EURUSD Currency Pair Surges on Inflation and GDP Data 

EURUSD Currency Pair Surges on Inflation and GDP Data 

The EURUSD currency pair experienced a notable surge driven by the release of inflation and GDP data. Headline inflation aligned with expectations, declining from 5.5% to 5.3%, while Core inflation remained steady at 5.5%, defying predictions of a 0.1% decrease. This moderation in inflation may reassure the European Central Bank (ECB) amid their efforts to end aggressive monetary policy tightening and stimulate the European economy. However, ECB President Lagarde indicated that a rate hike for September remains a possibility, which could strengthen the Euro against the Greenback.  

Additionally, the European economy outperformed expectations, with quarter-on-quarter GDP growth reaching 0.3%, surpassing the 0.2% forecast. Year-on-year GDP growth slowed less than expected and exceeded forecasts by 0.1%, despite a slight decline from the previous month’s figure from 1.1% to 0.6%. 

Technical  

The EURUSD currency pair trended lower on the 4H Chart since intersecting below the 50-day moving average. A slight surge attempted to drive upward momentum but was met with resistance at the Golden Ratio, where a leg down established support at 1.09599. Against the backdrop of slowing headline inflation, the price action rose and broke out of the 1.10290 resistance at the 23.60% Fibonacci level. If the upward momentum is sustained, the 1.11407 resistance at the Golden ratio may pose a barrier towards the 1.12525 major resistance, which could see a reversal. 

However, the curve could flatten at the 23.60% Fibonacci level, which may encourage a pullback towards the 1.09599 support. If this support level fails to hold, a breakdown towards the 1.08423 major support may occur.

Summary 

The EURUSD currency pair trended lower on the backdrop of a struggling European economy. Inflation data released today showed signs of recovery which may prompt the currency pair to retest the 1.11407 resistance at the Golden Ratio. However, the 23.60% Fibonacci level could hold, which may encourage a pullback towards the 1.08423 major support. 

Sources: TradingView, Reuters, Trading Economics