The EUR/USD pair has been consolidating in a narrow range since late January after a dip to 1.11. It has since rallied to 1.15 but ended up in a tight range between roughly 1.1270 and 1.1450 in the past 2 weeks.
This week, it was coiling further until Thursday after the CPI data, which showed a -0.7% headline reading and a 0.2% core reading. This was nothing to write home about but the USD gained across the board, though it stalled immediately following the reaction. The EUR/USD for example fell to 1.12 and held as if the market wanted to see what the GDP data will offer on Friday. Well, we got the GDP data, and it was nothing impressive, but was not disappointing neither because expectations were already held back.
US Preliminary GDP q/q (Q4): 2.2%
Advanced Estimate: 2.6%
Q3, 2014: 3.9%
(click to enlarge; source: forexfactory.com)
GDP data was originally estimated to be 2.6% in the “advanced” reading. After scaling back expectations, the “preliminary” reading was indeed lower, pretty much as expected. We already saw data sets out of Q4 that were disappointing, such as retail sales. So everything negative out of today’s GDP report has been priced in as the USD has been stalling throughout February.
There is still the Chicago PMI and Revised UoM Consumer Sentiment reports, but they should not have that much impact. However, volatility might still pick up after all the US data set, so let’s be prepared for that.
There are a couple of things in the 1H chart that would suggest further bearish outlook.
1) If price holds below 1.1340, preferably below 1.13. (1.1280-1.13 reflects the lows from the previous consolidation, while 1.1340 represents the upper area of the moving average cluster, and if price holds below it, there is still slight bearish bias.
2) If the 1H RSI holds below 60, the bearish momentum from Thursday’s dip will still be in play, and EUR/USD would likely be heading back towards the 1.11 low on the year next week, with risk of extending lower.
Previous Post by Author: CAD/JPY Confirming a Double Bottom