EUR/USD Snaps Four-Month Losing Streak As Weak US Data Provide Propulsion

Summary:
• The EURUSD pair has gained almost 2 percent in May, and an ECB meeting set for next week is unlikely to change things.

EUR/USD stayed on course to end a four-month losing streak, as it traded at 1.0873, up by 0.36 percent in the intraday session on the last day of May. The US dollar lost further ground on Friday, as PCE Index readings failed to alleviate the losses incurred due to the lower-than-expected GDP reading and a higher-than-expected Initial Jobless Claims figure.

The euro has been on the upward trajectory against the US dollar since mid-April, and ended up as the winner in six of the last seven weeks. Furthermore, it rose significantly in May, gaining 1.96 percent to register its first monthly win in 2024.  However, EURUSD’s upside is likely to be limited by the ECB’s expected interest rate cut announcement next week. On the other hand, the Federal Reserve is expected to maintain US rates at 5.25-5.50 percent at least until September.

The final release of US GDP figures announced on Thursday showed that the US economy grew by 1.3 percent in the first quarter of the year, lower than the preliminary figure of 1.6 percent announced in April. With the high interest rates in place, the economy could continue underperforming in the second half of the year to the detriment of the dollar.

In addition, Initial Jobless Claims rose by 219,000 in the week ending May 24, beating the forecast figure of 218,000. This will add to the downward pressure on the dollar, after April PCE Price Index matched the forecast expectations YoY.  Meanwhile, the monthly Core PCE reading, which excludes energy and food expenditure, came in at 0.2 percent, missing the forecast 0.3 percent. This, too will pressure the greenback and provide upward propulsion to EURUSD.

Technical analysis

The momentum on EUR/USD currently calls for a continuation of the upside, with the pivot likely to be at 1.0846. The upward momentum will likely meet the first resistance at 1.0878, but extended control by the buyers could breach the resistance and potentially move the pair further up to test 1.0900. On the other hand, a move below 1.0846 will signal control by the sellers. The first support will likely be at 1.0825, and extended control by the bears could break the support and invalidate the upside narrative. Also, the resulting momentum could push the pair further down to test 1.0800.