EUR/USD: Focus on US GDP, US dollar vulnerable to sell the fact trade
- EUR/USD remains on the defensive, having found acceptance below 1.176.
- The recent surge in dollar index suggests markets may have priced-in a better-than-expected Q1 US GDP.
- EUR/USD may see a corrective bounce post-GDP.
EUR/USD may see a corrective bounce if the preliminary first-quarter US GDP reading matches or fails to beat expectations by a big margin.
The upbeat US retail sales data released a week ago pointed to a stronger economy in the first three months than previously expected.
The widely-tracked Atlanta Fed's GDPNow tracker, rose to 2.8 percent following the release of the retail sales data, having begun the year with a 0.3 percent projection for the first quarter.
As a result, the American dollar has been better bid right from the start of the current week. This is evident from EUR/USD’s drop to 1.1118 yesterday – the lowest since June 2017 – from the high of 1.1324 seen on April 17.
The dollar index, which tracks the value of the greenback against majors, has risen from 97.18 to an 11-month high of 98.32 over the last few days.
Put simply, investors seem to have priced-in an above-forecast GDP reading. The data due at 12:30 GMT is expected to show the economy expanded at an annualized rate of 2.1 percent in the first quarter, having registered a growth rate of 2.2 percent in the preceding quarter.
The EUR/USD pair could see a corrective bounce if the GDP fails to beat expectations by a big margin (Atlanta Fed’s GDPNow tracker sees growth rate at 2.7 percent).
The common currency, however, may slide below 1.11 if the GDP prints above 3 percent.
Technical Levels