Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0650.
- Add a stop-loss at 1.0755.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0755.
- Add a stop-loss at 1.0650.
The EUR/USD pair wavered on Thursday morning ahead of the crucial US GDP and inflation numbers. It also moved sideways after the strong economic numbers from Germany and the United States. The pair was trading at 1.0695, a few pips below this week’s high of 1.0712.
US GDP and inflation data
There are signs that the European economy is doing well. A report published on Tuesday revealed that business output rose to the highest point in months. The composite PMI rose to 51.4, which was higher than the median estimate of 50.8.
A separate report published on Wednesday revealed that the current assessment of the German economy rose from 88.1 in March to 88.9 in April. Business expectations rose to 89.9 while the business climate index rose to 89.4.
These numbers mean that the European economy is doing relatively well since inflation is also coming down. If the trend continues, the European Central Bank (ECB) will start cutting interest rates as soon as June this year.
The EUR/USD also moved sideways after the US released encouraging durable goods order numbers. A report showed that orders rose from 0.7% in February to 2.6% in March, higher than the expected 2.5%. Core durable orders rose from 0.1% to 0.2%.
The next important numbers that could impact the Federal Reserve will be the upcoming US GDP and Personal Consumption Expenditures Price Index (PCE) data.
The expectation is that the economy expanded in Q1, helped by consumer and government spending. Most analysts expect that the economy grew by 2.5% in Q1 after growing by 3.4% in Q4.
They also believe that Friday’s PCE report will be the most important one before the Fed makes its monetary policy decision next week. A higher-than-expected figure will push the Fed to deliver a hawkish statement, signaling that it may not cut rates this year.
EUR/USD technical analysis
The EUR/USD pair remained in a tight range ahead of the crucial GDP and PCE numbers. It was trading at 1.0695 on Thursday morning. It has moved slightly above the 50-period moving average and is sitting at its lowest swing on February 14th.
Most importantly, the pair has formed a bearish flag pattern, which is characterized by a long vertical line and an ascending rectangle. In most cases, this pattern is usually a sign of a continuation.
Therefore, the outlook for the pair is bearish, with the next point to watch being at 1.0650, the lower side of the flag pattern.
Ready to trade our daily Forex signal? Check out the best forex brokers in Europe worth using.