Piece written by Alexa Smith, Trive Financial Market Analyst
The EURUSD currency pair exhibited a slight surge in anticipation of the release of Euro Area GDP, and the eagerly awaited FOMC Minutes. With US inflation depicting a downward trajectory and disappointing labour market data, all signs point to a forthcoming dovish stance from the Federal Reserve. This shift has provided a boost to the Euro against the Greenback, especially as the European Central Bank (ECB) maintains a hawkish outlook.
The spotlight, however, remains on the impending Euro Area GDP data. Past GDP figures left the EURUSD pair somewhat perplexed, revealing a flat quarterly expansion of 0% and a modest 1.1% annual growth. While Germany grappled with economic stagnation at 0%, France and Spain showcased more robust growth rates at 0.5% and 0.4% respectively. This positive trend in these economies fuelled an optimistic expectation of a 0.3% quarterly GDP growth in today’s report. On the flip side, Italy’s economy faced a contraction of 0.3%, intensifying pressure on the forecasted yearly GDP figure, which is expected to decelerate from the previous reading to 0.6%.
Technical
The EURUSD currency pair is trading within an ascending channel pattern on the 1D Chart, but a swift rejection of the 1.12761 swing high saw the price action tumble. A surge in volume on the backdrop of cooling US inflation attempted to gain upside traction but ultimately fell short of the 50% level, encouraging the currency pair to cushion at the 1.08792 support.
The 1.08792 support poses a barrier towards the 1.08371 support, which may mark a pivot point for a downtrend. However, the price action could cushion at the 1.08371 support and see the broader upward trend play out. In this case, the 1.10777 resistance at the 50% level may be a point of interest in bolstering the currency pair towards the upper boundary of the ascending channel.
Summary
The EURUSD currency pair is edging lower on the backdrop of a resilient US economy; however the Euro Area GDP data and a dovish Fed could encourage a surge towards the 1.10777 resistance at the 50% level. Although, contracting GDP data could encourage a pullback towards the 1.08792 support.
Sources: TradingView, Reuters
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