So both German and Italian GDP growth contracted 0.2% in Q2. Investment and construction are weak but the conventional wisdom is that there should be a pick-up in the second half of 2014. Hopefully that is true but certainly Russia and the sanctions regime could well be a contributor here.
All of this means that the ECB are more likely to continue their slightly more dovish tone in the short term which helps my short Euro positions. I continue to look at 1.3680 as resistance and 1.3270/1.33 as an area of support. Look for rally in the coming sessions off oversold conditions which I think ultimately will be sellable for a continuation lower in the coming weeks. By year end I see us having dipped below 1.30.
Guest post by Gary Corney from www.fxlight.co