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.

Omkar Godbole FXStreet Contributor

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
PP 1.1138
1. S1 1.1113
2. S2 1.1093
3. S3 1.1067

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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