EUR/USD Forecast: Two steps up, now one step down? US GDP critical after the Fed


  • EUR/USD has hit a two-month peak in response to the Fed's dovish decision. 
  • US GDP figures are critical to the next moves. 
  • Thursday's four-hour chart is showing that bulls are in control.

No taper – and therefore no tantrum in markets, but a positive mood that has been weighing on the safe-haven dollar and sending EUR/USD to 1.2150, the highest since late February. Traders have no time to rest before the next top-tier US event. 

The Federal Reserve left its interest rate unchanged as expected in its April decision, and stressed that any pickup in inflation is transitory even though acknowledging the economic improvement. Reducing the pace of buying bonds from the current $120 billion/month was not even on the agenda – and that means further dollar devaluation. 

Powell Analysis: The five dovish comments that down the dollar for longer

Jerome Powell, Chairman of the Federal Reserve, stressed that millions of Americans are out of work and that inflation is due to base effects and bottlenecks, which will likely be resolved. He also said the economy has a "long way to go." Did he receive Thursday's Gross Domestic Product figures in advance? 

The economic calendar is pointing to a considerable annualized increase of 6.5% in US GDP in the first quarter of 2021. The year began with a harsh upswing of COVID-19, continued with a "deep freeze" storm but then turned around.

America's vaccination campaign began kicking in and President Joe Biden's massive $1.9 trillion stimulus deal came into effect in March, enough to impact growth figures. However, Disappointing Durable Goods Orders for March, published on Monday, somewhat dampened market expectations, and that may lead to a positive surprise. 

US Q1 GDP Preview: Eyes on inflation and FOMC as economic recovery gathers steam

While there is a chance for GDP to fall short of investors' expectations, the euro is well-positioned to take advantage of a minor miss in US data and may weather upbeat figures. The old continent's vaccination campaign has picked up markedly and infections are falling. German and Spanish inflation figures are unlikely to ruin the rally, at least for now. 

President Joe Biden presented another tax and spend plan worth $1.8 trillion – even before Congress passed his proposed $2.25 trillion program focused on infrastructure. Markets have shrugged off the news, as any grand schemes would have a hard time mustering a majority on Capitol Hill.

All in all, the broader trend is to the upside, but a short-lived correction cannot be ruled out.

EUR/USD Technical Analysis

Euro/dollar is trending higher since bottoming out early in April. It has recently been trading above an uptrend support line that follows the 50 Simple Moving Average. Momentum remains to the upside and the Relative Strength Index (RSI) is below 70 – thus outside overbought conditions. 

Overall, bulls are in the driver's seat. 

The fresh April high of 1.2150 is the immediate resistance line. It is followed by 1.2180 and 1.2240, levels last seen in February. 

Support awaits at 1.2117, the previous April peak, and then by 1.2080, 1.2050 and 1.20, all stepping stones on the way up. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD battles 1.21 after mixed US data

EUR/USD is trading above 1.21, choppy after US retail sales missed estimates with a drop of 1.3% but on top of upward revisions. Increases in producer prices accelerated last month.

EUR/USD News

GBP/USD bounces off two-month lows

GBP/USD has bounced off the fresh two-month low of 1.4034 but remains depressed. The delay in Britain's reopening is outweighing upbeat UK job figures. Tension is mounting ahead of the Fed.

GBP/USD News

XAU/USD looks to $1880 after recapturing $1858

Gold price is attempting a minor recovery above $1850, although the bulls appear to lack conviction, as the US dollar continues to hover near monthly highs.

Gold News

Bitcoin continues to range higher, but altcoins suffer

Bitcoin price has experienced a 32% upswing over the past six days and might retrace to gather more steam. Ethereum price performance is lackluster as it rallied roughly 17% in the same period as BTC.

Read more

Tesla still stuck in first gear

Tesla stock recovered last week as some investor enthusiasm finally returned to the stock with the release of the new Model S Plaid at Tesla's Freemont factory.

Read more

Majors

Cryptocurrencies

Signatures