TheNews

Trading the News: U.S. Gross Domestic Product (GDP)



Updates to the U.S. Gross Domestic Product (GDP) report may curb the recent weakness in EUR/USD as the growth rate is anticipated to slow to an annualized 2.0% from 2.9%. Bear in mind, market participants may put greater emphasis on the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, as the reading is projected to increase 2.6% during the first three-months of 2018, which would mark the fastest pace of growth since 2007. Signs of heightening price pressures may ultimately trigger a bullish reaction in the U.S. dollar as it puts pressure on the Federal Open Market Committee (FOMC) to extend the hiking-cycle.

However, a series of below-forecast data prints may sap the appeal of the greenback, and EUR/USD may stage a near-term rebound as market participants scale back bets for four Fed rate-hikes in 2018.

EUR/USD Daily Chart

• Near-term outlook for EUR/USD remains tilted to the downside as it extends the series of lower highs & lows from the previous week, with the pair clearing the March-low (1.2155).
• Close below 1.2130 (50% retracement) raises the risk for a move towards 1.1960 (38.2% retracement) to 1.1970 (23.% expansion), with the next region of interest coming in around 1.1810 (61.8% retracement) followed by the Fibonacci overlap around 1.1670 (78.6% expansion) to 1.1680 (50% retracement).
• Keep a close eye on the RSI as it approaches oversold territory, with move below 30 raising the risk for a further decline in the exchange rate as the bearish momentum gathers pace.

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