EUR/USD Extends Bearish Sequence Ahead of 1Q U.S. GDP Report
- EUR/USD Clears March-Low (1.2155) as Bearish Sequence Unfolds. Relative Strength Index (RSI) Slips Towards Overbought Territory.
Trading the News: U.S. Gross Domestic Product (GDP)
Bear in mind, market participants may put greater emphasis on the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, as the reading is projected to increase 2.6% during the first three-months of 2018, which would mark the fastest pace of growth since 2007. Signs of heightening price pressures may ultimately trigger a bullish reaction in the U.S. dollar as it puts pressure on the Federal Open Market Committee (FOMC) to extend the hiking-cycle.
However, a series of below-forecast data prints may sap the appeal of the greenback, and EUR/USD may stage a near-term rebound as market participants scale back bets for four Fed rate-hikes in 2018.
Impact that the U.S. GDP report has had on EUR/USD during the previous quarter
|Period||Data Released||Estimate||Actual||Pips Change||Pips Change|
|01/26/2018 13:30:00 GMT||3.0%||2.6%||-8||-4|
4Q 2017 U.S. Gross Domestic Product (GDP)
EUR/USD 15-Minute Chart
The U.S. economy grew less-than-expected during the last three-months of 2017, with the growth rate slowing to an annualized 2.6% from 3.2% in the third-quarter. A deeper look at the report showed the core Personal Consumption Expenditure (PCE) climbing to an annualized 1.9% from 1.3%, while the gauge for Personal Consumption increased 3.8%during the same period amid forecast for a 3.7% print.
The lackluster data prints sparked a mixed reaction in the greenback, with EUR/USD largely consolidating throughout the day to close at 1.2429. Sign up & join DailyFX Currency Strategist Christopher Vecchio LIVE to cover the fresh updates to the U.S. GDP report.
EUR/USD Daily Chart
- Near-term outlook for EUR/USD remains tilted to the downside as it extends the series of lower highs & lows from the previous week, with the pair clearing the March-low (1.2155).
- Close below 1.2130 (50% retracement) raises the risk for a move towards 1.1960 (38.2% retracement) to 1.1970 (23.% expansion), with the next region of interest coming in around 1.1810 (61.8% retracement) followed by the Fibonacci overlap around 1.1670 (78.6% expansion) to 1.1680 (50% retracement).
- Keep a close eye on the RSI as it approaches oversold territory, with move below 30 raising the risk for a further decline in the exchange rate as the bearish momentum gathers pace.
For more in-depth analysis, check out the Q2 Forecast for EUR/USD
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--- Written by David Song, Currency Analyst
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