EUR/USD Tests 1.0900 – ECB Rate Decision, Inflation and Growth Data Ahead

EUR/USD Price, Chart, and Analysis

• German Q4 GDP misses expectations and turns negative.
• EUR/USD is back above 1.0900 ahead of major data and events.

Most Read: EUR/USD Technical Outlook: Minor Setback on the Cards?

German gross domestic product (GDP) turned negative in the fourth quarter of 2022 according to the latest data from the Federal Statistical Office of Germany, Destatis. German Q4 GDP was expected flat and today’s reading will add to concerns that recent positive market sentiment may be short-lived.

‘The gross domestic product (GDP) fell by 0.2% in the fourth quarter of 2022 on the third quarter of 2022 after adjustment for price, seasonal, and calendar variations. After the German economy managed to perform well despite difficult conditions in the first three quarters, economic performance slightly decreased in the fourth quarter of 2022. Especially the price, seasonally and calendar adjusted private consumption expenditure, which had supported the German economy in the first three quarters, was lower than in the previous quarter.’

German Flash Q4 GDP

The latest Euro Area GDP and Inflation Report are released this week, on Tuesday and Wednesday respectively, ahead of the eagerly awaited ECB policy meeting decision on Thursday. All three events have the capacity to move the Euro and need to be followed carefully.

For all market-moving events and economic data releases, see the real-time DailyFX Calendar

EUR/USD is trading just above 1.0900 with a weaker US dollar in part responsible for the move higher. The US dollar (DXY) is sitting on a multi-month level of horizontal support and the greenback may struggle in the coming days with both the Fed’s monetary policy decision and the latest US Jobs Report (NFPs) released this week. The Fed is fully expected to hike interest rates by 25 basis points on Wednesday and remind the market that interest rates are going to stay higher for longer. Whether the market chooses to believe chair Powell is a different matter.

EUR/USD Daily Price Chart – January 30, 2023

Charts via TradingView

Retail Traders Increase Their Net-Long Positions

Retail trader data show 39.39% of traders are net-long with the ratio of traders short to long at 1.54 to 1.The number of traders net-long is 8.11% higher than yesterday and 26.25% higher from last week, while the number of traders net-short is 4.61% higher than yesterday and 8.74% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse lower despite the fact traders remain net-short.

What is your view on the EURO – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.