EUR/USD Analysis: Upside bias remains well in place and targets 1.1000

EUR/USD faces some selling pressure on the back of the recovery in the greenback, which appears particularly exacerbated after flash GDP figures showed the economy expanded more than expected during the October-December 2022 period (+2.9%).

The improvement in the dollar also appears propped by a positive surprise from Durable Goods Orders and weekly Claims, which altogether continue to give evidence of a resilient economy and a tight labour market.

While these results definitively reinforce the persistent hawkish narrative from rate setters at the Federal Reserve, markets continue to see the probability of a pivot in the Fed’s monetary conditions in the near term. The latter was almost exclusively behind the decline in the buck since the beginning of the new year, although it seems that the Fed – and Chief Powell – will have the last word on this debate at next week’s FOMC gathering.

Short-term technical outlook

Now that EUR/USD recorded a fresh YTD high at 1.0929 earlier in the session, it should quickly leave it behind to initially challenge the 1.0936 level (weekly top April 21 2022) and once that area is cleared, the pair could shift the focus to the psychological 1.1000 barrier, a region last traded back in early April of the last year. While spot navigates the vicinity of the overbought territory, a corrective decline should not be ruled out in the very near term. The occurrence of such a scenario could see the minor support at 1.0766 (low January 18) initially revisited ahead of the 2-month support line in the 1.0670 zone.