EUR/USD: Strong Economic Data and ECB Decision Awaited

The Euro-US Dollar (EUR/USD) currency pair has seen some interesting moves this week. Traders have been on high alert, with heavyweight data releases from the Euro Area and the US on the horizon. Market sentiment has been swinging back and forth as traders try to digest the latest economic data and central bank commentary.

US Q1 GDP Release: The US Q1 GDP release on Wednesday was the first data release on the calendar, and it came in at 6.4% (annualized), beating expectations of 6.1%. This figure was encouraging, as it indicates that the US economy is recovering well from the COVID-19 pandemic. The positive GDP data provided a boost to the US dollar (USD), which briefly sent the EUR/USD pair below 1.10.

Euro Area Inflation: The Euro continues to show strength despite ongoing hawkish central bank chatter. The European Central Bank (ECB) is grappling with stubbornly high inflation, with the Euro Area annual inflation rate standing at 6.9% in March, significantly higher than the central bank’s mandate of 2%. The ECB has already raised interest rates by 350 basis points since August 2022, and the markets are eagerly awaiting next week’s ECB rate decision to see how the central bank will respond to inflationary pressures.

Mixed Sentiment: Retail trader data reveals mixed sentiment, with 33.93% of traders net-long and 66.07% net-short. The ratio of traders’ shorts to longs stands at 1.95 to 1. The number of traders net-long is lower than yesterday and last week, while the number of traders net-short is higher than yesterday and last week.

EUR/USD: Stable and Resilient

Despite the mixed sentiment, the EUR/USD has remained relatively stable and resilient. The currency pair has been trading around 1.10, with support seen around 1.0960 and resistance at 1.1096, Wednesday’s multi-month high. The three simple moving averages are in order and remain supportive, while a multi-week series of higher highs and higher lows remains in place.

Looking ahead, traders will be keeping a close eye on the ECB rate decision next week. The central bank’s decision will likely have a significant impact on the EUR/USD, and traders will need to stay alert to potential market-moving events.