EUR USD extends decline on US GDP rate hike anticipation

EUR/USD extended its retreat on Thursday as the dollar rose broadly on positive GDP data from the US Commerce Department.

US gross domestic product for the second quarter was reported to have expanded by an annual rate of 2.3%. While this figure fell short of economists’ expectations for 2.6%, the reading outlined healthy growth fueled by consumer spending. Furthermore, 1^st quarter GDP was revised up to a 0.6% advance from a previously reported contraction of 0.2%.

These figures imply solid economic momentum that could prompt a sooner rate hike by the Fed. This implication helped drive the dollar higher and pressure the EUR/USD currency pair on Thursday.

From a technical perspective, EUR/USD is in its third day of retreat from major resistance around the 1.1100 level, which is also where the key 50-day moving average continues to be situated.

This week’s declines occur within the context of a large trading range generally between 1.1400 resistance to the upside and 1.0800 support to the downside that has been in place for the past three months. While the currency pair has indeed been range-bound, however, price action for the past month has been decidedly bearish, as the chart displays a clear pattern of lower highs and lower lows.

From a broader view, EUR/USD continues to be firmly entrenched in a long-term declining trend from last year’s 1.4000-area high, and also continues to trade well below its 200-day moving average.

With further downside momentum fueled by continued dollar-strengthening against the euro, the immediate bearish target is at 1.0800 support, which is the lower border of the noted trading range.

Further to the downside, as the declining chart pattern continues, the next major objective below the current range resides at the 1.0500 level, which is the area of March’s twelve-year low and site of a rough double-bottoming pattern in March and April.

Any sustained break below 1.0500, which would confirm a continuation of the long-term downtrend, could pressure EUR/USD towards further downside support around the 1.0200 level.