Traders focused on US GDP data overnight, which came in at an annualised 3.5%. This was well ahead of an estimate of 3.1% and the result was also compositionally impressive. Additionally, the strong 4.6% Q2 reading was not revised lower and investors found this quite comforting. EUR/USD extended its losses on the back of USD strength and further euro weakness.
The single currency lost ground after German and Spanish CPI came in below expectations. This saw pessimism grow heading into today’s CPI release for the region. EUR/USD slipped to a low of $1.2540 but has since recovered back above $1.2600. There has been a downtrend resistance line in place since August and that continues to cap any recovery for the pair. At the same time, a short term uptrend line which has been in place since October lows has been breached. This leaves the pair vulnerable to a retest of October lows in the $1.2500 region. Apart from CPI, we also have German retail sales and French consumer spending to look out for.