EUR/USD and US GDP: Levels, Ranges and Targets

USD GDP last at 1.1, 1.4 Q 4 2015 and 1.8 expected contains significant hurdles to rise above because 1.1 is far below all averages short and long term. As GDP continued its multi year slide, the averages followed. The point at 1.1 is not only extraordinarily low but the extremes in average prices are located at 0.58 and 0.36. A break at both levels then negative GDP becomes a distinct possibility. The rescue is 1.1 point is low, oversold and its only direction is up. The rise in GDP comes due because of oversold and not because of bright economic outlooks.

What holds GDP from further falls is exports exceeded imports, PCE was up, State and local government spending was up and residential fixed income rose. Under a Yellen threat to raise, housing, mortgage rates and renovations will remain volatile to lock in current rates before any possible rise.

The 1.8 forecast derives from the 3 year average. To rise from 1.1 then breaks must occur at 1.27 and a rough patch at 1.78 and 1.79. GDP averages lack uniformity. If 1.8 is seen then 1.78 and 1.79 become supports in future quarters but significant headwinds exist at 2.00, 2.01, 2.10 and 2.15 so the range becomes a tight 1.79 to 2.00. The immediate points are just the start to a long long road and many levels to see the upper average at 2.54, 2.60 and 2.70. Total ranges if 1.8 is seen would become 1.79 to 2.54, 2.60 and 2.70.

While 1.8 is forecast, targets in my estimation are 1.59, 1.44 and lows at 0.92, 0.81 and 0.75. The averages however are significantly oversold and a rise is expected. But the upper forecast is only derived from the 1 and 2 year averages because averages from 3 to 9 years lack the status as overbought or oversold. Those averages are middle range and could easily fly higher or lower. Failure to break 1.27 would impart an important commentary to any Yellen Fed Funds rise. Overall, 1.8 as well lacks any confidence to a rise.

EUR/USD is built upon a current base at 1.0976. The longer term base is located at 1.0413. A break of 1.0976 targets next 1.0955, 1.0885, 1.0847 and 1.0845. Today’s bottom is found at 1.0953.

Despite oversold, significant resistance is and has been built into current prices for many weeks. The two big breaks are found at 1.1113 and 1.1116 and down from 1.1153 and 1.1140 over past weeks. Both points are dropping by the day to drive EUR/USD prices lower. Under the assumption 1.1116 breaks higher then more problems exist at 1.1158 , 1.1189 and another falling line at 1.1234.

The next break point for EUR/USD is located at 1.1042 but again tough resistance is clustered from 1.1024 to 1.1032 and many points in between. The points mentioned from 1.1024 to 1.1032 is for today and again lies just above current prices. Tomorrow the numbers will change yet the cluster above remains due because its deeply ingrained inside EUR/USD prices for many many weeks. To drive through this cluster will take an event such as a far lower US GDP reading. EUR/USD contains problems in its inability to rise and its current price remains so low and travels downwards while oversold.

The current trading signals crew remains 3 months later and all are doing quite well everyday. All are eager to stay and none left. I keep it very small as a crew. I will open room for another 1 or 2 slots for interested persons. If interested brian@btwomey.com

Brian Twomey, Inside the Currency Market, btwomey.com

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