EURUSD Extends Losses As Dollar Fundamentals Pile Up Pressure

Summary:
• Profit taking has limited the upside for the US dollar, but EURUSD is likely to slide further as US economic data continue to beat forecasts.

EURUSD traded downwards on Wednesday as strong US dollar fundamentals exerted downward pressure. The pair was down by 0.04% at the time of writing, with the exchange rate at 1.08273.  The absence of Eurozone macroeconomic data on Tuesday helped the dollar protect its gains following impressive Durable Goods Orders data. The trend could continue on Wednesday, as there isn’t any high-impact data expected from the Eurozone.

The US economy reported a rise in Durable Goods Orders by 1.4% in February, better than the forecast 1.2%. Furthermore, that was a substantial jump from January’s -6.9%.  Similarly, the Core Durable Goods Orders (excluding transportation items) came in at +0.5%, beating the forecast figure of +0.4%.

The US dollar remains strong, despite some profit taking ahead of the anticipated release of Q4 2023 GDP figures.  The DXY index stayed above 104.000 for the last three trading sessions, and was at 104.308 at the time of writing. Yields on benchmark 10-year US Treasury bonds are also strong and have been above 4.200 for more than a week. This will provide support to the dollar during the intra-day session.

The Federal Reserve estimates that the US economy will grow by 2.1% in 2024, with three interest rate cuts foreseen. Investors will pick cues from release of fourth quarter 2023 GDP figures on Thursday, and we are likely to witness more profit-taking in the intervening period, thanks to the USD’s current strong standing. That could put a lid on the dollar’s gains on Wednesday, in the absence of high-impact Eurozone economic data. However, a speech by ECB executive board member, Frank Elderson could provide some volatility to the EURUSD pair.

Technical analysis

Sellers of EURUSD will be in control as long as the pair remains below the 1.0840 pivot level. The selling momentum could break the support at 1.0815 in extension, and potentially test 1.0800. However, a move above 1.0840 could build momentum for the upside. With the buyers in control, the currency pair could head up to meet resistance at 1.0850. Extended control by the buyers will likely break the resistance, invalidate the downside narrative and test 1.0865.