US Economy Grew Nicely – EUR/USD Rises

The US economy grew at an annual pace of 2.5% in Q3 2011 according to the first release. This is within expectations of a 2.4%-2.5% rise. Early expectations stood on a rise of 2.4%.

The GDP Price Index which accompanies the GDP figure rose by 2.5%, as expected. US weekly unemployment claims printed 402K, as expected, also within expectations of 400K.

The figures are OK, and they provide more fuel for the risk rally that was already ignited by the deal that was struck in the EU Summit. EUR/USD is moving up after this release and is confirming the break above 1.4030.

The US economy grew at a pace of only 1.3% in Q2 and only 0.4% in Q1. This new level of growth isn’t strong, but definitely lowers the chances of a recession.

The moves of EUR/USD are based mainly on the debt crisis in Europe, as the markets digest the EU Summit Deal  although these good news from the US sure help unwind the general gloom atmosphere that held the markets so far.

The next resistance line is 1.41, followed by 1.4160. Support is at 1.4030, a line which was broken before the publication and is now getting further down. Further support is at 1.3950.

Is EUR/USD returning to the previous long term range, or is it temporary?

For more on EUR/USD, see the euro/dollar forecast.

We still have another important US release later on: Pending Home Sales. See how to trade this event with USD/JPY.

Apart from lower chances of recession, also the chances of QE3, which have already been low, took another blow. Next week we’ll know if the good economic indicators of late are also seen in employment.