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

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

26.05.2023

In U.S. currency trading the previous day, 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.From a technical perspective, the CAD/JPY pair is trading above the 20-period moving average (MA) on the hourly chart; however, on the 4-hour chart, it is forming an ascending wedge near recent highs, so traders should be wary of a pullback as the market consolidates. On the other hand, on the weekly chart, the RSI still has room to rise toward 70, so traders should keep a close eye on the direction of the trend.

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

Today, at 15:00 Asia time, UK retail sales, Sweden’s producer price index and retail sales will be released; at 15:30, Swiss nonfarm payrolls; at 15:45, France’sConsumer Confidence Index, and during European trading hours at 21:30, U.S. Personal Income, the U.S. Core PCE Deflator, U.S. Durable Goods Orders, and U.S. Wholesale Inventories; at 23:00, the U.S. University of Michigan Consumer Sentiment Index; and at 24:00, Canada’s Fiscal Balance.Please note that next Monday is a public holiday in the UK, the U.S., and Switzerland, marking the start of a long weekend, so traders should be cautious of price movements leading up to the holiday.