The Euro and the US Dollar traded in a narrow range on Friday as investors digested mixed economic data from both sides of the Atlantic. The EUR/USD pair hovered around 1.0900, slightly below its weekly high of 1.0935.
Eurozone GDP Growth Slows Down in Q1
The main driver of the EUR/USD price action on Friday was the Eurozone Gross Domestic Product (GDP) report for the first quarter of 2023. According to Eurostat, the GDP of the 19-nation bloc grew by 0.1% quarter-on-quarter, down from 0.3% in the previous quarter. This was in line with market expectations but still marked the slowest growth rate since Q4 2022.
On an annual basis, the Eurozone GDP expanded by 1.2%, matching the previous quarter’s figure and slightly beating the consensus estimate of 1.1%. The report also showed that household consumption and government spending contributed positively to growth, while net trade and investment had a negative impact.
The GDP data confirmed that the Eurozone economy was losing momentum amid rising inflation, supply chain disruptions and geopolitical tensions. The European Central Bank (ECB) has been maintaining an accommodative monetary policy stance to support the recovery, but some analysts have started to question whether the central bank will be able to deliver two more rate hikes this year as previously signaled.
US Retail Sales Disappoint in April
Meanwhile, the US Dollar failed to capitalize on the Euro’s weakness as it faced its own headwinds from disappointing retail sales data. The US Commerce Department reported that retail sales fell by 0.7% month-on-month in April, missing the market forecast of a 0.2% increase. This followed a revised 10.7% surge in March, which was boosted by stimulus checks and pent-up demand.
The report also showed that core retail sales, which exclude autos, gasoline, building materials and food services, dropped by 1.5% in April, after a revised 8.9% jump in March. This was well below the analysts’ expectation of a 0.5% rise.
The retail sales data suggested that consumer spending, which accounts for about 70% of the US economy, cooled down in April after a strong rebound in March. However, some economists argued that the decline was likely temporary and that consumer confidence and demand would pick up again in the coming months as more Americans get vaccinated and businesses reopen.
EUR/USD Technical Outlook
From a technical perspective, the EUR/USD pair remains trapped in a falling wedge pattern on the four-hour chart, indicating a potential bullish reversal in the near term. However, the pair needs to break above the upper trendline of the wedge and the 200-period Exponential Moving Average (EMA) at 1.0940 to confirm this scenario.
On the downside, immediate support is seen at 1.0900, which coincides with Thursday’s low and a static level. A break below this level could open the door for further losses toward 1.0870 (Fibonacci 38.2% retracement of the latest uptrend) and 1.0800 (psychological level and Fibonacci 50% retracement).
The Relative Strength Index (RSI) indicator on the four-hour chart is hovering near 30, suggesting that the pair is oversold and could bounce back soon.
Summary
The EUR/USD pair traded in a tight range on Friday as investors weighed mixed economic data from Europe and the US. The Eurozone GDP growth slowed down in Q1, while the US retail sales declined in April. The pair remains within a falling wedge pattern on the four-hour chart, with 1.0940 as the key resistance and 1.0900 as the key support.
