EUR/USD stays above 1.0900 ahead of US GDP during ECB blackout

• EUR/USD steadies around nine-month high after five-day uptrend.
• Upbeat German data, pre-Fed consolidation favor bulls amid sluggish market.
• ECB’s Makhlouf fired the last hawkish shot before the one-week silence before monetary policy meeting.
• Advance reading of US Q4 GDP will be crucial ahead of next week’s FOMC.

EUR/USD bulls are in command near the nine-month high, despite recently taking a breather around 1.0915, as the major pair traders await the first readings of the US fourth quarter (Q4) Gross Domestic Product (GDP). The quote cheered broad US Dollar weakness and the upbeat German data, not to forget the hawkish bias surrounding the European Central Bank (ECB), to print a five-day uptrend by the end of Wednesday.

That said, the US Dollar Index (DXY) remained on the back foot while bracing for the third consecutive weekly loss around 101.65 as hopes of a dovish Federal Open Market Committee (FOMC) grew more robust.

On the other hand, Germany’s IFO Business Climate Index matched 90.2 forecasts for January versus 88.6 prior, but the Current Assessment eased from 94.4 to 94.1 versus 95.0 expected. Further, the IFO Expectations for the said month also came in higher-than-consensus 85.0 while rising to 86.4, compared to 83.2 previous readings. Following the data release, IFO Economist Klaus Wohlrabe noted that “the German economy is starting the year with cautious optimism.”

Elsewhere, ECB Governing Council member Gabriel Makhlouf became the last policymaker from the bloc’s central bank to fire the hawkish shot, suggesting a 50 bps rate hike ahead of the one-week blackout pre-ECB. "We need to continue to increase rates at our meeting next week – by taking a similar step to our December decisions," said ECB’s Makhlouf. Makhlouf added that they need to increase rates again at the March meeting.

Amid these plays, market sentiment remained dicey as the calendar was light elsewhere, and there were few macros amid the China holidays and the Fed blackout. Wall Street closed mixed, and the US 10-year Treasury bond yields ended Wednesday with minor moves around 3.45%.

Looking forward, a slew of the US data will entertain the EUR/USD traders even if the Fed and the ECB policymakers are restricted from speaking. Among them, the first reading of the US Q4 GDP, expected to print annualized growth of 2.6% versus 3.2% prior, will be crucial amid the recession talks.

Also read: US Gross Domestic Product Preview: Three reasons to expect a US Dollar-boosting outcome

Technical analysis

Although a weekly support line restricts the immediate downside of the EUR/USD pair near 1.0865, the monthly high and April 2022 peak, respectively, near 1.0926 and 1.0936, could challenge the bulls.