EURUSD Surges to Its 2-Week Highs Ahead of the US GDP Report
EURUSD is off to a bullish start in today’s European session. The currency pair broke through resistance at yesterday’s highs at 1.0907. It is now trading at its highest levels since February 10 at 1.0940.
There could be a number of factors pushing EURUSD up. For one, US President Donald Trump’s news conference earlier sparked some dollar weakness. It’s possible that European traders only caught on it now. Secondly, there were reports from the World Health Organization (WHO) saying that coronavirus figures in Italy may be inflated due to testing errors. The Veneto region apparently did not follow testing guidelines and may have reported more infections than what was accurate. Third, some traders could be unwinding their long-USD positions before the month ends.
On the 4-hour time frame, we can see that despite this uptick on EURUSD, its downtrend remains intact. By connecting the highs of December 31, January 16, and February 3, we can see that trend line resistance falls around 1.0970. This price also coincides with the 200 SMA and the 61.8% Fib level (when you draw the FIbonacci retracement tool from the high of January 31 to the low of February 20). Reversal candlesticks around this price could indicate that EURUSD may soon resume its downtrend to support at 1.0780. Better-than-expected US GDP data could trigger this. At 1:30 pm GMT, the preliminary reading of the US Q4 2019 GDP is expected to come in at 2.1%.
On the other hand, if US data disappoints or if risk aversion picks up, we could see EURUSD trade through the confluence of resistance. There is near-term resistance at 1.1000 where the currency pair previously made lows. If it does not hold, the next ceiling could be at 1.1095 where EURUSD topped on February 3.