EUR/USD forecast after the strong EU GDP data

The EUR/USD pair retreated for the third straight day after France announced new Covid restrictions and after the relatively strong Eurozone GDP data. The pair is trading at 1.1262, which is about 1% below the highest level last week.

France new Covid restriction

France, a major Eurozone economy, has seen a worrying number of Covid-19 cases in the past few days. As such, the government announced new measures today. They include mandating all students to put on masks when they are both in class and in outdoors.

Also, the government ordered nightclub owners to shut their businesses for a month. At the same time, the government encouraged employers to let people work from home in a bid to tame the virus. Meanwhile, the United States government has asked its citizens to avoid France for now. Therefore, there is a likelihood that the country’s economy will struggle in the coming months.

The EUR/USD also declined ahead of a leadership change in Germany. On Tuesday, Olaf Scholz signed an agreement with two other parties. He will then be voted in in parliament on Wednesday and then become Chancellor. This will be a notable thing since Germany has had one leader in the past 16 years.

Data published by Eurostat showed that the Eurozone economy is doing relatively well. The data showed that the country’s economy expanded by 3.9% year-on-year in the third quarter. This was significantly lower than Q2s expansion of 14.2%. It was also better than the median estimate of 3.7%.

Additional data showed that the German industrial production rose by 2.8% in October after falling by 0.5% in September. This increase was better than the expected 0.8%.

The EUR/USD is also falling as data showed that the Omicron variant is not as dangerous as previously thought. While it is spreading faster, its symptoms are milder than those of the Delta variant.

EUR/USD forecast

The daily chart shows that the EURUSD pair has declined in the past three consecutive days. It is trading at 1.1263, which is a few points above the year-to-date low of 1.1180. The pair is still below the 25-day and 50-day moving averages. The pair has moved below the Ichimoku cloud while the MACD is below the neutral level. Therefore, the outlook for the EUR/USD is bearish ahead of the upcoming US inflation data.