EUR/USD forecast: Bulls continue to show some resilience near 200-DMA ahead of German CPI, US GDP

  • Disappointing US data helped limit the pair’s early downtick on Wednesday.
  • The upside remains capped amid nervousness ahead of Trump-Xi meeting.

The EUR/USD pair had good two-way moves on Wednesday and was solely influenced by the US Dollar price dynamics. The greenback built on the previous session's goodish up-move led by not so dovish comments by the Fed officials and exerted some initial downward pressure on the major. However, the USD uptick quickly ran out of the steam following the disappointing release of US durable goods orders data, which recorded a larger than expected drop of 1.3% in May as compared to -0.1% anticipated. This was accompanied by a downward revision of the previous month's already weaker readings, which exerted some downward pressure on the buck and provided a minor lift to the pair.

The pair bounced back to the 1.1400 neighbourhood but lacked any strong follow-through and finally settled nearly unchanged for the day. Investors seemed reluctant to place any aggressive bets in the wake of contradicting trade-related comments by the US President Donald Trump and Treasury Secretary Steven Mnuchin. Speaking to CNBC on Wednesday, Mnuchin was noted saying that the US-China trade agreement was 90% done and that he is hopeful to move forward with a plan to complete the deal by the end of the year. There were also reports that the US would delay new tariffs to bring China back to the negotiation table, though the positive headlines were largely offset by Trump's latest tariff threats to China. 

In the latest development, South China Morning Post reported on Thursday that the US and China have tentatively agreed to another truce ahead of a meeting between the two leaders at the G20 summit this weekend. The news was seen as easing pressure on the Fed to cut interest rates, which was evident from a follow-through recovery in the US Treasury bond yields and underpinned the USD demand through the Asian session. The pair has now retreated back to the lower end of its weekly trading range as market participants now look forward to the prelim German consumer inflation figures for June. 

Cost of living in Euro-zone's biggest economy is estimated to have risen by 0.1% in June as compared to a 0.2% rise in the previous month. Any disappointment will strengthen the case for a further ECB monetary policy easing and exert some fresh downward pressure on the shared currency. Meanwhile, the US economic docket highlights the release of the final version of the US Q1 GDP growth figures and might further collaborate towards producing some short-term trading opportunities later during the early North-American session.

From a technical perspective, the pair has been showing resilience near the very important 200-day SMA, which is closely followed by a six-month-old descending trend-channel resistance breakpoint near the 1.1330-25 region, which should now act as a key pivotal point for short-term traders. A sustained break through the mentioned support might prompt some additional weakness and drag the pair further below the 1.1300 handle towards testing the 1.1275-70 support region – marking 23.6% Fibo. level of the 1.1803-1.1107 downfall.

On the flip side, bullish traders are likely to wait for a sustained move beyond the 1.1400 round figure mark before positioning for any further near-term appreciating move. Above the mentioned handle, the pair seems all set to aim towards testing March monthly swing highs, around the 1.1445-50 region – also nearing 50% Fibo. level, en-route the key 1.1500 psychological mark. 

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