Downside Risks! Every advanced economy could probably be described by those words. However, when a supposed hawkish central banker says those words it may cripple a currency. While Mario Draghi’s accommodative comments weighed heavily on the euro, a surprising downwardly revised first quarter GDP reading from the U.S. helped the euro stabilize.
The slower rate of economic growth in the U.S. is a potential game changer for the recent wave of US dollar strength. The headline revision was Business Investment falling to 0.4% from 2.2%. If anyone expected the Fed to meet their GDP range of 2.3-2.6% (which was 2.3-2.8% two weeks ago), the second quarter must be robust to make up for the early shortfall. Early indicators may suggest that consumer confidence is soaring, but we will see how strong the dollar may remain if the markets are bombarded by dovish Fed member comments.
The euro is trending bearishly below the 200, 100, and 50-day simple moving averages, but there is a definite sense of exhaustion behind this move. Currently, price is hovering around the psychological 1.30 level. Key resistance remains 1.3150 while 1.2950 may be the key to see a move toward the 1.2800 region.