2023-07-27 13:38:55 ET
The
EUR/USD
exchange rate plunged to the lowest level since July 11th as the market reflected on the latest US GDP data and a statement by the European Central Bank (ECB). The pair declined to a low of 1.0985 on Friday, much lower than this month’s high of 1.1275. As a result, the DXY index jumped to $101.6.
Strong US GDP data
The EUR/USD has been in the spotlight in the past few days as investors react to several
USA news
.
On Tuesday, data by the Conference Board showed that the country’s consumer confidence jumped to 117 in July as inflation retreated. A higher confidence figure is a positive thing for an economy since it implies higher consumer spending.
The other important
USD news
came on Wednesday when the Federal Reserve delivered its interest rate decision. In it, the bank decided to hike interest rates by 0.25%, pushing them to the highest level in more than two decades. The bank also stood with its data-dependence stance.
Watch here: https://www.youtube.com/embed/NZjuhy8Yqtw?feature=oembed
On Thursday, the European Central Bank followed suit and hiked interest rates by 0.25%. It pushed the benchmark deposit rate to 3.75%, the highest level since 2001. It was also the ninth straight rate increase. Analysts believe that this could be the final rate hike. In a note, an analyst at Evercore ISI said:
“We reiterate our call that in the base case, the ECB — like the Fed — is done raising rates, though there is certainly still a material risk of a further hike.”
The EUR/USD exchange rate slipped after the US published robust
US GDP
numbers. According to the Bureau of Economic Analysis, the economy expanded by 2.4% in the second quarter, higher than the expected 1.8%. This increase followed a 2% increase in the first quarter. The report signals that the Fed could hike at least one more time.
EUR/USD technical analysis
The EUR to USD exchange rate has been in a strong bearish trend in the past few weeks. This decline accelerated on Thursday after the latest US GDP numbers. As it dropped, the pair retreated below the key support at 1.1018, the lowest point on Thursday.
The EUR/USD exchange rate dropped below the 50-period and 25-period volume-weighted moving average (VWMA). It also retreated below the important support at 1.1094, the highest point on April 26.
Therefore, the outlook for the EUR/USD pair is bearish ahead of the monthly PCE data scheduled for Friday. The PCE is an important number since it is the Fed’s favourite inflation gauge. The next price to watch will be at 1.0837, where it formed a triple-bottom between June and July.
The post
EUR/USD forecast: forex signal ahead of US PCE inflation data
appeared first on
Invezz
.
www.investorsobserver.com