EUR/USD Current Price: 1.0513
- US dollar up sharply on Thursday, pulls back modestly from multi-year highs.
- US economy contracts in the first quarter, US Core CPE and EZ GDP are due on Friday.
- EUR/USD keeps avoiding a correction, recovers 1.0500.
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The EUR/USD dropped again on Thursday, hitting a new cycle low for the fourth consecutive day. It bottomed at 1.0470 and then rebounded, reaching levels above 1.0500. The move off lows was helped by an improvement in market sentiment in Wall Street. The S&P 500 was up by more than 2%. US yields at the same time were higher, benefiting the dollar.
The DXY hit the highest level since 2002, near 104.00, as the rally of the greenback remains solid. No signs of a pullback are seen, but a correction is overdue. The positive trend for the dollar across the board is firm, not hit even by weaker-than-expected US data.
In the Eurozone, data showed inflation in Germany did not cool off in April. The Consumer Price Index rose to an annual rate of 7.4% (consensus: 7.25). On Friday, GDP data is due and end-of-month flows could add volatility. European Central Bank's tightening expectations continue to decline according to what is priced in the swaps market that looks for 125 basis points hikes over the next twelve months, down from 150 bps days ago.
In the US, Initial Jobless Claims dropped to 180K and Continuing Claims to 1,408K, the lowest since 1970. The critical report showed real US GDP contracted 1.4% (annualized rate) during the first quarter against market consensus of a 1% expansion. Large declines in exports and inventories weighed on GDP growth. Analysts point out the negative Q1 GDP won’t deter the Fed from raising rates next week. The US dollar dropped only for a few minutes after the reading and then hit fresh highs. On Friday, data to be released include the Personal Consumption Expenditure Price Index and income and spending data.
EUR/USD short-term technical outlook
Just like Wednesday, the EUR/USD trimmed losses during the American session, recovering from multi-year lows. The euro avoided a consolidation under 1.0480. The rebound found resistance quickly at 1.0525, and the pair could not recover the 20-hour Simple Moving Average (1.0520). The four-hour chart shows a short-term bearish trend, with the RSI under 30 and Momentum at extremely low levels but with difficulties hitting new lows, a potential sign of a pause in the dollar’s rally.
The area between 1.0480 and 1.0460 contains strong support levels that could favor a rebound or at least some consolidation if the EUR/USD manages to remain above 1.0460 over the next sessions. A break lower would expose 1.0400, and below the next level to watch is the 2016 low at 1.0339. On the upside, if the euro rises above 1.0530, it could climb toward the next resistance at 1.0570, then at 1.0605 awaits the 20-SMA in the four-hour chart.
Support levels: 1.0465 1.0415 1.0370
Resistance levels: 1.0530 1.0570 1.0630
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