Euro remains on the back foot as data disappoints

EUR/USD finally yielded its grip on the 1.36 handle, as pressure remains on the ECB to act in a comprehensive way next week. 

The pair remains just shy of 1.36 in Asia, but seems to have found some stability for now. All the readings out of Europe overnight were quite disappointing, starting with German unemployment which ticked much higher when the market was actually expecting a fall. French consumer spending, private loans, German import prices and the Spanish home price index all contracted. At the same time, ECB Executive Board member Mersch was on the wires reinforcing the notion that measures will be announced next week. Many analysts now feel we’ll hear measures that contain a combination of measures possibly including an LTRO and rate cuts.

Selling strength the preferred strategy

Traders just remain happy selling the single currency into strength at the moment. Having recently traded below the 200-day moving average, any moves back into this line are likely to be used as an opportunity to sell. While the momentum is firmly to the downside, I feel the pair might be slightly oversold at the moment. The 200-day moving average currently comes in just shy of 1.37, where a previous support line also comes in. In the near term, 1.35 looks like a realistic target as it was the bottom back in February.

The European calendar is relatively light today with bank holidays for France and Germany. On the USD side of the equation, there will be plenty to look out for with GDP, unemployment claims and pending home sales due out. US GDP is expected to be revised to a negative print, with most analysts feeling this is consistent with a handover into Q2, which is then expected to show a bounce-back. Should the Q1 figure surprise to the upside, then perhaps we might finally see a bounce in the greenback which has remained subdued. This would have a net negative impact on EUR/USD as well.

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