Technical Bias: Bullish
- EURUSD climbs above 1.07.
- US housing starts, building permits disappoint.
- ECB says Eurozone economy is already benefiting from bond buying program.
The EURUSD extended its gains on Thursday, as the dollar continued to slide amid disappointing growth figures while the euro remained elevated following remarks from European Central Bank President Mario Draghi.
The EURUSD has gained 1.3 percent since Monday, as weak economic data took the sails out of a recovering US dollar. The EURUSD climbed to a session high of 1.0767 on Thursday. The pair would subsequently consolidate at 1.0741, advancing more than half a percent. The pair faces initial support at 1.0602. On the upside, the EURUSD is testing the 1.0734 resistance. A close above that level exposes the 1.0785 barrier.
The trend index is showing bullish momentum, as the pair trades above its long-run averages (SMA 100 and SMA 200). Long-term, however, the markets still anticipate a fall to parity for the EURUSD.
The euro received a lift on Wednesday after European Central Bank President Mario Draghi indicated that the central bank’s bond buying program was already boosting the Eurozone economy. The program, which was announced in January and set in motion last month, is expected to last at least 18 months.
Draghi’s press conference was interrupted on Wednesday after a protester jumped from the media seats onto his desk, shouting “end ECB dictatorship.” The young woman, named Josephine Witt, was escorted out of the media room by security.
The Eurozone had no economic data to report on Thursday ahead of the final March CPI figures, which are scheduled to be released at the end of the week.
In the United States, tepid economic data continued to raise concerns about the US economic recovery. On Thursday the Commerce Department said housing starts increased much less than forecast in March after plunging in February. Meanwhile, building permits declined more than forecast, suggesting housing activity may remain subdued during the spring.
The US economy probably suffered a mild setback in the first quarter. Economists anticipate that gross domestic product expanded between 1.5 percent and 2 percent annually in the first three months of the year, although others suggest the growth rate was much slower than that. US GDP contracted in the first quarter of 2014 before making a huge comeback in the next two quarters.
The Federal Reserve sees GDP growth between 2.3 percent and 2.7 percent this year, according to a revised summary of economic projections released last month. The economy is forecast to grow at a similar rate in 2016.