Forex Today: Overdue dollar correction underway ahead of key data

Here is what you need to know on Friday, April 29:

The US Dollar Index (DXY) turned south following a six-day rally, during which it gained more than 3%, early Friday with investors finally looking to book their profits on the last trading day of April. First-quarter Gross Domestic Product (GDP) and April HICP inflation data from the euro area will be watched closely by market participants ahead of the Personal Consumption Expenditures (PCE) Price Index, Personal Income and Personal Spending figures from the US.

Although the dollar continued to outperform its rivals despite the disappointing growth data on Thursday, it is having a difficult time finding demand ahead of the weekend. The improving market mood, as reflected by strong gains seen in major European equity indexes, seems to be playing a role in recent dollar weakness. 

US GDP Quick Analysis: Houston, we have contraction, but three reasons support dollar strength.

EUR/USD is trading at a fresh daily high above 1.0570 early Friday. In addition to the selling pressure surrounding the dollar, the euro's strength is helping the pair extend its rebound. The data from Germany revealed earlier in the day that the economy grew at an annualized rate of 3.7% on a yearly basis in the first quarter (calendar-adjusted) of 2022. This reading came in better than analysts' estimate of 3.6%.

After touching its lowest level since July 2020 near 1.2400 on Thursday, GBP/USD gained traction and was last seen rising nearly 0.8% on the day above 1.2550.

USD/JPY is pulling away from the fresh multi-decade high it set above 131.00 on Thursday and is trading below 130.00 in the early European session.

Gold registered modest gains on Thursday and gathered bullish momentum after breaking above $1,900 early Friday. The benchmark 10-year US Treasury bond yield is trading flat on the day near 2.84%, allowing XAU/USD to capitalize on the dollar weakness.

Bitcoin rose above $40,000 but failed to close there on Thursday. BTC/USD trades with modest losses near $39,500 on Friday. Ethereum lost its bullish momentum before reaching $3,000 and was last seen fluctuating in a relatively tight range around $2,900.