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EUR/USD Testing the Last Support After the Soft Q3 GDP, China Tariffs

EUR/USD failed to hold gains above 1.10 once again, after a strong bullish run in November and reversed lower, continuing to slip lower for about a week, losing around 250 pips in the process as it fell below 1.08. This pair remains depressed below this important level, with the trade battle between the EU and China addig further to the Euro weakness.

Earlier last week we saw some optimistic Eurozone data such as the improvement in the services PMI for November, but the Euro has been struggling to find buyers and moving averages have been broken one after the other on the H4 chart. Economies of France, Germany, and Italy continue to see a drop in business activity, while Sentix investor confidence fell deeper in negative territory on Monday.

Following a rough start to the new week on early Monday, the risk sentiment has been positive, with European and the US stock markets continuing to remain optimistic and bond yields falling. Nonetheless, EUR/USD remains negative after the dovish switch by the ECB. Today we had the final Q3 GDP revisions for the Eurozone, as well as the industrial production numbers from Germany and Italy which were expected to be negative, adding further to the bearish mood on this pair.

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Eurozone Final Q3 GDP Report

  • Q3 final GDP -0.1% vs -0.1% second estimate
  • GDP YoY 0.0% vs +0.1% second estimate

Consumer spending contributed +0.2% to the GDP in Q3, while government expenditure provided +0.1%. This was offset by a -0.3% change in inventories, as well as negligible contributions from gross fixed capital creation and external balance. which made up for a -0.1% contraction in Q3. Although the annualized numbers is looking good, which means that October was positive. Meanwhile the EU has opened some sort of trade battle with China, which will end up

EU Leaders Speaking in Beijing During the EU-China Summit

  1. Balanced Trade:
    • Von der Leyen stated an agreement with President Xi that trade should be balanced between China and the EU.
  2. Global Cooperation on AI:
    • Agreement to cooperate on Artificial Intelligence (AI) at a global level. This suggests a commitment to collaboration in the development and regulation of AI technologies.
  3. Concrete Actions for Market Access:
    • Michel emphasized the expectation for China to take more concrete actions to increase market access for foreign firms. This indicates a desire for greater openness and opportunities for international businesses in the Chinese market.
  4. Reciprocal and Balanced Relationship:
    • Michel highlighted the need to make the trade and economic relationship more reciprocal and balanced. This implies a call for fairness and equity in the economic ties between the EU and China.
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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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