The EUR-USD is testing key support levels as a slew of U.S. economic data keeps traders on edge. Here’s what’s been shaking things up.
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Economic Data and Fed Drama
The latest U.S. economic data isn’t so great. Let’s start with the surprises:
- Pending Home Sales: April’s pending home sales sank by -7.7%, way below the expected -0.6%. This indicates weak economic activity, which typically puts pressure on the U.S. dollar.
- Initial Jobless Claims: Slightly disappointing, with claims at 219,000 versus the 218,000 expected. Not a game-changer, but it hints at a softening labor market.
- GDP Data: The Q1 GDP second reading matched expectations at 1.3%, a neutral factor in the mix.
- Trade Balance and Inventories: April’s trade deficit ballooned to $99.4 billion, worse than the $91.8 billion forecast. Meanwhile, wholesale inventories inched up by 0.2%, beating the flat 0.0% estimate. These point to some economic weak spots.
Over at the Fed, former New York Fed President William Dudley threw shade at the FOMC, arguing they’re not doing enough to curb inflation. His remarks add to the uncertainty, influencing market expectations for future rate hikes.
Technical Analysis
Following these data releases, the dollar initially dipped as bonds found some love. But the greenback clawed back some gains later, reflecting the mixed sentiment. Analysts at Deutsche Bank noted that month-end dollar selling could be a factor, keeping an eye on how this might affect EUR-USD.
From a technical analysis perspective, the EUR-USD has made some big swings. Yesterday’s price action was entirely one-sided. Sellers had control and maintained it throughout the Wednesday trading session, pushing EUR-USD lower by 55 pips (-0.51%) to close literally one pip above 1.0800.
Today is almost a 180. Bulls have pushed the EUR-USD back to 1.0836 – but that’s where prices have stalled. With weak economic data and Dudley’s critique of the Fed, it’s likely that volatility will continue.
Is EUR-USD a Buy?
Using TipRanks’ technical analysis tool, the indicators seem to point to a positive outlook for EUR-USD. Indeed, the summary section pictured below shows that 10 indicators are Bullish, compared to five Neutral and six Bearish indicators.
