EUR/USD Forecast: Discouraging US data triggers risk aversion

EUR/USD Current Price: 1.1019

• The United States Gross Domestic Product was up a modest 1.1% in the first quarter of the year.
• PCE inflation surprised on the upside, lifting concerns about Fed’s next steps.
• EUR/USD could extend its corrective decline in the near term, but bulls hold the grip.

The EUR/USD pair maintained its positive tone throughout the first half of the day, consolidating around the 1.1040 level, as financial markets held in wait-and-see mode ahead of the United States Gross Domestic Product (GDP) figures. The preliminary estimate of the Q1 GDP was anticipated to indicate an annualized pace of growth of 2% in the three months to March, but the headline figure disappointed, as the economy grew just 1.1%. Furthermore, Personal Consumption Expenditures Prices rose by more than anticipated in the same quarter, up 4.2% in the same period. Finally, Initial Jobless Claims for the week ended April 21 resulted in 230K, better than the expected 248K.

The EUR/USD pair fell with the news and is currently approaching the 1.1000 figure. Earlier in the day, European data was also unimpressive, weighing on the Euro. The Eurozone April Economic Sentiment Indicator came in at 99.3, missing the 99.9 expected, while the March figure was downwardly revised to 99.2.

Stock markets are holding ground, despite the negative news, but the US Dollar surges alongside Treasury yields as the news paint a gloomy picture for the American economy.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair retains a neutral-to-bullish stance. The pair holds well above bullish moving averages, with the 20 Simple Moving Average (SMA) providing dynamic support at around 1.0955. The longer moving averages keep heading north below it, while technical indicators head nowhere above their midlines. Overall, bulls hold the grip in the longer-term perspective.

In the near term, and according to the 4-hour chart, the risk skewed to the downside. The pair is currently crossing a mildly bullish 20 SMA, while the longer ones lose their upward strength far below the current level. Technical indicators, on the other hand, head firmly lower, the Momentum within negative levels and the RSI currently challenging its 50 level. Still, chances of a continued decline are pretty limited, as the pair would need to fall through 1.0900 to start discouraging buyers.

Support levels:  1.0990 1.0955 1.0910  

Resistance levels: 1.1075 1.1120 1.1165

View Live Chart for the EUR/USD