EUR/USD Forecast: Bullish levels to watch after devastating US data downs the dollar

Better than expected but still the worst in history – the US economy fell by 32.9% annualized in the second quarter, better than -34.1% estimated but well within the wide range of expectations. 

In quarterly terms, the world's largest economy squeezed by 9.5% – and that is better than Germany's contraction of 10.1% recorded early in the day. Nevertheless, EUR/USD is rising.

Investors seem to look beyond the second quarter – which ended a month ago – and focus on recent data. Europe is suffering several COVID-19 flareups but is returning to growth. That cannot be said about the US, where weekly jobless claims increased once again.

Initial applications rose to 1.434 million and continuing claims are up above 17 million – in the week when Non-Farm Payrolls surveys are held. Even if America gains jobs in July, the prospects are dim as the death toll from the disease is rising. 

For the full explanation: US GDP Quick Analysis: Could have been worse, but will not improve, winners and losers in markets

EUR/USD has already topped the post-Fed high of 1.1806 and may be ready to extend its gains. New coronavirus figures from the US may weigh heavily on the dollar later in the day.

EUR/USD Technical Analysis

Despite the recent rally, the Relative Strength Index on the four-hour chart remains below the 70 level – outside overbought conditions and allowing the currency pair to continue rising. 

The next level to watch is 1.1820 – a high point in September 2018. Beyond that point, euro/dollar would hit the highest since June 2018 – a two-year peak. The next hurdles are 1.1850 and then only the psychologically significant 1.20 – but that would trigger overbought conditions if it happens too fast.

Momentum remains to the upside and EUR/USD holds above the 50, 100, and 200 Simple Moving Averages. 

Support awaits at 1.1780, 1.1750, and 1.17.