EUR/USD erases weekly losses after US dollar reversal

• EUR/SD started to rise late on Thursday and extended gains on Friday on the back of a weaker US Dollar.
• Next week: US Q2 GDP and ECB meeting.

The EUR/SUD pair remains at daily highs and on top of 1.1700 near the end of the week. The pair managed to rebound from 20-day lows. On Thursday bottomed at 1.1573 but all changed after US President Trump comments.

He spoke against Fed’s rate hikes, threatened to increase tariffs and also pointed to China, the European Union and other countries as currency manipulators. His comments triggered a sell-off of the greenback. A bearish correction the US dollar was a possibility and Trump’s words accelerated the move.

The slide of the greenback pushed EUR/USD to rise to 1.1723 on Friday. During the last hours, EUR/SUD has been hovering between 1.1700 and 1.1720, posting a modest weekly gain. The rebound so far appears to be not strong enough to remove the bearish bias, but the technical outlook for the euro improved significantly. Price is testing the 55-day MA and a close significantly above 1.1720 could signal more gains ahead.

Week ahead:

In the Eurozone, on Thursday the European Central Bank will meet. “With ECB policy largely set for the next year or so and the macro picture little changed, we don’t look for any big revelations from President Draghi. However, he will need to clarify the ECB’s forward guidance on rates, especially given the recent questions around the translation of the June statement. Market reaction to this meeting should be fairly muted”, wrote analysts at TDS.

The key event regarding economic indicators, in the US will be on Friday with the release of the advance estimate of GDP growth during the second quarter. “We anticipate strong contributions from both consumption and trade based on already published data on retail sales and exports/imports. Business investment may also have provided some lift to the economy as shipments of non-defense capital goods excluding aircraft continued their advance. Residential investment, for its part, may not add much to Q2’s print, reflecting lackluster housing starts data. All told, GDP may have expanded a solid 4.5% in annualized terms in the second quarter. That would be the steepest progression since 2014Q3″, said analyst at the National Bank of Canada.

Market participant will also look close for new actions and comments from the Trump administration regarding the trade war and currencies.