EUR/USD returns to pre-Draghi levels ahead of US GDP
Fawad Razaqzada July 26, 2019 11:46 AM
The EUR/USD came back to where it started before the European Central Bank’s policy announcement was made on Thursday. The single currency initially fell to a fresh 2019 low against the dollar in reaction to what looked like a dovish ECB Policy statement, before staging a sharp rally off the lows in response to President Mario Draghi’s comments at the press conference, where the ECB President appeared a lot less dovish than had been anticipated. He said that there were no discussions of cutting interest rates on Thursday, while any rate cut would come with mitigating measures. What’s more, there was a lack of unanimity in discussions, according to Draghi. But overall, the central bank did appear to prepare the markets for easing in September. So, fundamentally, the outlook remains bearish for the euro.
The EUR/USD will remain in focus later on with the release of US second quarter GDP. The world’s largest economy is forecast to grow at its slowest pace since 2016, ahead of an expected rate cut from the Federal Reserve next week. GDP is expected to print a meagre +1.8% q/q annualised (that is, quarterly change x4) versus +3.1% in Q1. This should move the markets, especially if the actual number shows a large deviation from the expected reading. So, hold off your weekend plans until after it is published.
Looking ahead to next week, there will be plenty of news that could impact the EUR/USD exchange rate. Among other things, we will have CPI and retail sales from the Eurozone, while US data includes the always-important non-farm payrolls report. For a more in-depth outlook, watch out for our week ahead report due later this afternoon.
Meanwhile from a purely technical point of view, the EUR/USD still looks heavy with price unable to break through the 1.1180-1.1210 resistance area yesterday. So a breakdown below 1.1100 towards the 127.2% Fibonacci extension at 1.1025 looks the more likely outcome at this stage than a short-covering rally towards the 200-day average at 1.1300. That is unless US GDP comes in well below expectations today or the Fed cuts by 50 basis points next week.
Source: Trading View and FOREX.com
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.