German Q2 GDP Contracts 0.1% as EUR/USD Hovers Near 50-Day SMA at 1.2000

German Economy Contracts in Q2 as EUR/USD Hovers Near Key Average

Germany’s economy contracted by 0.1% in the second quarter, matching forecasts and reversing the 0.4% growth seen in the first quarter. Preliminary data from Destatis also showed annual GDP growth of 0.4%, beating expectations for 0.2% and rebounding from flat growth in Q1.

The quarterly decline highlights the fragile state of Europe’s largest economy. Domestic demand remains muted as households battle elevated prices, while export growth continues to slow. German manufacturing and industrial output have also been weighed down by weaker global demand.

EUR/USD Trades Just Below 50-Day SMA

The euro was little moved by the GDP release, with EUR/USD last trading near 1.1550, up 0.08% on the session. The pair is trading just below its 50-day simple moving average (SMA) at 1.2, signaling a cautious tone after last week’s sharp drop from July highs near 1.1850.

Immediate support rests at 1.1520, with stronger demand likely near 1.1480. On the upside, initial resistance is seen at 1.1588, followed by 1.1625. A sustained move above these levels would improve sentiment and signal a potential rebound.

Dollar Flows and Fed Policy Still Driving Market Tone

Traders continue to focus on U.S. Federal Reserve policy expectations rather than German data. The Fed’s data-dependent stance and ongoing speculation about another rate hike are helping to keep a firm bid under the dollar, limiting upside potential for the euro.

Upcoming Eurozone PMI readings and U.S. economic reports later this week will be closely watched for fresh direction. Until then, EUR/USD is expected to trade sideways to lower, staying sensitive to shifts in dollar sentiment.

Market Forecast: German Data Highlights Eurozone Growth Concerns

The weaker German GDP underscores lingering growth challenges for the Eurozone, reinforcing the European Central Bank’s cautious approach on rates.

For EUR/USD, the 50-day SMA at 1.2 is the key technical level. A decisive close above this moving average would signal renewed bullish momentum, with room for a move toward prior highs. Failure to reclaim 1.2 would leave the pair vulnerable to additional selling, especially on a break below 1.1520, which would expose 1.1480 next.

Traders are likely to remain cautious until a clear breakout or breakdown confirms the next trend.