The GDP report is scheduled for release at 12:30 GMT on Thursday. The US Dollar stays dangerously close to multi-month lows against the Euro ahead of this data amid diverging policy outlooks between the European Central Bank (ECB) and the Fed.
Although the backward-looking data might do little to influence market expectations about the Fed's next policy move, it could revive fears over the US economy tipping into recession later in the year. In that scenario, the Fed “policy pivot” narrative could gain traction and force the USD to stay on the back foot. That said, an upward surprise of the US GDP print could revive expectations about the Fed staying focused on battling inflation and help the Greenback stage a rebound, at least with the initial reaction.
According to the CME Group FedWatch Tool, markets are nearly fully pricing in one more 25 basis points (bps) Fed rate hike at the May 2-3 policy meeting but seeing a more than 80% probability that there will be an at least one 25 bps rate cut by September policy meeting.
Eren Sengezer, Senior Analyst at FXStreet, shares his technical outlook for EUR/USD: “The Relative Strength Index (RSI) indicator on the daily chart stays near 60, suggesting that EUR/USD has more room on the upside before turning technically overbought. Additionally, the gap between 20-day Simple Moving Average (SMA) and the 50-day SMA continues to widen following the bullish cross seen in early April, supporting the bullish view.”
Eren also points out the key technical levels for the pair: “1.1100 (psychological level) aligns as next resistance for the pair ahead of 1.1160 (static level from March 2022). With a daily close above the latter, the pair could face interim resistance at 1.1200 (psychological level, static level) before targeting 1.1300 (psychological level, static level). On the downside, 1.1000 (20-day SMA, psychological level) forms first support ahead of 1.0900 (static level) and 1.780/1.0760 area (50-day SMA, 100-day SMA).
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