- EUR/USD has gone into a consolidation phase following Wednesday's rebound.
- The US economy is expected to expand by 0.4% in the second quarter.
- Euro could attract bulls in case it manages to clear 1.0230 resistance.
EUR/USD has lost its bullish momentum after having gained nearly 100 pips in the late American session on Wednesday. The pair trades near the upper limit of its 10-day old range and needs to clear the 1.0230 level to continue to push higher.
Although the US Federal Reserve hiked its policy rate by 75 basis points (bps) to the range of 2.25-2.5% on Wednesday, the dollar faced heavy selling pressure. During the press conference, FOMC Chairman Jerome Powell said that they will not be offering any rate guidance from now on and added that they will adopt a "meeting-by-meeting" approach. Following these comments, the probability of one more 75 bps rate increase in September dropped to 30% from 47.3% a week ago.
Later in the day, the US Bureau of Economic Analysis will release its first estimate of the second quarter Gross Domestic Product (GDP) growth. The US economy is forecast to expand at an annualized rate of 0.4% following the first quarter's 1.6% contraction.
According to the CME Group's FedWatch Tool, markets are pricing in a 30% probability of one more 75 bps hike in September. With a stronger-than-expected GDP print, hawkish Fed bets could return and help the dollar regather its strength. On the other hand, EUR/USD recovery could pick up steam in case the US economy fails to rebound. The US Department of Labor's weekly Initial Jobless Claims data will also be featured in the US economic docket.
Meanwhile, the data from the euro area showed that the Consumer Confidence Index declined to -27 in July from -23.8 in June. Additionally, the Economic Sentiment Indicator fell to 99 from 103.5 in the same period.
EUR/USD Technical Analysis
The Fibonacci 38.2% retracement level of the latest downtrend forms strong resistance at 1.0230, which is also the upper limit of the 10-day-old trading range. With a four-hour close above that level, the pair could target 1.0300 (psychological level, Fibonacci 50% retracement) and 1.0320 (200-period SMA on the four-hour chart).
On the downside, 1.0200 (50-period SMA, psychological level) aligns as initial support before 1.0150 (Fibonacci 23.6% retracement, 100-period SMA) and 1.0100 (psychological level, static level).
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