Article by ForexTime
The EUR/USD is trading under renewed pressure, diving below 1.1800 for the first time since late 2005. Weak German orders data and a sub-forecast Eurozone ESI economic confidence indicator have maintained dollar bulls’ focus on the euro, with an above-forecast retail sales outcome having little offsetting impact. The strength of the greenback has come amid renewed confidence in the U.S. economy and as the Fed minutes showed that most Fed officials are willing to be patient on interest rates. The ECB warned that its waiver of stricter collateral rules for Greek banks hinges on a successful review of the current bailout program and a new bailout agreement.
Eurozone retail sales rose 0.6% month over month in November, more than expected, although the 3 months trend rate still slowed to 0.0% from 0.1%, still impacted by the -0.9% month over month decline in September. The annual rate stood at a relatively robust 1.5% year over year in November, and the breakdown showed robust growth in non-food sales.
Separately, Eurostat reported a further deceleration in producer price inflation to -1.6% year over year in November, which ties in with the first negative HICP rate since 2009 and is mainly impacted by lower energy prices.
Additionally, Eurozone ESI economic confidence stagnated in December, versus expectations for a further improvement. Manufacturing confidence fell further into negative territory, which failed to compensate for the improvement in services and consumer confidence. The December reading meant the index was unchanged throughout Q4 last year at 100.7, versus an average of 100.9 in Q3.
The EUR/USD is being driven lower by interest rate differential which continue to favor the greenback. The next level of target support is the 2005 lows at 1.1675. Momentum is negative and the currency pair is oversold based on daily, weekly and monthly RSI readings.
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