EUR/USD in a tight range after soft EU Q3 GDP data; US PPI next

The EUR/USD pair is little changed today as the market reacts to the second estimate of EU’s third-quarter GDP data. It is trading at 1.1830, which is below this week’s high of 1.1920.

Eurozone GDP data

The EU economy bounced back in the third quarter as countries eased travel and business movements. According to Eurostat, the region’s GDP rose by 12.6% in the third quarter after contracting by a record 11.8% in the second quarter. But the overall economy remains below pre-pandemic levels. It declined at an annualised rate of 4.4%, which was better than the second quarter’s decline of 11.8%.

Analysts were expecting the economy to rise by 12.7% on a YoY basis and fall by 4.3% on a QoQ basis.

According to Eurostat, all countries in the EU made strong progress in the third quarter. All major countries like Germany, France, Italy, and Spain recorded strong gains. Output of the four countries was more than 15%.

The third-quarter performance of the EU was lower than the 30% bounce in the United States. It was also lower than that of the UK, which expanded by 15.5%.

Still, despite the recovery, analysts believe that the EU’s economy is not out of the woods yet. Indeed, there is a fear that the bloc will slide back into negative growth in the fourth quarter because of the new wave of the virus.

In Germany and France, the governments have announced partial lockdowns in most parts. These lockdowns include mandatory closure of bars and restaurants and overnight curfews. Travel between member states and other countries has also declined substantially. In a statement this week, Christine Lagarde said:

“While the latest news on a vaccine looks encouraging, we could still face recurring cycles of accelerating viral spread and tightening restrictions until widespread immunity is achieved. The recovery may not be linear, but rather unsteady.”

US PPI data ahead

The next major data to watch will be factory gate prices, also known as producer price index (PPI) data from the United States. This data will come out at 13:30 GMT. Analysts polled by Reuters expect the data to show that the headline PPI rose by 0.2% in October and by 0.4% year-on-year in October. They expect the core PPI to rise by 0.2% MoM and by an annualised rate of 1.2%. These numbers are significantly below the Fed target of 2.0%.

The data comes a day after the statistics bureau released the US consumer price index data. The data showed that the headline and core CPI at 1.2% and 1.6%, respectively. These numbers point to a situation where US interest rates will remain low for the next two years.

The EUR/USD will also react to the Michigan consumer sentiment and a number of central bank speakers at the ECB annual forum.

EUR/USD technical outlook

On the daily chart, we see that the EUR/USD has been in a relatively narrow range in the past few weeks. It has struggled to move below 1.1610 and go above 1.1916. It has also moved above the 15-day and 25-day weighted moving averages.

It is now at the first resistance line of the standard pivots. For today, I suspect that the pair will close at the current range but the key levels to watch will be Wednesday’s low of 1.1738 and Tuesday’s high of 1.1840. Here’s our review on the best forex demo accounts.