the EURGBP climbed 0.15 percent to 0.8019. The pair is likely supported at 0.7946, slightly below the 20-day exponential average. Initial resistance is located at 0.8045.

The Office for National Statistics will post revised second quarter GDP figures on Friday. The ONS said last month the UK economy advanced 0.8 percent between April and June.

The euro climbed against the Japanese yen, as the EURJPY advanced 0.15 percent to 137.08. Initial support is likely found at 136.60 and resistance at 1.3719, the 20-day average.

The euro edged higher against the Canadian pound, as the EURCAD climbed 0.05 percent to 1.4596. The pair faces initial support at 1.4556 and resistance at 1.4632.

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