EUR/USD: Focus shifts to Eurozone GDP after dovish Fed

A better-than-expected Eurozone GDP would only accentuate bullish pressures and allow a sustained rally to 1.16 and above. 

The EUR/USD pair clocked a 20-day high of 1.1508 in Asia and could soon test monthly highs near 1.1570, courtesy of the dovish Fed. 

The US central bank kept rates unchanged and discarded promises of further gradual increased. It added further that the next move in rates could be up or down and expressed willingness to adjust the quantitative tightening program if the economy continues to trend south. 

That is a significant dovish change from the previous stance, which cited interest rates as the primary tool. 

The dollar, therefore, could remain under pressure in the near-term. The bond yield differentials are also biased toward the EUR bulls. 

For instance, the spread between the US and German 10-year government bond yield fell to 248 basis points earlier today and could slide further toward the recent low of 239 basis points in the EUR-positive manner, having witnessed an ascending triangle breakdown on the daily chart on Tuesday. 

Further, the EUR could pick up a strong bid in Europe if both the German jobs data and the Eurozone Q4 GDP data blow past expectations, dashing hopes of a dovish change in the ECB's forward guidance. 

A convincing break above the recent high of 1.1570, however, may remain elusive if the Eurozone GDP shows a sharp deceleration in the economy. The data, due at 10:00 GMT, is expected to show the economy expanded 0.2 percent quarter-on-quarter in the fourth quarter. In annualized terms, however, the growth rate is seen slowing to 1.2 percent from the previous quarter's print of 1.6 percent.

EUR/USD Technical Levels