EUR/USD Forecast: Steady ECB and upbeat US GDP boost sentiment
|EUR/USD Current price: 1.0893
- The European Central Bank left its monetary policy unchanged, as widely anticipated.
- The United States preliminary Q4 Gross Domestic Product printed at 3.3%.
- The EUR/USD pair battles around 1.0900 without directional strength.
The EUR/USD pair traded uneventfully around the 1.0900 figure throughout the first half of the day, awaiting critical first-tier news. First came the European Central Bank (ECB), which decided to leave rates unchanged, as widely anticipated. The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility remain unchanged at 4.50%, 4.75% and 4.00%, respectively.
The accompanying document showed that “The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner” and that “future decisions will ensure that its policy rates will be set at sufficiently restrictive levels for as long as necessary,” failing to provide fresh clues on the future of monetary policy and leaving the pair holding within familiar levels.
Second came the United States (US) with the preliminary Q4 Gross Domestic Product (GDP) estimate. According to the Bureau of Economic Analysis (BEA), the economy grew at an annualized pace of 3.3% in the three months to December, much better than the 2% anticipated. Furthermore, the core Personal Consumption Expenditures (PCE) Price Index held at 2% in the same quarter, while Initial Jobless Claims for the week ended January 19 increased to 214K, worse than anticipated. Data was mixed, and the US Dollar initially gained with the news.
Still, stock markets are also encouraged by upbeat growth, leaving the USD mixed across the FX board. ECB President Christine Lagarde is offering a press conference, which can shed additional light on what the central bank plans on rate cuts and result in another directional shock.
EUR/USD short-term technical outlook
The EUR/USD pair battles around 1.0900 after the news, still unable to trigger a significant breakout. Technical readings in the daily chart offer a neutral-to-bearish stance, with the pair developing below a firmly bearish 20 Simple Moving Average (SMA) while a flat 200 SMA provides support at around 1.0845. Technical indicators, in the meantime, remain directionless within negative levels.
In the near term, EUR/USD is neutral. Technical indicators in the 4-hour chart have turned marginally lower but are stuck around their midlines. At the same time, the pair develops below its 100 and 200 SMAs, both in the 1.0920/30 region and a handful of pips above a flat 20 SMA. Bears could gain control on a clear break below 1.0845, while buyers will seize control on an advance beyond 1.0944.
Support levels: 1.0845 1.0800 1.0760
Resistance levels: 1.0890 1.0945 1.0980
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