EUR/USD Forecast: Holds above 1.0500 after ECB and US data

• Euro weakened after the ECB meeting, as markets saw no change ahead.
• US Dollar lost momentum during the American session despite upbeat US growth data.
• The EUR/USD managed to remain above the 1.0530 support area.

The EUR/USD reached a bottom at 1.0521, matching the previous week's lows. Market participants perceived the European Central Bank (ECB) as adopting a more dovish stance, while the US Dollar failed to benefit from better-than-expected US growth data.

As expected, the ECB kept its policy unchanged on Thursday, with a unanimous decision. This marked the first pause since mid-2022. Market analysts view the 4.00% deposit rate as the terminal rate, at least for now, as inflation slows down and the Eurozone economy heads towards a recession.

ECB President Christine Lagarde and the governing council maintained their stance that inflation remains high, reiterating that rates will remain elevated for as long as necessary. The previous guidance was left unchanged. The Euro weakened further after the meeting.

Data released on Thursday showed the US economy expanding at an annual rate of 4.9% during the third quarter, surpassing expectations of 4.2%. However, the Core Personal Consumption Expenditure (PCE) rose 2.4%, below the expected 2.5% and slower than the 3.7% in the previous quarter. On the employment front, Continuing Claims jumped to 1.79 million, the highest in months. These numbers indicate that the US economy remains robust.

The US Dollar failed to benefit from the positive GDP data as US Treasury yields reversed and turned lower during the American session, boosting the rebound in EUR/USD. The fundamental factors continue to favor the US Dollar, and while it may not fuel further gains, it could limit the declines. On Friday, the monthly US Core PCE will be relevant. 

EUR/USD short-term technical outlook

The EUR/USD dropped to 1.5021 and then rebounded back to the 20-day Simple Moving Average (SMA) at 1.0555. Technical indicators do not provide clear signals in the short term. A weekly close below 1.0500 would indicate potential for further losses, while above 1.0700 would strengthen the Euro's outlook.

On the 4-hour chart, the pair broke below an uptrend line but then recovered, managing to hold above the 1.0530 support area. Technical indicators offer no clear signs. The Euro is currently below the 20-SMA (1.0595). A break below 1.5030 would expose 1.0500. Given the mixed signals, some consolidation between 1.0530 and 1.0570 is likely in the very near term.

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