On Friday, the EUR/USD currency pair experienced a two-day reversal last week, moving closer to 1.0850. This was primarily due to a negative shift in risk sentiment and expectations of profit-taking before the weekend.
Support for the US Dollar was strengthened by positive US macroeconomic data released on Thursday. The US Commerce Department reported an impressive 2.9% annualized pace of GDP growth in the fourth quarter, surpassing the consensus estimate of 2.6%. Additionally, the Initial Jobless Claims showed a surprising drop to 186K for the week ending January 21, compared to 192K in the previous week.
The Durable Goods Orders also exceeded expectations, growing by 5.6% in December. While orders excluding transportation items saw a slight decrease of -0.1% MoM, the overall data indicates a resilient US economy. This, in turn, has led to a recovery in US Treasury bond yields and has boosted investor confidence, further supporting the US Dollar.
Despite these trends, the market expects a more hawkish stance from the European Central Bank, which could limit further losses for the EUR/USD pair. Traders are advised to wait for confirmation of a near-term top before positioning for any corrective decline.
EUR/USD Traders to Keep an Eye on Super-Central Bank Week
Next week’s central bank events, including the Federal Reserve’s policy decision on Wednesday and the ECB monetary policy meeting on Thursday, are expected to play a crucial role in determining the direction of the EUR/USD pair. The market will also closely monitor the Core PCE Price Index, as it may have an impact on the USD price dynamics.
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