Home EUR/USD Outlook: Risk Appetite Improves on Positive US Data

EUR/USD Outlook: Risk Appetite Improves on Positive US Data

  • Retail sales in the United States rebounded dramatically in January.
  • The dollar lost some of its previous day’s gains, but it was still close to a six-week high.
  • The European Central Bank will likely increase its terminal rate to 3.25%.

Today’s EUR/USD outlook is slightly bullish. The dollar stagnated on Thursday even as the Federal Reserve appears poised to boost interest rates further. Risk appetite increased in response to evidence that the outlook for global growth is improving due to a slew of positive US economic data.

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According to data released by the US Commerce Department on Wednesday, retail sales in the United States rebounded dramatically in January after falling for two consecutive months.

This came a day after US inflation data revealed slower but persistent consumer price growth. Earlier this month, data revealed that the US job market continued to be tight as job creation surged rapidly in January.

On Thursday, the dollar lost some of its previous day’s gains, but it was still close to a six-week high against most major currencies.

Most analysts surveyed by Reuters predict that the European Central Bank will increase its deposit rate by at least two additional hikes, increasing the terminal rate to 3.25% in the second quarter.

All 57 economists surveyed between February 10 and February 15 believed ECB President Christine Lagarde when she said the deposit rate would increase to 3.00% at the March 16 meeting.

The ECB will follow up on its move in March by increasing rates by another 25 basis points the following quarter, providing the terminal deposit rate of 3.25%.

EUR/USD key events today

Investors will be watching several US economic reports, such as data on building permits, initial unemployment claims, and PPI.

EUR/USD technical outlook: Bears and bulls battle for control in the 1.0801-1.0655 range

EUR/USD technical outlook

The 4-hour chart shows EUR/USD trading slightly below the 30-SMA and the RSI slightly below 50. This is a sign that bears are a bit stronger at the moment. However, a larger scale view shows the price consolidates with support at 1.0655 and resistance at 1.0801.

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The price is trading closer to the support, with bears showing more strength. If they can hold on to control, the price will likely retest and break below the 1.0655 support. However, if the price breaks above the 30-SMA, it will probably retest the range resistance at 1.0801.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.