EUR/USD Resumes Uptrend, Trading at New 6-Month High
Frankfurt (May 16) EUR/USD declined today following the 05:00 ET release of Eurozone GDP and the ZEW Economic Sentiment Index, falling from roughly the 1.1045 level down to 1.1035. However, the pair stabilized at this level and is now trading at new session highs. At present, EUR/USD is at 1.1058, a gain of 0.76% over Monday’s North American close. This represents a new 6-month high for the pair.
Eurozone GDP increased 0.5% in the first quarter of 2017, in line with the preliminary reading released earlier in May. The data was also in line with consensus forecasts. GDP rose 0.6% in Q4 of 2016 and the year-over-year rate was confirmed at 1.7%, down slightly from the 1.8% reading for the previous quarter. The data may spark speculation over the ongoing European Central Bank’s (ECB) stimulus program. The June ECB meeting may prove crucial given the improved growth conditions.
The German and Eurozone ZEW Economic Sentiment Indexes were released at the same time as GDP. German ZEW Economic Sentiment for May came in at 20.6 versus expectations for a reading at 22.0 and a prior reading at 19.5. German ZEW Current Conditions for May was reported at 83.9, above expectations for a reading at 82.0 and a prior reading at 80.1.
The Eurozone ZEW Economic Sentiment Index was reported at 35.1, well above expectations for a reading at 29.1 and a prior reading at 26.3. Finally, the Eurozone trade balance was reported along with GDP and ZEW Sentiment. The March Trade Balance was reported at 39.0B versus forecasts for a reading at 26.5B and a prior level at 17.8B.
All told, EUR/USD has reacted positively to today’s batch of data, rising to a new rally high in the uptrend dating to the beginning of 2017, when the pair bottomed at 1.0340. EUR/USD is currently at the session highs and trading at the best levels since the spike to the upside that took place at the time of the US Presidential election.
The next upside target for the pair is at the November 4th high at 1.1142, followed by the November 9th spike high at just shy of the 1.1300 level.
With overbought conditions now a factor on the daily chart and the pair up against trendline resistance, a period of consolidation could develop over the near term.
With today’s breakout, first support is now at the May 8th high at 1.1021. Holding at or above this former resistance on a move to the downside would be a bullish sign that leaves the pair well-positioned to resume the advance over the near term. Signs of stabilization on a return to this former high would warrant new buying in EUR/USD.
Regarding economic data, the US will release Housing Starts and Building Permits for April at 08:30 ET. Housing Starts is expected to come in at 1.260M for April, versus a prior reading at 1.215M, while Building Permits are expected at 1.270M following a reading of 1.260M in March. Industrial Production and Capacity Utilization will then be released at 09:15 ET. Month-over -month Industrial Production is expected at 0.4% following a reading at 0.5% in March, while Capacity Utilization for April is expected at 76.3%, following a prior reading at 76.1% the prior month. There are several low impact reports being released in the US throughout the balance of the week.
In the Eurozone, the European Central Bank’s Nowotny and Coeure are scheduled to speak today at 11:30 ET and 13:00 ET, respectively. Inflation data will be released Wednesday at 05:00 ET. Month-over-month CPI for April is expected at 0.4% following a reading at 0.8% in March. The year-over-year number is forecast to come in unchanged from March, at 1.9%. Core CPI year-over-year is expected at 1.2%, unchanged from the prior reading.
Source: EconomicCalendar
