eur fundamentals

Euro Edges Higher, Euro-zone Retail Sales Likely to Disappoint

Tuesday, 02 December 2008 21:55:11 GMT  |  Terri Belkas, Currency Strategist

The euro continues to form a series of higher lows, suggesting EUR/USD could be forming some sort of intermediate bottom.

Nevertheless, intraday rising trendline support near 1.25 is a more significant level that will be worth watching, as a break below may be followed by a test of the October lows of 1.2328. Looking ahead, Euro-zone retail sales are expected to have fallen 0.4 percent during October, leaving the annual rate at a disappointing -1.5 percent. However, given the 1.6 percent plunge in spending in Europe's largest economy, Germany, there is potential downside risk for Wednesday's report. The Euro-zone has already fallen into recession, as indicated by the 0.2 percent contraction in GDP during Q2 and Q3, and continued declines in consumption would only suggest that GDP will fall negative in Q4 as well. As a result, a weaker-than-expected retail sales reading should weigh on the euro, especially since the results will add to speculation that the European Central Bank will cut rates aggressively on Thursday.

 

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