The EUR/USD pair is experiencing a decline, edging closer to the 1.0400 mark during European trading on Thursday. Several factors contribute to this slide, including an unexpected contraction in French GDP for the fourth quarter and rising expectations of an ECB rate cut. Traders remain cautious as they await the release of key economic data from the United States, Germany, and the broader European Union.
The technical outlook for the EUR/USD suggests the formation of a symmetrical triangle, with a potential breakout target at the $0.84 level. This target stands at 110% of the current trading levels, indicating a significant potential movement if the breakout occurs. However, the current market environment is characterized by caution, which has prevented traders from making large bets on the pair.
One of the primary factors supporting the EUR/USD is the sliding US bond yields, which have put USD bulls on the defensive. Despite this support, several elements weigh heavily on the pair. The recent uptick in the US Dollar, coupled with expectations of a rate cut by the European Central Bank, has exerted downward pressure. Additionally, the Federal Reserve's hawkish pause has created a challenging environment for non-yielding commodities like the EUR/USD.
As market participants await the ECB's verdict, they closely monitor upcoming GDP data from Germany and the European Union. These figures are crucial as they provide insight into the economic health of the region. Recent data has painted a picture of an economy mired in stagnation, adding to the challenges faced by the EUR/USD.
The cautious market environment and renewed US Dollar buying have dragged the pair lower. The ECB's focus on supporting activity within the common bloc also influences the EUR/USD's performance. Traders are refraining from placing substantial bets ahead of the US Q4 advance GDP data release, which is expected to offer further direction for the pair.