The negativity of the results of the latest American economic data brought some losses to the US dollar, which allowed the EUR/USD currency pair to rebound higher. The gains went past the 1.0945 resistance level before settling around the 1.0890 level at the time of writing the analysis prior to the announcement of the inflation figures for the Eurozone.
Last night the US government said, in a reduction from its initial estimates, that the US economy grew at an annual rate of 2.1% in the period from April to June, which shows continued flexibility in the face of rising borrowing costs for consumers and businesses. The government had previously estimated that the American economy grew at an annual rate of 2.4% in the last quarter.
Overall, the Commerce Department's second estimate for growth in the last quarter saw a slight acceleration from an annual growth rate of 2% in the period from January to March. Although the economy slowed down due to the Federal Reserve Bank's painstaking campaign to tame inflation by raising American interest rates, it managed to continue growing, with employers continuing to hire and consumers continuing to spend.
A report Wednesday on the country's gross domestic product -- the total output of goods and services -- showed that growth in the last quarter was driven by increases in consumer spending, business investment and spending by state and local governments. The report's consumer price gauge also showed inflation slowing, which could ease pressure on the Federal Reserve to raise interest rates further.
Technical analysis of the currency pair:
- The price of the EUR/USD currency pair broke through the downtrend line on the short-term time frame, indicating that the reversal from the downtrend is sound.
- The price may be in a state of decline to the previous resistance level which may now serve as support.
- The Fibonacci retracement tool shows that the 61.8% level is in line with the broken trendline around 1.0815.
- The minor correction could already find buyers at the 50% Fibonacci level at 1.0830 or the 38.2% level closer to the secondary psychological mark 1.0850 and the dynamic inflection point at 200 SMA.
The 100 SMA is below the 200 SMA to indicate that a downside opportunity remains or that selling is still likely to gain strength. However, EUR/USD is already trading above both moving averages, so this may remain a dynamic support on the downside. At the same time, the stochastic indicator points down to show that the selling pressure is effective, and that the volatility indicator has room to decrease before it reflects the saturation levels in selling. The RSI is also moving down and has room to cover before reaching the oversold zone, so the correction may continue until that happens.
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