Over the previous week, the EURUSD has recorded several fresh 2014 lows and the pair registered a further one yesterday. The EURUSD continued to be sold in anticipation of the latest German CPI data, but it was the US GDP announcement which triggered bearish movement.
The latest figures from the US Department of Commerce showed that the US economy expanded by an annualised 4% between April and June, far surpassing all expectations. The EURUSD fell as low as 1.3369 on the news, its lowest valuation since the 13th November 2013.
Where this pair moves from here will be largely dependent on how the markets react to today’s German employment report and EU CPI. Although on headline it would appear that the EU CPI is higher risk, it is worth keeping a close eye on the German employment report. Although it is widely expected that EU CPI remained at 0.5% for the third successive month in July, it does appear that the ECB are prepared to offer their recent stimulus measures time before considering the possibility of implementing QE. As long as EU CPI refrained from further decreasing last month, this might provide the EURUSD with some breathing space.
In reference to the German employment report, this is where investors looking for downside moves could find more opportunities. The German economy has been a casualty of the geopolitical conflict in Eastern Europe, with their recent IFO data representing a third consecutive decline. Additionally, the Bundesbank recently warned that there is a possibility that the German economy stagnated in Q2.
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It is currently expected that the German employment sector contracted by 5,000 jobs in July and if this is confirmed, it will add additional pressure on the EURUSD valuation. Potential upcoming EURUSD support levels can be found located at 1.3365 and 1.3335.
*Ahmad is chief market analyst at FXTM
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