EUR/USD plunges to multi-week lows near 1.0540 after US PCE

  • EUR/USD continues to fall to the 1.0540 zone on Friday.
  • The final German GDP Growth Rate stood at 0.9% year-on-year.
  • The US PCE surprised to the upside in January.

He EUR/USD accelerates its decline to fresh lows near 1.0540 after the US PCE release on Friday.

EUR/USD remains offered well below 1.0600

Selling momentum in the EUR/USD is bolstered by the unrelenting advance of the Dollar, which lifts the USD Index (DXY) to yearly highs above the 105.00 barrier after the US inflation figures ., reflected in the PCE, were positive in January.

In fact, the pair continues to lose ground after US Headline PCE rose 5.4% in the year to January (from 5.3%) and Core PCE gained 4.7% year-over-year, outperforming on both cases the initial estimates.

Other data showed a Personal Income increase of 0.6% MoM also in January and a Personal Spending increase of 1.8% vs. the previous month. Later in the session, New Home Sales and the latest Michigan Consumer Sentiment data will close out the weekly schedule across the pond.

Additionally, FOMC Governor P.Jefferson (permanent voter, centrist) and Cleveland Fed’s L.Mester (2024 voter, hawkish) will deliver speeches.

What to expect from the EUR

Price action around EUR/USD remains subdued, forcing the pair to make new lows around 1.0500 in response to dollar strength.

Meanwhile, the evolution of the prices of the European currency should closely follow the dynamics of the dollar, as well as the possible next movements of the ECB, after the bank has already anticipated another rate hike of 50 basis points at the meeting of March.

Returning to the euro area, it seems that recession concerns have dissipated, although it remains an important factor for the recovery of the single currency, as well as the hawkish discourse of the ECB.

technical levels

For now, the pair is down 0.33% at 1.0559 and a drop below 1.0545 (Feb 24 monthly low) would target 1.0481 (Jan 6 low) en route to 1.0329 (200-day SMA). On the other hand, the next bullish barrier is located at 1.0714 (55-day SMA), followed by 1.0804 (weekly high on February 14) and finally 1.1032 (2023 high on February 2).

Source: Fx Street

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