EUR/USD rebounds from five-year low towards 1.0550 ahead of Eurozone GDP, US PCE inflation data

• EUR/USD refreshes intraday high while snapping six-day downtrend near the lowest levels since 2017.
• Off in Japan, cautious mood ahead of the key data triggers consolidation of recent losses.
• Eurozone GDP is likely to improve during Q1 2022, US PCE Price Index may ease to 5.3% YoY.
• Hawkish comments from ECB policymakers, recently mixed US GDP can strengthen recovery moves.

EUR/USD renews intraday high around 1.0530 while portraying the corrective pullback near the lowest levels since 2017 during Friday’s Asian session.

The major currency pair’s recent gains could be linked to the US dollar’s pullback amid an absence of bond moves and the market’s cautious sentiment ahead of the key Eurozone and the US data.

A Showa Day Holiday in Japan turns down bond traders on Friday and limits the strong positive catalyst for the US dollar, namely the US Treasury yields.

The bond coupons eased 4.2 basis points (bps) to 2.82% by the end of Thursday’s US session. The pullback in the Treasury yields, as well as the US dollar, could also be linked to the mixed US Gross Domestic Product (GDP) release.

The Q1 2022 US GDP dropped to -1.4% from 6.9% prior, versus the 1.1% forecast. However, the details concerning the personal consumption, inventories and net trade which flashed positive signs seemed to have helped the EUR/USD bears on Thursday.

It’s worth noting that the Eurozone GDP is likely to improve to 5.0% YoY versus 4.6% prior, per the seasonally adjusted Q1 2022 figures, which in turn shows a better number than the US and hence may favor the EUR/USD rebound. Also likely to underpin the recovery moves are the hawkish comments from the European Central Bank (ECB) policymakers. Recently,  European Central Bank (ECB) Vice President Luis de Guindos said on Thursday that the “surge in energy prices is reducing demand and raising production costs.”

On other hand, the Fed’s preferred inflation gauge, from the US Core Personal Consumption Expenditures Price Index for March, expected to ease to 5.3% YoY versus 5.4% prior, will also be important to watch for near-term EUR/USD directions.

Additionally, Russia’s tussles with the West and Ukraine, as well as China’s covid woes, are additional catalysts for the EUR/USD traders to watch.

Also read: EUR/USD Forecast: Euro remains bearish with a strong support above 1.0460

Technical analysis

Unless rising back beyond a five-month-old descending trend line, around 1.0600 by the press time, EUR/USD prices are directed towards the year 2017 trough surrounding 1.0340.