EUR/USD price declines from 3-week high despite positive GDP data
Euro surges to three-week high against dollar on strong economic data
EUR/USD price hit a three-week high last week, briefly breaking above the significant 1.0600 level that had capped price action since November.
This short-lived rally was fueled by stronger-than-expected economic data, including positive employment figures and GDP growth in the euro area and the EU. However, the pair quickly retreated below the 1.0600 mark, highlighting the level's continued resistance potential. Despite this pullback, a potential bullish reversal remains in play.
In the third quarter of 2024, the euro area saw GDP rise by 0.9%, a notable improvement from the previous quarter's 0.5% growth, while the EU's economy expanded by 1.0%. Positive economic indicators such as these could provide a foundation for sustained euro strength, although EUR/USD remains locked below key resistance.
Technical analysis points to EUR/USD bullish outlook
Intraday technical analysis reveals that while EUR/USD’s advance above 1.0600 was short-lived, the pair found support at the 200 EMA during the Asian session today, holding steady at 1.0537. This price level could act as a crucial cushion for any further declines, particularly with the Relative Strength Index (RSI) rising from an oversold 30 to a neutral 55 during the European session. This uptick suggests that market sentiment could be shifting in favor of bulls, indicating potential upward momentum if the 1.0600 resistance level is overcome.
EUR/USD price dynamics (September-December 2024). Source: TradingView.
The head and shoulders pattern that developed between November and December remains a key factor to watch. While the recent price action has seen setbacks, the pattern suggests a possible broader-term uptrend, especially if EUR/USD manages to break above 1.0600 and hold the gains. The path ahead will depend on continued strong economic data, the persistence of positive trends in the eurozone, and the ECB decision on interest rates. Hence, EUR/USD could aim for higher targets, supported by positive technicals and economic fundamentals if the 1.0600 level is cleared.
EUR/USD posted two consecutive up-close weeks since its recovery from a multiyear low. Traders watch the NFP report to influence Fed Chairman Jerome Powell stance on interest rate.
