Should We Be Wary of Euro Movements as Germany Enters a Technical Recession?

Should We Be Wary of Euro Movements as Germany Enters a Technical Recession?

26.05.2023

In the U.S. currency market yesterday, the Canadian dollar rose slightly against the yen. The CAD/JPY pair rose from 102.100 to 102.841, a move of approximately 70 pips. Technically, while the CAD/JPY pair is trading above the 20-period moving average on the hourly chart, it has formed an ascending wedge near the high on the 4-hour chart, so we should be wary of a pullback as the market takes a breather.On the other hand, on the weekly chart, the RSI still has room to rise to 70, so we should pay close attention to the direction of the trend.

European currencies saw the euro trade in a tight range against the pound after Germany’s first-quarter GDP, released yesterday, came in at -0.5% year-on-year—marking the second consecutive quarter of contraction and placing the euro in a “technical recession.” The EUR/GBP pair fell to 0.8665 before rebounding to 0.8705. It closed slightly higher, just below the daily 200-day SMA.In today’s Asian session, the EUR/GBP pair is rising, supported by the 20-period moving average on the hourly chart, so we will be watching for a potential rebound in the euro during the European session.

Today, during Asian trading hours, UK retail sales, Sweden’s producer price index and retail sales are scheduled for 15:00; Swiss non-agricultural employment figures are set for 15:30; and France’s consumer confidence index is scheduled for 15:45. During European trading hours, US personal income, the US core PCE deflator, US durable goods orders, and US wholesale inventories are scheduled for 21:30.at 11:00 PM, the US University of Michigan Consumer Sentiment Index, and at 12:00 AM, Canada’s fiscal balance. Please note that next Monday is a public holiday in the UK, US, and Switzerland, marking the start of a long weekend, so we should be cautious of price movements leading up to the holiday.