EUR/USD Bumps support again after GDP

By John Jagerson, 27 July 2007

The downside on the EUR/USD picked up some momentum early in the session coming all the way down to 1.3626. It will be interesting to see how long the flight to lower risk assets like gov't bonds continues to assist the USD's value. Following the 2nd quarter GDP, the EUR/USD cut its support bounce short and "reapplied" for a support break. Because GDP was above many expectations and a major improvement from last quarter's numbers, the EUR/USD responded predictably by pushing back towards support. However, some of the factors driving U.S. GDP, including non-residential construction, don't seem likely to continue improving in 3rd quarter and other traders will probably recognize this as well. The market is already cooling off for the coming weekend so a break here is unlikely before next week. From a technical perspective, I think this is a real make it or break it level. If the market descends below this level early in the week ahead, we could see a lot more volatility in the short term.