Article by ForexTime
The Euro continued to trade under pressure as the interest rate differential with the U.S. continued to move in the greenback’s direction. The EC downgraded their growth prospects for the EU while inflation remained steady at depressed levels.
Growth prospects on the European continent continue to face headwinds. The European Commission announced Tuesday that it expects Eurozone growth to increase a paltry 0.8% year over year, down from 1.2% expected when the EC released its Spring Economic Forecasts in April. The forecast for next year was cut to 1.1% from 1.7% and to 1.7% in 2016. The inflation forecast was cut to 0.5% this year, from 0.8% expected previously. The 2015 forecast was lowered to 0.8% from 1.2% and 2016 to 1.5%, which is still below the ECB’s 2% inflation target.
Spanish unemployment increased 79K in October, but a seasonally adjusted number shows unemployment is down 5.91% year over year, a marginal improvement from the 5.86% decline in September.
Inflation remained steady but continues to decline. Eurozone September wholesale inflation remained steady at -1.4% year over year, compared to forecasts of a decline of -1.5%, unchanged from the previous month, and with prices up 0.2% month over month.
The technical continue to show that the currency pair is in a defined downtrend, with the 10-day moving average seen as short term resistance. Target support on the currency pair is seen near the weekly lows at 1.25. Momentum on the EUR/USD has turned negative, as the MACD (moving average convergence divergence) index generated a sell signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread. The index moved from positive to negative territory confirming the sell signal. The RSI (relative strength index) made a lower low on Monday, reflecting accelerating negative momentum.
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