EUR/USD forecast ahead of EU GDP and inflation data

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Aug 17, 2021
  • The EUR/USD has been under pressure this week.
  • On Monday, it erased some of the gains made after the weak consumer confidence data.
  • The pair will next react to the latest EU GDP and inflation data.

The EUR/USD has been under pressure in the past few days as investors focus on the Fed actions. They are also waiting for key data from the US and the Eurozone. It is trading at 1.1770, which is slightly below last week’s high of 1.1805.

Eurozone GDP and inflation data

After a slow start, Eurozone governments managed to ramp up their vaccination drive in the second quarter. This, in turn, saw more countries start opening up and allowing businesses to continue with their activities.

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The impact of these measures to the Eurozone economy will be seen on Tuesday when Eurostat publishes the latest EU GDP numbers. The data is expected to show that the region’s economy rebounded by 2.0% on a quarter-on-quarter basis in Q2. This, in turn, likely led to an annualised increase of 13.7%. The impact of these numbers on the EUR/USD will likely be limited.

Eurostat will also publish the latest Eurozone consumer inflation numbers on Wednesday. The data is expected to show that the headline CPI declined to -0.1% in July after rising by 0.3% in the previous month. This will translate to a year-on-year increase of 2.2%. 

The so-called core consumer price index, which strips the volatile food and energy products, is expected to decline to 0.4%. It is expected to rise by 0.7% on a year-on-year basis. As such, the overall CPI will be above the ECB’s target of 2.0%.

The key driver for the EUR/USD will be a statement by the Federal Reserve chair, Jerome Powell. In his speech on Tuesday, he is expected to talk about the state of the American economy and some of the key measures the bank will do. The speech comes at a time when some analysts are pricing in more tightening soon.

EUR/USD technical analysis

EUR/USD

The hourly chart shows that the EUR/USD pair rebounded last week and rose to 1.1805. This jump happened after the relatively weak US consumer confidence data. It was also along the 50% Fibonacci retracement level. 

Since then, the pair has retreated and is between the 23.6% and 38.2% retracement level. It also seems like it is forming a bullish flag pattern. Therefore, the pair will likely rebound as investors target the 61.8% retracement at 1.1830.

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