EUR/USD Forecast: Draghi-ed down to the middle of the wedge, US GDP eagerly eyed

The EUR/USD is trading at the 1.16 handle, on the lower side of the wedge. The pair was dragged down on Thursday by Mario Draghi, the President of the European Central Bank.

The ECB left its policy measures unchanged and Draghi initially merely repeated the previous decisions: the reduction and the eventual end of the bond-buying scheme by year-end and a pledge to leave rates unchanged through the summer of 2019. At first, the pair did not move.

But then came Claire Jones of the Financial Times and asked Draghi to clarify the meaning of "through the summer" as translations to other languages had different meanings. Draghi said that the English version is the only valid one and hinted that September 2019 is currently the preferred timing for a hike rather than an earlier date. That sent the Euro plunging.

In the US, Durable Goods Orders were mixed, and the Trade Balance came out worse than had been expected. Nevertheless, the US Dollar remained firm on Thursday. The critical event awaits today.

• The US publishes the first estimate of Q2 GDP, and it is expected to be tremendous. Economists had estimated an annualized growth rate of 4% due to the tax cuts and other temporary factors. Yet on Monday, Fox News revealed leaks from the White House suggesting a better growth rate of 4.8% and expectations were reset.

In a speech on Thursday, US President Donald Trump played down expectations for a growth rate above 5% but hinted it would be robust. It is important to remember that in this specific release, the US also revises data for the past year. Revisions may push Q1 growth, standing at 2.0% lower, thus enabling a stronger growth rate in the second quarter.

See:

• How to trade the US GDP with EUR/USD
• US GDP Preview: After the Trump leak, look beyond the headline number

EUR/USD Technical Analysis

The EUR/USD touched the downtrend resistance line no less than four times, making it a potent line. The most recent pullback already sends it to the lower half of the wedge. Uptrend support, touched three times so far, is also significant and awaits the pair just around 1.1600.

The bears are in control also on other indicators. The Relative Strength Index (RSI) is below 50 on the four-hour chart and Momentum has turned negative. The pair is also trading below both the 50 and 200 Simple Moving Averages.

1.1615 was a swing low in mid-July, and it is backed up by the uptrend support line. Further down, we find the 1.1575 level which held the pair up last week. Further down, 1.1508 was the trough of 2018.

Looking up, 1.1680 was a high point last week. 1.1750 was a peak earlier in the week, and 1.1795 was a swing high early in the month.

More: EUR/USD lost a critical line and recapturing it may be hard – Confluence Detector