rude Risks Larger Pullback as Oil Prices Initiate Bearish Sequence.

DailyFX Table


EUR/USD pares the decline from earlier this week as the 4Q Euro-Zone Gross Domestic Product (GDP) report showed the growth rate expanding an annualized 2.7% to outpace the U.S. economy, and the pair may continue to gain ground over the next 24-hours of trade should the Consumer Price Index (CPI) boost the outlook for underlying inflation.

Even though the headline reading is expected to slow to an annualized 1.2% in January, a pickup in the core CPI print may keep the Euro afloat as it encourages the European Central Bank (ECB) to move away from its easing-cycle. Positive developments coming out of the monetary union may keep President Mario Draghi and Co. on course to end the quantitative easing program in September, and the central bank may start to adopt a hawkish tone over the coming months as ‘the latest economic data and survey results indicate continued strong and broad-based growth momentum at the turn of the year.’

At the same time, Governing Council officials may continue to jawbone the Euro ahead of the next meeting on March 8 as the exchange rate trades at the highest level since 2014, but the broader shift in EUR/USD behavior may continue to unfold in 2018 as the central bank starts to taper the quantitative-easing (QE) program.

EUR/USD Daily Chart

EUR/USD Daily Chart

  • Broader outlook for EUR/USD remains tilted to the topside as both price and the Relative Strength Index (RSI) extend the bullish formations from late last year.
  • Waiting for EUR/USD to close above the 1.2430 (50% expansion) hurdle to open up the next region of interest around 1.2640 (61.8% expansion) to 1.2650 (38.2% retracement), with the pair at risk for a further advance as long as the RSI trades in overbought territory.
  • Keeping a close eye on the RSI as the momentum indicator appears to be flattening out, with a move below 70 raising the risk for a near-term pullback in EUR/USD as the oscillator flashes a textbook sell-signal.
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