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EUR/USD Hits Fresh Session Low As Eurozone's Largest Economy Contracts

EUR/USD Hits Fresh Session Low As Eurozone's Largest Economy Contracts

Edward Hyon,

Talking Points:

  • German GDP (QoQ) (2Q P): -0.2% Actual Vs -0.1% Estimated; 0.8% Prior.
  • German GDP WDA (YoY) (2Q P): 1.2% Actual Vs 1.4% Estimated; 2.3% Prior.
  • EUR/USD Hits A Fresh Session Low As Germany 2Q GDP Misses Estimates.

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The German Gross Domestic Product (GDP) for the second-quarter contracted 0.2 percent and missed estimates that called for a 0.1 percent contraction. This is compared to a print of 0.8 percent expansion from the first-quarter. Moreover, the lagging indicator showed a year-on-year GDP at 1.2 percent versus 2.3 percent year-on-year reading in the first-quarter. It missed market expectations of 1.4 percent. The region’s powerhouse failed to do the heavy lifting and such an outcome may boost ECB stimulus expansion bets, weighing the Euro says DailyFX Currency Strategist Ilya Spivak.

Before the data, EUR/USD fell mildly on the backdrop of a report that showed the second largest economy in the Eurozone, French economic growth, unchanged for the second-quarter. It missed market forecast of 0.1 percent and the currency pair continued to trade firmly below the critical 1.3400 level. Immediately after the release of the German GDP figures, the Euro plunged against the US Dollar to hit a fresh session low of 1.3350.

Looking ahead, the Eurozone GDP and CPI figures will take center stage at 09:00 GMT, today. Traders will be watching closely at the Eurozone GDP figures as it’s the most comprehensive measure of economic output and provides key insight to the overall economy. DailyFX Chief Currency Strategist John Kicklighter mentions the possibility of a lift in the Eurozone yields if growth starts to waver due to capital flight out of the region, which will bode ill for the Euro. See John’s Trading Video explaining how the GDP release can impact the Euro.

For the forex traders that respect technical analysis, Ilya Spivak mentions near-term support at 1.3345 (23.6% Fib Exp.) and near-term resistance at 1.3419 (23.6% Fib Ret.). He is short EUR/USD in line with the long-term fundamental outlook and says an upswing will be treated as an opportunity to add to the position. Meanwhile according to DailyFX Speculative Sentiment Index, the ratio of long to short positions in the EUR/USD stands at 1.59 as 61% of traders are long.

EUR/USD 5 Minute Chart

EUR/USD Hits Fresh Session Low As Eurozone's Largest Economy Contracts

Daily Chart - Created Using FXCM Marketscope 2.0, Volume Indicator Available Here

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Edward Hyon, DailyFX Research Team

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