- EUR/USD has bounced up from 1.1240 (76.4% Fib R of 1.1176/1.1448), forming a bull RSI divergence on the hourly chart.
- A corrective rally may remain elusive if the German CPI misses estimates. The final reading of the US Q4 GDP is expected to show moderation in growth rate. The slowdown, however, is priced in, hence the data may not move the needle on EUR/USD.
Euro sellers have likely run out of steam near 1.1240 (76.4% Fib R of 1.1176/1.1448) and with the hourly relative strength index (RSI) creating higher lows, the shared currency could see a corrective bounce ahead of the German inflation data.
As of writing, EUR/USD is trading at 1.1254, up 0.10 percent on the day, having bolstered the bearish setup with a close below 1.1280 (61.8% Fib R of 1.1176/1.1448) on Monday. Even so, the 76.4% Fib support at 1.1240 held ground in the last 12 hours, possibly due to 10-year treasury yield’s drop to 15-month lows during the Asian trading hours.
The common currency may pick up a bid, as suggested by the bullish divergence of the hourly RSI if the Eurozone consumer and industrial sentiment indicate due for release at 10:00 GMT, beat estimates.
Any relief rally, however, could be reversed quickly if the preliminary German consumer price index (CPI) for March, scheduled for release at 13:00 GMT, prints below the estimate of 0.6 percent month-on-month and 1.6 percent year-on-year. A below-forecast CPI would only validate ECB’s recent decision to delay the rate hike to 2020.
The final 4th quarter US GDP, scheduled for release at 12:30 GMT (30 minutes before the German CPI), is expected to show that the growth rate cooled to 2.4 percent year-on-year, as opposed to the prior estimate of 2.6 percent. That US economy slowed down in the final three months of 2018 is generally accepted and priced in by now. So, the data will likely have little impact on the markets, unless it misses expectations by a big margin. In that case, markets may begin pricing 2020 rate cut, sending EUR/USD higher.
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