- EUR/USD touched a fresh two-month high on Thursday.
- USD selloff pauses after upbeat GDP data from US.
- Focus shifts to Q1 GDP figures from eurozone and Germany.
The EUR/USD pair posted strong gains on Wednesday and climbed to its highest level in two months at 1.2150 on Thursday before losing its momentum. As of writing, the pair was virtually unchanged on the day at 1.2120.
FOMC Chairman Jerome Powell's dovish commentary despite the improved economic outlook weighed heavily on the greenback on Wednesday and the US Dollar Index (DXY) dropped below 90.50. However, the sharp upsurge witnessed in the US Treasury bond yields on the back of upbeat US data helped the DXY stage a rebound and forced EUR/USD to turn south.
The US Bureau of Economic Analysis (BEA) first estimate showed on Thursday that Real Gross Domestic Product (GDP) expanded at an annual rate of 6.4% in the first quarter of 2021, compared to analysts' estimate of 6.1%. Additionally, the weekly Initial Jobless Claims declined to 553,000 from 566,000 previously.
At the moment, the DXY is up 0.1% on the day at 90.68 and the benchmark 10-year US T-bond yield is rising more than 2% at 1.649%.
On Friday, first-quarter GDP data from Germany and the eurozone will be watched closely by market participants.
EUR/USD outlook
Credit Suisse analysts think that the EUR/USD could target the 78.6% retracement of the Q1 fall at 1.2212 in the near term with scope for the 1.2243 February high.
"A direct break of the 1.2243 February high would open the door to a retest of the high for the year at 1.2350," analysts added. "Support moves to 1.2103 initially, then 1.2067, with the immediate risk seen higher whilst above 1.2057/56. Below would see yesterday’s ‘outside day’ negated to warn of a ‘false’ break higher to turn the risk back lower for a slide back to 1.1995/90."
Technical levels to watch for
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