EUR/USD has managed to climb back above 1.0700 despite initial weakness following the release of inflationary US GDP data. The upcoming core Personal Expenditures Price Index for March, set to be released on Friday, could introduce further volatility into the market and impact the outlook for US interest rates, consequently affecting the value of the USD.
On Friday, EUR/USD was trading in the 1.0730s as traders awaited the release of the core Personal Consumption Expenditures Price Index (PCE), a key inflation gauge preferred by the US Federal Reserve. The pair experienced a slight decline on Thursday post the Q1 US GDP report but quickly recovered, continuing its short-term uptrend.
The core PCE data, scheduled to be released by the US Bureau of Economic Analysis (BEA) at 12:30 GMT, could shift market expectations regarding the timing of Fed interest-rate cuts, thereby influencing the EUR/USD exchange rate.
EUR/USD saw a decline on Thursday following the release of US first-quarter GDP data, hitting a low of 1.0678. Despite missing consensus expectations for annualized GDP growth, the Personal Consumption Expenditures Prices component showed a significant increase compared to the previous quarter, supporting the USD. This led to a decrease in the likelihood of a rate cut by the July meeting, strengthening the Greenback temporarily.
The market is now awaiting the core PCE data for March, with a potential upside surprise already hinted at by the GDP report. A reading higher than the expected 2.6% could lead to a decline in EUR/USD, signaling persistent price pressures and encouraging the Fed to maintain interest rates at their current levels for a longer period.
Looking ahead, the Euro side of the pair may see some turbulence based on commentary from European Central Bank (ECB) officials, while the US PCE data remains a focal point for EUR/USD movement. The technical analysis suggests a bullish trend for EUR/USD, with resistance levels at 1.0757 and 1.0807, and a potential downside target at 1.0601 if the Bear Flag hypothesis is revived.