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The EUR/USD will also react to the upcoming US GDP numbers. In most cases, the second estimate of the GDP figure tends to have no major impact on the pair since the deviation from the first is usually not all that big.
- Sell the EUR/USD pair and set a take-profit at 1.0500.
- Add a stop-loss at 1.0656.
- Timeline: 1-2 days.
- Set a buy-stop at 1.0627 and a take-profit at 1.0690.
- Add a stop-loss at 1.0500.
The EUR/USD continued its bearish trend after the Fed minutes confirmed the fear in Wall Street about the interest rate hike trajectory. It dropped to a low of 1.060, the lowest point since January 6 of this year as the US dollar index continued its recovery.
The EUR/USD plunged to the lowest level in more than a month after the Fed delivered minutes of the past meeting. These minutes showed that all members of the committee supported the smaller hike that the bank implemented.
At the same time, they all agreed that more hikes were necessary to deal with inflation, which is a thorn in the flesh for the Fed. The minutes said:
“Participants observed that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to 2%, which was likely to take some time.”
The hawkish tone in the minutes is notable since the meeting happened before the US published strong data. These numbers showed that the country’s unemployment rate dropped to 3.4% while inflation dropped slightly to 6.4%.
There will be several important economic data on Thursday. In Europe, Eurostat will publish the final reading of January’s inflation data. Based on the initial estimate, analysts expect that the headline CPI rose from 8.5% to 8.6% during the month. Core CPI is expected to have remained unchanged at 5.2%. Like the Fed, the ECB is also considering bigger rate hikes.
The EUR/USD will also react to the upcoming US GDP numbers. In most cases, the second estimate of the GDP figure tends to have no major impact on the pair since the deviation from the first is usually not all that big. Economists expect the data to show that the economy expanded by 2.9% in Q4.
The EUR/USD pair has been in a strong bearish trend in the past few days. The sell-off accelerated after the Fed minutes. As it crashed, it moved below the key support at 1.0615, the lowest point on February 17. It also dropped below the important support at 1.0656 (Feb 10 low). The pair also moved below the 50-period moving average and the Ichimoku cloud.
Therefore, the outlook is bearish, with the next reference level to watch will be at 1.0500. The stop-loss of this trade will be at 1.0650.
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