EUR/USD remains under pressure post upbeat US inflation

The Core Personal Consumption Expenditure (PCE) index beat consensus at 2.5% vs. 2.4% forecast and this is music to the ears for USD bulls.
The US Gross Domestic Product (GDP) for the first quarter annualized also beat consensus at 2.3% vs. 2% forecast while the non-annualized reading came below consensus at 2% vs. 2.2% forecast.

Flavio Tosti Independent Analyst

The EUR/USD is trading at about 1.2080 down 0.20% on Friday as the PCE came in above expectations. The US GDP headline figure came above consensus at 2.3% for the first quarter of 2018 versus 2% forecast by analysts.

The EUR/USD is having a small reaction up towards 1.2080 likely due to profit-taking. The main trend remains strongly bearish.

The inflation data with the core Personal Consumption Expenditure (PCE) index came above expectations at 2.5% versus 2.4% forecast by analysts. This is potentially very bullish for the USD as the PCE is the favorite gauge of inflation of the Fed. Sustained inflation means that the odds of four rate hikes go up in 2018, which results in more USD demand. The GDP first quarter results came above expectation while the non-annualised data came below expectations at 2% versus 2.2% forecast.

Overall the recent data is rather good with upbeat PCE and mixed GDP. This should keep the USD bull trend in place. The US Dollar Index, which measures the greenback relative to a basket of currencies continue its ascent higher towards the 92 figure while US 10-year yields trade sub 2.980% but still at very high levels.

On the broader picture, the EUR is under pressure as the ECB meeting on Thursday was leaning towards the dovish side. Mario Draghi President of the ECB didn’t really bring anything new as the ECB is continuing the asset purchasing program (APP) while staying cautious in providing large liquidity.

EUR/USD daily chart

The EUR/USD is in a bear trend and there is little in the way before it reaches 1.2000 support. Next scaling point is seen at 1.1915 swing low. Resistances to the upside at the 1.2100 and 1.2200 figure.

Author

Flavio Tosti

Independent Analyst

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