US dollar (USD) analysis and charts
- The US economy grew 3.3% in the last three months of 2024
- This was significantly higher than the expected 2% increase.
- Does this economy need dramatic interest rate cuts?
Download Q1 USD Technical and fundamental forecasts
Recommended by David Cottle
Get Free USD Forecast
The US dollar remained surprisingly stable through Thursday’s interesting economic data, suggesting that perhaps all the market is interested in at the moment is what the Federal Reserve will make of everything.
In any case, the US economy ended the year on a strong note. In this first advanced view, gross domestic product growth in the final quarter of 2023 soared to her 3.3%. Granted, this was much lower than his 4.9% last quarter, but much better than his anemic 2% rise that the market was expecting.
However, statistics released at the same time showed that orders for durable goods remained flat in December. This is a clear disappointment and may have blunted some of the impact from more historical GDP numbers.
The world’s largest economy remains generally resilient against a long period of significant interest rate increases, and whether the economy has slowed enough to justify the cuts in borrowing costs that markets expect later this year. seems not yet clear. After all, inflation is still above target, although not by a huge amount.
However, investors will have to wait until January 31st before the Fed makes its first monetary easing of the year. Looks like I’ll have to wait nervously.
Markets heard the announcement from the European Central Bank on Thursday. The company chose to keep its main refinancing rate unchanged at 4.5%. This is the highest level in 22 years since September last year. Calls for stability had been widely expected in advance, but the euro weakened against the dollar after ECB President Lagarde spoke to reporters. This subdued move appears to be due to his optimistic assessment of the eurozone’s economic background.
ECB leaves interest rates on hold, EUR/USD slumps ahead of press conference and US Q4 GDP
At the same time, the dollar depreciated slightly against the Japanese yen, but remains above the 147 yen handle.
euro/usd technical analysis
Charts created using TradingView
Recommended by David Cottle
How to trade EUR/USD
EUR/USD remains confined to a wide range with an upper limit of 1.09794. This is the first Fibonacci retracement marking the rally from early October lows to last December highs. This is the highest daily closing price for the market since the sharp decline seen on January 2nd.
The lower limit of this band is the intraday low on January 23rd at 1.08231. The market has not fallen below that level since December 13th. This range appears to be entrenched, breaking below the long dominant uptrend line of January 16th. A more rapid decline is not foreseen.
Which direction this range breaks is likely to be very informative from a medium-term directional perspective, but a permanent break is unlikely, at least until the market hears from the Fed. It seems low.
According to IG’s own data, traders are very confused about this pair, with bulls holding a slight majority lead with a 51/49 margin.
–David Cottle, DailyFX
