The euro is showing limited movement in the European session. Currently, EUR/USD is trading at 1.2035, down 0.10% on the day. The euro hasn’t managed a winning day since Thursday, and the pair is perilously close to the 1.20 line, which is a psychologically important level.
Germany Retail Sales slumps
Germany is the eurozone’s largest economy and has traditionally been the economic powerhouse of the bloc. With the eurozone still grappling with the devastating effect of the Covid pandemic, Germany is again being counted on to lift the eurozone to recovery. However, Germany’s economy is also showing signs of fatigue. German GDP for Q4 of 2020 showed negligible growth, although the gain of 0.3% managed to beat the street estimate of 0.1%. On Tuesday, German Retail Sales for January came in at -4.5%, after a disastrous -9.6% reading in December. This caught the markets by surprise, as the street consensus stood at +0.2%. The sharp drop in consumer spending can be attributed to the partial Covid-19 lockdown which started back in December.
One bright spot in the German and eurozone economies has been the manufacturing sector. In February, German Manufacturing PMI came in at 60.7 and the eurozone read at 57.9, both of which were revised slightly upwards. These figures are well into expansionary territory, and the German release marked a 3-year high. In contrast to the rosy manufacturing numbers, the services industry has lagged behind and remains in contraction mode due to the lockdowns which have curtailed many services. Germany’s Services PMI is projected to come in at 45.9, well below the neutral 50-level.
EUR/USD faces resistance at 1.2091. Above, there is resistance at 1.2190. On the downside, the pair is putting strong pressure on the 100-day moving average (MA), which is situated at 1.2019. A close below this line would be a technical bearish signal for the pair. The pair is potentially targeting support at 1.1945, which could potentially extend to the round number of 1.1800.