The GDP Growth Rate of the Eurozone Faltered in Q4. Image source: cre8or, flickr.com
Economic activity continues to be uneven across the world, which adds to the global uncertainty. Consequently, this is likely to intensify fears amongst the already anxious investors. To learn more about how all of this relates to the heightened demand for safe-haven assets, check out our last analysis of gold.
The rate of economic expansion in the Eurozone for the fourth quarter fell below the initial market forecasts, underpinning weaker-than-expected economic activity. This added to the struggles of the euro in the short term. The single currency was hit last week by the recuperating greenback.
EURCAD 1H Price Chart. Image source: Trendsharks ©, created with TradingView.com
As can be seen on the hourly chart above, the EURCAD is currently depreciating within the limits of a broad descending channel. These outline roughly the existence of a 1-5 impulse wave pattern, as postulated by the Elliott Wave Theory.
Given that the price action appears to have completed the second retracement leg (3-4) just below the 38.2 per cent Fibonacci retracement level at 1.42691, the third bearish impulse leg (4-5) is likely to follow next.
If the price action manages to penetrate below the convergence of the 100-day MA (in blue), 50-day MA (in green) and the 61,8 per cent Fibonacci at 1.42045, the dropdown is then likely to be extended further downside towards the previous swing low at 1.41000.
Conversely, a rebound from the 100-day MA may be followed by a re-test of the 38.2 per cent Fibonacci. That is why bears should be cautious if they decide to take advantage of the underlying opportunity.
Еurozone's massively subdued economic activity in Q4
Eurozone Preliminary QoQ GDP Growth Rate. Image source: TradingEconomics.com
According to Eurostat's findings, Eurozone's GDP growth rate reached 0.3 per cent in the three months leading to December, below the market forecasts of 0.4 per cent. This performance underscores a sizable decrease from the 2.2 per cent rate of economic expansion that was recorded in the third quarter.
The weaker-than-expected data is somewhat surprising given the robust GDP growth numbers that were posted in the U.S. over the same period, and the substantial improvement in Eurozone industrial activity.
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