The euro might have grown more last week, but the investors got wary about the fundamentals. As such, manufacturing production in the Eurozone fell by 0.8% MoM in February, with -0.6% in January. The expectations were at +0.1%, but they were not met for the third time in a row. YoY, manufacturing production also fell in Feb, by 2.9%, with -3.7% in Jan, and came short of expectations, too.
While such a plunge could be explained by the holiday season in Jan and cold weather in Feb, this alone would not have lead to such a serious slowdown. Most likely, consumer demand is also falling, and this is quite alarming.
Last week, the ECB meeting report came in, too, saying there are risks for the Eurozone in connection with trade war escalation and expensive euro. With this in mind, cutting the QE is to be done in a very careful way, so as not to minimize its effect. The meeting minutes once again repeat that the ECB is going to act very cautiously in terms of rate hikes.
ECB Chair Mario Draghi said last week that such a careful approach is very feasible right now, with all the external influence putting the economy under pressure. He was positive regarding the inflation, though, saying it should reach the target in the mid term. Overall, Mr Draghi says, the Eurozone economy will be growing steadily in the rest of 2018.
Technically, the EUR/USD is forming a triangle in the mid term, while an upside channel appeared after the bounce-off against the support. The immediate target of this uptrend is the diagonal resistance at 1.2345; in case it gets broken out, the price may move to the projection resistance at 1.2520, while the major local uptrend target will be the current high at 1.2555. Conversely, if the support at 1.2299 gets broken out, the pair may fall again to reach and test the support at 1.2240.
By Dmitriy Gurkovskiy, Chief Analyst at RoboForex
Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboForex shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.