Euro Drops to 1.1552 as GDP Misses and Fed Looms – Is 1.1450 Next for EUR/USD?
Euro-area data out Wednesday was underwhelming. French consumer spending rose 0.6% in June but the overall bloc’s GDP...
Quick overview
- Euro-area data showed mixed results, with French consumer spending up 0.6% in June but Germany and Italy both contracting 0.1%.
- The eurozone's GDP grew only 0.1%, leading to a swift drop in EUR/USD to a 5-week low of 1.1552.
- Investors are cautious about the euro's strength amid economic contractions in key member states.
- Upcoming US economic data and the Federal Reserve's decisions will significantly influence the EUR/USD direction.
Euro-area data out Wednesday was underwhelming. French consumer spending rose 0.6% in June but the overall bloc’s GDP numbers were red flags. Germany’s economy contracted 0.1% in Q2, as expected, but after 0.4% growth in the prior quarter. Italy also contracted 0.1% and Spain’s CPI hit 2.7% so inflation is sticky.
The eurozone’s total GDP grew 0.1% which is better than flat but far from comforting after 0.6% growth. The reaction in EUR/USD was swift with the pair dropping below 1.1570 support and hitting a 5-week low of 1.1552.
Investors are clearly rethinking the euro’s strength especially with Germany and Italy back in contraction.
All Eyes on the Fed, ADP, and US GDP
The next move in EUR/USD will be driven by a busy US calendar. Markets await:
- ADP Non-Farm Employment (12:15 GMT): 77K vs -33K prior
- Advance GDP q/q (12:30 GMT): 2.5% vs -0.5%
- Federal Reserve Rate Decision (18:00 GMT): No change at 4.50% but the focus is on the FOMC Statement
- FOMC Press Conference (18:30 GMT): Any mention of September rate cuts or dovish pivot will trigger volatility
A strong US GDP print or hawkish Fed tone will strengthen the dollar and push EUR/USD to 1.1450. A soft data surprise will give the euro some room to breathe.
EUR/USD Technicals Flash Bearish Continuation
The 4-hour chart shows EUR/USD has broken below the 50-period SMA at 1.1676 and the ascending trendline from June. Price is consolidating just below minor resistance at 1.1571 with RSI at 33 which is oversold but not reversing yet.
Unless bulls get back above 1.1655 the pair is vulnerable to:
- Immediate support at 1.1500
- Deeper targets at 1.1452 and 1.1385
Short term bounce possible but without bullish divergence or 50-period SMA retest the pair will continue to fall. Watch the FOMC for dollar direction.
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