Forex Opinion & Analysis

EUR/USD Extends Losses as U.S. Debt-Ceiling Impasse Clouds Sentiment

  EUR/USD -0.22% Add to/Remove from Watchlist Add to Watchlist Add Position

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The EUR/USD continued to retreat on Thursday as the dollar’s rally seems unremittable as the impasse in the US debt-ceiling negotiations weighed on investors’ sentiment.

At the time of writing, the EUR/USD pair is trading at the 1.0715 zone, 0.35% below its opening price, posting the third daily decline in a row.

With US debt-ceiling negotiations in a deadlock, concerns the United States could default and trigger a massive recession are clouding the market’s outlook, driving flows into safe havens.

Fueling the dollar’s rally, data showed the US first-quarter GDP annualized growth was upwardly revised to 1.3% from 1.1% previously estimated.

On Friday, the US will release the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge. The data is expected to show a deceleration of the annual rate to 3.9% in April versus the 4.2% recorded in March.

The inflation figures could impact expectations of the Federal Reserve’s next decision on June 14. According to the CME FedWatch Tool, probabilities slightly favor an on-hold verdict (51.8%) versus another 25-basis-point hike (48.2%) following FOMC minutes.
EUR/USD Daily Chart
From a technical standpoint, the EUR/USD maintains a short-term bearish bias according to indicators on the daily chart, while the price heads south and consistently prints lower lows below the 20- and the 100-day simple moving averages (SMAs). 

A break below the 1.0700 psychological level could pave the way to more losses, targeting the longer-term support at the former Fibonacci resistance at the 1.0580 zone and the 1.0500 mark ahead of the 200-day SMA at 1.0470. 

On the other hand, the immediate resistance area is seen at the 100-day SMA at the 1.0815 zone, followed by the 1.0900 psychological level.


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