The last week of April promises to be "hot" for EUR/USD traders, although out of all the upcoming reports, we can highlight the two: the US GDP growth report and the core PCE index. The other reports will play an important but nonetheless, a supporting role. The aforementioned reports, however, can fundamentally "redraw" the fundamental picture for dollar pairs. And the EUR/USD pair will be no exception. Let's take a look at the main events of the upcoming trading week.
Monday
The economic calendar for the first working day is almost empty. Only the German IFO indices are of interest. Positive dynamics are expected here – in particular, the German business climate indicator may again update a multi-month record, reaching the 93.4-point mark. This indicator has been growing consistently for six months already. March is expected to be the seventh month of positive dynamics. The IFO economic expectations indicator and the current situation assessment indicator should also reflect positive trends. Overall, this may support the euro in the context of strengthening hawkish expectations regarding the ECB's further actions.
Also on Monday, traders may be interested in the Bundesbank report. Hawkish notes in the document may support the euro, however, as a rule, this report has a weak impact on the EUR/USD pair.
Tuesday
The main release on Tuesday is the US consumer confidence indicator. After reaching an 11-month high in December (109 points), this indicator gradually fell, reflecting the deteriorating mood of US residents. A further decline is expected in April – down to 103.9. However, if this comes out in the "green," the dollar will receive some support, especially in light of inflation expectations.
Certain volatility in the EUR/USD pair may be provoked by another release on Tuesday. During the US session, the March volume of new home sales in the US will be published. According to preliminary forecasts, the indicator is expected to be in the negative zone (for the first time since September of last year), reflecting a 0.5% decrease in volume. In this case, the greenback will be under pressure, as the deterioration in the real estate market will become another argument against an aggressive policy by the US central bank. Recall that other reports in this area (which were published last week) came out in the "red": for example, the indicator of building permits issued in the US in March decreased by 8.8%, indicating that the high cost of borrowing is putting pressure on this sector of the economy. The grim picture was complemented by the volume of home sales in the secondary market - in March, it decreased by 2.4% (this is the weakest result since November 2022). If the "primary market" also disappoints dollar bulls, EUR/USD bulls will have a reason to strengthen their positions.
Wednesday
On Wednesday, data on the volume of durable goods orders in the US for March will be published. Experts predict a contradictory dynamic: the overall indicator should rise to 0.8% (from the previous value of -1.0%), and excluding transportation, decrease by 0.2%. The report may put pressure on the greenback if both components of the report come out in the negative area.
Thursday
On Thursday, April 27, traders will be focused on the US GDP report in the first quarter of 2023. Recall that the first quarter of 2022 reflected a 1.6% contraction in the American economy, the second quarter – a 0.6% contraction. In the third quarter, the indicator came out of the negative zone and showed a 3.2% increase in GDP volume. However, in the fourth quarter, the pace of economic growth slowed down: the indicator reached 2.6%. According to the forecasts of most experts, the downtrend will continue in the first quarter of this year: in their opinion, the GDP volume increased by 2.0% during this period. The GDP price index, measuring the annual change in prices of goods and services included in GDP, is also expected to show a downtrend, coming in at 3.8% (for comparison, it's worth noting that the deflator was at 9.0% in the second quarter of 2022).
If the American economy disappoints, the dollar will be hit by a wave of sell-offs. A weak result is unlikely to shake traders' confidence that the Fed will raise the rate by 25 basis points in May, but hawkish expectations regarding the Fed's further actions will significantly weaken.
Friday
On the last trading day of the week, we will learn the dynamics of the Fed's most preferred inflation indicator – the Personal Consumption Expenditures (PCE) index. It is believed that FOMC members closely monitor this report. Since November of last year, it has shown a contradictory trend, fluctuating in the range of 4.6%-4.7% (in annual terms). The latest report (for February) showed a decline in the index to 4.6%. According to the forecasts of most experts, the March result will reflect a further slowdown in inflation – to 4.5%. In this case, we can talk about a certain trend, especially against the backdrop of a decline in the overall consumer price index, the producer price index, and the import price index.
Friday's release may put significant pressure on the American currency, especially if it comes out in the "red," and particularly if the US GDP growth report published on Thursday disappoints dollar bulls.
Also on Friday, data on the growth of German inflation will be published. A slowdown in the main indicators is expected here. For instance, the overall consumer price index in annual terms should reach 7.3% (previous value 7.4%). The Harmonized CPI should demonstrate a similar trend. If the report comes out in the "green," it will be an "alarm bell" for bears, as German inflation correlates with the dynamics of the overall European CPI.
Conclusions
The EUR/USD pair traded within a 100-point range last week, not crossing the limits of the 9th figure. The contradictory fundamental background "extinguished" both upward and downward momentum. In my opinion, next week the balance will tilt one way or another. Key macroeconomic releases will strengthen the positions of either bulls or bears in the EUR/USD market. First and foremost, we're talking about the US GDP growth data and the Personal Consumption Expenditures index. If the stars align "in a row" – against the greenback – bulls will overcome the resistance level of 1.1050 (the upper Bollinger Bands line on the daily chart) and possibly test the target at 1.1100.
In the event that the main reports will still favor the dollar (contrary to forecasts), we will witness a bearish correction again – with targets at 1.0900 and 1.0830 (the Kijun-sen line on the same chart).
