EUR/USD Forecast: More pain on a strong US GDP or a "sell the fact" response?

EUR/USD staged a limited recovery after hitting 22-month lows.
US GDP is left, right, and center, and expected to be robust.
The four-hour chart shows EUR/USD exited oversold conditions.

Yohay Elam FXStreet

EUR/USD is recovering, but this can be described only as yet another "dead cat bounce." The rise is limited, and the moves have stalled. The divergence between the substantial slowdown in the euro-zone and the robust US economy received another confirmation on Thursday.

US Durable Goods Orders jumped by 2.7% in March, more than triple the initial expectations. Excluding defense and air, aka the "core of the core," orders rose by 1.3%, an encouraging figure. Not only do the data represent a revival of investment, but they also feed into today's US GDP report.

Official expectations stand at 2.1% annualized growth in Q1 2019, but realistic expectations are probably higher, especially as the Atlanta Fed's number stands at 2.7%. A 3% level or higher are also possible.

Today's release is the first one, which tends to provide the broadest surprises and has the most significant impact. In addition to the headline, markets will want to see the components. Consumption, investment, and exports are considered "good growth" while government spending and inventory building are the "wrong" types of growth.

See US First Quarter GDP Preview: Reasons to be cheerful

How will markets react?

A 3% level is USD positive, especially as growth in the first quarter is usually slow. However, after the downfall and the high expectations, the US Dollar may already price in a considerably fast growth rate and may "sell the fact" once the data comes out and as traders get ready for the weekend.

Apart from US data, there are reports that the US has made concessions to China on pharma clauses related to pharma in the trade talks. Chinese President Xi Jinping pledged not to devalue the yuan. There are no European figures due today.

EUR/USD Technical Analysis

The Relative Strength Index on the four-hour chart is at 31 at the time of writing, just above oversold conditions. Momentum is to the downside, and the 50 Simple Moving Average crossed the 200-one to the downside. All in all, the picture is bearish, but oversold conditions remain close.

Euro/dollar is battling 1.1140 which was the initial low after the downfall. The new 2019 trough of 1.1118 is the next line to watch. Further down, we are back to levels last seen in 2017: 1.1025 and 1.0900.

1.1176 was the previous low of the year, set back in March. 1.1205 was a swing low earlier in April, now serving as resistance. 1.1230 separated ranges earlier this week, and 1.1265 capped EUR/USD earlier.

More: EUR/USD has one critical support left ahead of US GDP – Confluence Detector

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

AUD/USD rises to 0.6950 as USD slips on Fed's Warsh

AUD/USD regains traction and extends the bounce toward 0.6950 in the Asian session on Friday. Fed Chair Warsh's comments reinforce the selling pressure on the US Dollar, allowing the pair to stretch higher. Warsh said that he remains committed to delivering price stability without giving away anything on future interest rate path.

USD/JPY falls in symc with USD, gives up 158.00 after Warsh's speech

USD/JPY has come under fresh selling pressure and gives up 158.00 in the Asian session on Friday amid the emergence of fresh US Dollar selling. Fed Chair Warsh's non-committal commentary on the future tightening path, weighs on the US Dollar and the pair.

Gold looks vacillating above $4,150

Gold alternates gains with losses below the key $4,200 mark per troy ounce on Friday. The yellow metal’s irresolute price action comes in response to a modest pullback in the US Dollar and a tepid recovery in US Treasury yields across the board.

Bitcoin steadies at $82,000: The five forces crushing the Uptober rally

Crypto markets have remained under pressure so far in October, with Bitcoin (BTC) sliding below $80,000 earlier this week before recovering to around $82,000 on Friday, as macroeconomic headwinds and cooling demand weigh on the market.

The Fed just got a second hot inflation number. Here's what the diesel signal is really saying

The Federal Reserve (Fed) faces a renewed inflation challenge after two consecutive reports showed price pressure intensifying across the US economy. September's Consumer Price Index (CPI) confirmed accelerating consumer inflation, while the Producer Price Index (PPI) revealed an even sharper rise in business costs. Behind both reports lies a common factor: energy prices.

Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff

Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.