EUR/USD: Focus on US GDP, US dollar vulnerable to sell the fact trade

  • EUR/USD remains on the defensive, having found acceptance below 1.176. 
  • The recent surge in dollar index suggests markets may have priced-in a better-than-expected Q1 US GDP. 
  • EUR/USD may see a corrective bounce post-GDP. 

EUR/USD may see a corrective bounce if the preliminary first-quarter US GDP reading matches or fails to beat expectations by a big margin. 

The upbeat US retail sales data released a week ago pointed to a stronger economy in the first three months than previously expected. Notably, the widely-tracked Atlanta Fed's GDPNow tracker rose to 2.8 percent following the release of the retail sales data, having begun the year with a 0.3 percent projection for the first quarter. 

As a result, the American dollar has been better bid right from the start of the current week. This is evident from EUR/USD’s drop from the high of 1.1324 seen on April 17 to a 22-month low of 1.1118 yesterday. Further, the dollar index, which tracks the value of the greenback against majors, has risen from 97.18 to an 11-month high of 98.32 over the last few days. 

Put simply, investors seem to have priced-in an above-forecast GDP reading. The data due at 12:30 GMT is expected to show the economy expanded at an annualized rate of 2.1 percent in the first quarter, having registered a growth rate of 2.2 percent in the preceding quarter. 

The EUR/USD pair could see a corrective bounce if the GDP fails to beat expectations by a big margin (Atlanta Fed’s GDPNow tracker sees growth rate at 2.7 percent). 

The common currency, however, may slide below 1.11 if the GDP prints above 3 percent. 

Technical Levels

    1. R3 1.1204
    2. R2 1.1184
    3. R1 1.1159
  1. PP 1.1138
    1. S1 1.1113
    2. S2 1.1093
    3. S3 1.1067


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