Euro Area GDP Grows by 0.1%, German Economic Sentiment Weakens

EUR/USD rates, charts and analysis

• The European Union economy achieved a minimum growth of 0.1% in the first quarter.
• Germany may enter a mild recession.

Seasonally adjusted gross domestic product for the first quarter increased by 0.1% in the euro area and by 0.2% in the European Union compared to the previous quarter, according to The second estimate published by Eurostat today. Data for the Eurozone on a quarterly and yearly basis were in line with the preliminary estimate of Eurostat.

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Last German ZEW Economic Sentiment Index Contradicting market expectations, it fell to -10.7, its lowest reading since December 2022. According to data provider ZEW, financial market experts expect the already unfavorable economic situation to deteriorate in the next six months. As a result, the German economy could slip into recession, albeit a mild one. The decline in sentiment is partly due to expectations of a rate hike by the European Central Bank.

The release of the two data barely moved the EUR into already weak trading conditions. EUR/USD remains just below 1.0900, partially supported by a slight decline in the US dollar. EUR/USD is trapped in a narrow trading range, with initial support at 1.0845, ahead of 1.0787. Initial resistance is seen around 1.0935 ahead of 1.1033. Both the 20 and the 50 day moving averages are also running and should be watched.

EUR/USD daily price chart – May 16, 2023

Chart via TradingView

Mixed retail bias

Retail trader data shows that 56.80% of traders are net long with the ratio of traders taking long to yellow positions at 1.31 to 1 and the number of traders longing is 0.76% higher than yesterday and 41.69% higher than last week, in While the number of traders, net short positions of traders increased by 13.86% compared to yesterday and decreased by 14.14% from last week.

We usually take a view contrarian to crowd sentiment, and the fact that traders are holding on suggests that EUR/USD prices could continue lower. Positioning is less net buying than yesterday but more net buying than last week. A mixture of current feelings and recent changes gives us More contrarian bias in EUR/USD trading.

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