EUR/USD bearish pattern emerges ahead of US GDP data

on Jun 24, 2021
  • The EUR/USD pair has formed a bearish flag pattern on the 3H chart.
  • Investors reacted to the relatively strong German business sentiment data.
  • The pair will next react to the upcoming US GDP data.

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The EUR/USD price is in a tight range as investors react to the relatively strong German business climate data. The pair is trading at 1.1927, which is slightly below yesterday’s high of 1.1970 and 0.60% above the lowest level last week.

EUR/USD price action

German business climate data

The German economy is staging a major recovery as local and international demand rises. This strength is confirmed by the flash manufacturing and services PMI data published on Wednesday by Markit. The data showed that the country’s composite PMI rose from 56.2 in May to 60.4 in June.

And on Thursday, the ifo Institute published strong business sentiment data. The business climate increased frim 99.2 in May to 101.8 in June. In the same period, the current assessment and business expectations increased to 96.6 and 104.0, respectively. These numbers were all better than the median estimates by analysts polled by Reuters.

Manufacturing sentiment rose to the highest level in more than three years. The same trend was seen in the services, trade and construction sectors. Strong business sentiment is an important predictor of economic growth because highly-confident businesses hire more workers and buy more raw materials. 

The EUR/USD will next react to the latest economic data from the United States. The Bureau of Labour Statistics will publish the latest initial jobless claims numbers. Analysts expect that initial claims declined from 412k to 380k a week before. Continuing claims are expected to fall from 3.5 million to 3.47 million.

The US will also publish its final estimate of the first-quarter GDP data. Analysts expect the data to reveal that the US economy expanded by 6.4% in the first quarter. The third estimate does not have a major deviation from the second one. Other economic data scheduled are durable goods orders and consumer spending.

EUR/USD technical forecast

EUR/USD technical chart

The EUR/USD has bounced back after it retreated sharply after last week’s Fed interest rate decision. The price is at the same level as the 25-day moving average and slightly below the 50-day EMA on the three-hour chart. It has also formed a bearish flag pattern, which typically sends a bearish breakout signal. Therefore, the pair will likely break out lower after the US GDP and durable goods orders numbers. If this happens, the next key level to watch will be last week’s low at 1.1846.