EUR/USD Daily Forecast – Euro Gains Ahead of GDP Figures and Fed Decision

The US dollar is broadly weaker in early trading on Wednesday and has given back a bulk of the gains it realized in yesterday’s North American session.

EUR/USD was last seen trading at 1.0860, holding near two-week highs, ahead of what promises to be a volatile day.

The combination of today’s US GDP release as well as the Fed decision and press conference should ignite some volatility into the markets.

Analysts forecast that GDP might have fallen an annualized 4% in the first quarter as the impacts of the Coronavirus in March are expected to have weighed on growth considerably.

The Federal Reserve is expected to keep policy unchanged at today’s meeting although investors will look to forward guidance to reprice assets. The central bank has taken some extraordinary measures to combat the economic impact of the virus and hints as to the bank’s next move will be important.

Volatility is likely to remain heightened after today as the European Central Bank is scheduled to meet on Thursday.

Technical Analysis

EUR/USD has seen a pattern of late-day selling which has resulted in the pair closing relatively unchanged over the past two sessions.

The pair once again shows early day demand although today could be different considering the data releases.

The trend in the dollar remains to the upside despite the downside pressure since Friday. The trade-weighted dollar index (DXY) briefly touched a two-week low yesterday, however, buyers lifted the index higher in the North American session.

It may take a sustained break below the mid-April low in the index to shift the outlook to bearish. For EUR/USD, the equivalent highs comes in near the 1.1000 handle.

Support for the session ahead is seen at 1.0775 considering the pair may see some outsized moves as a result of today’s events.

To the upside, resistance is seen at 1.0894. A break above the level opens up the path to 1.0983.

Bottom Line

• EUR/USD has been in an upwards recovery since Friday, however, today’s events may clarify the trend for the pair.
• The ECB meets tomorrow which stands to keep volatility heightened.