Euro Exchange Rate: EUR Outlook Turns Bearish Again as IP Data Puts the Brakes on Recent Rally

The Euro (Currency:EUR) is under pressure, save for some advances against a weakened Australian Dollar:  

• The Euro Dollar exchange rate is 0.15 pct in the red; EUR/USD is now quoted at 1.3291.
• The Euro Pound exchange rate is 0.16 pct lower at 0.8402.
• The Euro Australian Dollar exchange rate is 0.7 pct higher at 1.4379.
• The Euro New Zealand Dollar exchange rate is 1.02 pct lower at 1.6321. This move is bang-on expectations contained in our note last night on the forecasted direction for the Euro to New Zealand Dollar.

Please Note: The above are spot market quotes; your bank will affix a discretionary spread to the figures when passing on a retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please learn more here.

EU Industrial Production Sees EUR Under Pressure

The sharp drop in EU Industrial production has kept the shared currency largely on the defensive with EUR/USD dipping back below the 1.3300 level.

EU IP fell by -1.5% versus -0.1% eyed with particularly bad reading out of Italy.

"The news shows that the EZ recovery remains hesitant and uneven which in turn is likely to keep the EUR/USD contained to current ranges," says Boris Schlossberg at BK Asset Management.

Outlook for the Euro in the Short Term

Until the release of IP figures EUR/USD made steady gains since yesterday morning, it broke through the 1.33 level late yesterday and went on to hit a high of 1.3323 in Asia.

The outlook remains challenging though.

Luc Luyet at MIG Bank predicts a downward bias for the Euro:

"A potential medium-term top has been made at 1.3452, favouring a medium-term bearish bias.

"However, the lack of follow-through after the break of the support at 1.3190 suggests thus far limited medium-term downside risks. A key support stands at 1.2994."

Emmanuel Ng at OCBC Bank says:

"Despite background Italian political uncertainty, the EUR- USD edged higher in line with the majors on Tuesday and the pair may look towards 1.3300 and then 1.3315 if the broad dollar remains on the defensive.

"Downside support is expected towards the 55-day MA (1.3198). Elsewhere, we remain in favour of a heavy EUR-GBP, with the cross still contemplating the floorboards at 0.8400."

Gareth Berry at UBS believes that the possibility of further Euro gains does however still remain alive:

"Resistance is at 1.3343, a break above which would extend the recent strength to 1.3452. Support is at 1.3230 ahead of 1.3103."

Ahead: Weekly Jobless Claims

The outlook for currencies today sees the North America calendar bring the weekly jobless claims which are anticipated to rise to 332K from 323K the month prior.

"The weekly claims have been on a steady trend lower and have been one of the key supporting points for a US economic recovery. So if today's data shows a marked deterioration, USD/JPY could come in for further selling pressure with the pair targeting the 99.00 figure as the day proceeds," says Schlossberg.