- EUR/USD has regathered its bullish momentum ahead of key data.
- Next key resistance for the pair aligns at 1.0300.
- The extent of the euro’s rally depends on the GDP and inflation figures.
EUR/USD has gathered bullish momentum early Friday and climbed above the key 1.0230 level. The technical outlook suggests that sellers remain on the sidelines but the shared currency’s rally needs to be supported by Friday’s data releases.
The positive shift witnessed in risk sentiment is making it difficult for the greenback to find demand ahead of the weekend. Additionally, investors continue to scale back 75 basis points Fed rate hike bets for September following Thursday’s disappointing Gross Domestic Product (GDP) data, which showed that the US economy contracted at an annualized pace of 0.9% in the second quarter.
Later in the session, Eurostat will release the GDP and inflation data for the euro area. Investors expect the European economy to expand by 0.2% on a quarterly basis in the second quarter. The annual Harmonised Index of Consumer Prices (HICP) is forecast to stay unchanged at 8.6% in July. In case the data shows that the economy grew at a slightly better rate than estimated and inflation continued to edge higher in July, the pair is likely to preserve its bullish momentum.
On the other hand, a disappointing GDP print coupled with a slightly softer HICP figure could limit the pair’s upside. In case the growth data comes in line with expectations, market participants are likely to react to the inflation report.
In the second half of the day, the US Bureau of Economic Analysis will release the Personal Consumption Expenditures (PCE) Price Index data for June. During the press conference on Wednesday, “we will watch both CPI and PCE but we think PCE is the best measure of inflation,” FOMC Chairman Jerome Powell noted. The annual Core PCE inflation is expected to remain steady at 4.7%. The impact of the PCE data on the dollar should be straightforward with a stronger-than-forecast print helping the dollar find demand and vice versa.
EUR/USD Technical Analysis
EUR/USD was last seen trading above 1.0230, where the Fibonacci 38.2% retracement level of the latest downtrend forms the upper limit of the 10-day-old trading range. In case this level is confirmed as support, the next bullish targets could be seen at 1.0300 (psychological level, Fibonacci 50% retracement, 200-period SMA on the four-hour chart) and 1.0370 (Fibonacci 61.8% retracement).
On the downside, additional losses toward 1.0200 (psychological level, 50-period SMA) and 1.0150 (Fibonacci 23.6% retracement, 100-period SMA) could be witnessed if 1.0230 support fails.