EUR/USD analysis: at its lowest since January, breakout point being challenged
|EUR/USD Current price: 1.2124
- ECB maintains rates, QE in place, acknowledged slower growth.
- Dollar gets an additional boost from news officers head to China to solve the trade war.
The EUR/USD pair plunged to 1.2097, its lowest since early January amid a combination of dollar-positive events and the disappointment brought by an on-hold ECB. In the US, macroeconomic data was once again quite positive, with Initial Jobless Claims down to 209K in the week ended April 20, better than the 230K expected. Wholesale inventories were down to 0.5%, while the Good Trade Balance deficit shrank to $68.04B. Even the headline reading of Durable Goods Orders printed 2.6%, although the core figure, which excludes transportation, remained unchanged. Additionally, news that top White House economic advisor Larry Kudlow will join US Treasury Secretary Mnuchin’s delegation in the trip to Beijing to try solving the trade war with China, boosted the greenback. As for the ECB, the central bank maintained rates on hold and reiterated that monetary stimulus could be extended beyond September, while President Draghi acknowledged that economic growth in the Union has moderated. The dollar managed to retain its strength, despite Treasury yields pulled back, with the 10-year note benchmark comfortable around 2.99% all through the session.
Friday will see action coming from both economies, but the focus will be the US, as the country will publish its Q1 GDP and PCE index. The American economy is expected to have expanded 2.0% in the quarter, down from a previous revised 2.9%. Core PCE inflation, on the other hand, is seen rising 2.4% from the previous 1.9%.
The EUR/USD pair tested a major long-term support and bounced, but the risk of a bearish breakout hasn't been cleared. At 1.2100, the pair topped in 2015 and 2017 and could be considered an inflection point, with a break below it opening doors for a steeper decline, which will initially target the psychological 1.20 figure. The bounce following the mentioned multi-month low has helped the pair recover up to the 1.2120 region, with short-term technical readings still favoring the downside, as in the 4 hours chart, an early spike was contained by selling interest around a bearish 20 SMA, while technical indicators have pared their slides, but the Momentum stands well into negative territory, and the RSI at 25. The initial resistance comes at 1.2155, the low set ahead of the ECB, followed by the 1.2200 figure, where selling interest will probably reappear.
Support levels: 1.2100 1.2065 1.2020
Resistance levels: 1.2155 1.2200 1.2245
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