- EUR/USD picks up some traction near 1.1120.
- US-China trade concerns keep ruling the sentiment.
- Flash US Q1 GDP surprised to the upside today.
The greenback is now giving away some initial gains and allows EUR/USD to bounce off earlier lows near 1.1120.
EUR/USD gathers pace on US data
Spot regains some ground following mixed results from today’s US data releases.
In fact, the second revision of Q1 GDP showed the economy is expected to expand at an annualized 3.1%, although GDP Price Index rose below expectations at 0.5% QoQ.
Further data showed the trade deficit widened to $72.12 billion during April, while Initial Claims rose at a weekly 215K, a tad above estimates.
In the meantime, US-China trade war and its impact on global growth and yields emerges as the main driver for price action in the global markets for the time being, although market participants have slowly started to shift their focus to advanced inflation figures in the euro area (next week) ahead of the ECB meeting.
What to look for around EUR
Recent data releases in Euroland and Germany have poured cold water over the idea that some healing process could be under way in the region, re-shifting the focus to the ongoing slowdown and its probable duration and extension. This view has been reinforced in recent ECB minutes, where the Council appeared unconvinced about a pick up in the economic activity in H2 2019. That said, the current ‘neutral/dovish’ stance from the ECB is expected to persist for the remainder of the year and probable through H1 2020. The broad-based risk-appetite trends and USD-dynamics should dictate the sentiment surrounding the European currency for the time being, all in combination with the now stalled US-China negotiations and potential US tariffs on EU products. On the political front, Italian politics has resurfaced as a source of uncertainty and volatility, all gyrating around the country’s discomfort with EU fiscal rules.
EUR/USD levels to watch
At the moment, the pair is advancing 0.07% at 1.1138 and a breakout of 1.1215 (high May 27) would target 1.1226 (55-day SMA) en route to 1.1264 (monthly high May 1). On the other hand, the next up barrier lines up at 1.1124 (low May 29) seconded by 1.1107 (2019 low May 23) and finally 1.0905 (high Mar.27 2017).
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