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The EUR/USD is trading at $1.3644, up 0.07% as traders remain unfazed by disappointing reports from two of the largest countries in the eurozone. France and Italy reported a decline of 0.3% and 0.9% respectively in December; both countries announcements came in below market consensus.
Last week, Mario Draghi of the European Central Bank (ECB) claimed he did not see evidence of deflation in the region despite the rate of inflation falling. Today’s announcements highlight the weak demand in the eurozone.
The ECB has come under pressure to lower interest rates further recently or to introduce a stimulus package in an effort to encourage economic activity; however, Mr Draghi doesn’t want to loosen monetary policy again until he has to.
As Alastair McCaig stated, a drop below $1.3475 could be an indication to go short. Mr Draghi will make an announcement on Wednesday at 3.30pm (London time); any dovish suggestions could push the euro lower.