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Summary: The US Bureau of Economic Analysis released forecasts on Thursday, indicating that the annualized growth rate of the US Gross Domestic Product (GDP) for the third quarter is 4.9%. This data, surpassing market expectations of 4.2% after the 2.1% growth recorded in the second quarter, marks the fastest pace of economic growth in nearly two years. The European Central Bank, as widely anticipated, kept interest rates unchanged.

Fundamentals

Thanks to a surge in consumer spending, the US economy accelerated to a near two-year high in the third quarter, once again ignoring the persistent warnings of an economic downturn from economists since 2022.

Forecasts released by the US Bureau of Economic Analysis on Thursday indicated a seasonally adjusted GDP rate of 4.9% for the third quarter of the US, the fastest pace since the fourth quarter of 2021. While this robust economic growth is unlikely to be sustained, it demonstrates the resilience of the economy.

The primary engine of growth for the economy, personal consumption expenditure, increased by 4%, the highest level since 2021. Meanwhile, core inflation indicators slowed to the lowest level since 2020. Despite rapid increases in prices and borrowing costs, the US economy has continued to maintain stability, repeatedly exceeding the expectations of forecasters and alleviating concerns of a recession. The primary driving factor behind this resilience is the ongoing strength of the labor market, which continues to fuel household demand.

However, growth in the fourth quarter of the US may slow down due to the United Auto Workers (UAW) union strike and the millions of Americans resuming student loan payments. Most economists have revised their forecasts, believing that the Fed can engineer a "soft landing" for the economy. Financial markets are anticipating that the Fed will maintain interest rates in November.

In other economic news, the European Central Bank's (ECB) rate decision was announced earlier, keeping rates unchanged. The main refinancing rate, marginal lending rate, and deposit rate remained at 4.50%, 4.75%, and 4.00%, respectively. The ECB stated that "the key interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal." Future decisions will ensure that policy rates are set at a sufficiently tight level "as long as necessary."

During the post-meeting press conference, ECB President Christine Lagarde noted that growth risks "lean to the downside" and geopolitical tensions could shake business and household confidence.

On the other hand, if the labor market continues to exhibit resilience and real incomes rise, economic growth could be higher. Global economic growth might be "stronger than expected."

Lagarde also pointed out that factors such as rising energy and food prices could pose upside risks to inflation. She emphasized the role geopolitical tensions could play in driving short-term energy price increases, while also drawing attention to the impact of climate crises, which could lead to unexpected food price increases.

However, she also acknowledged that inflation pressures may diminish, particularly in the case of declining demand, which could be due to more noticeable effects of monetary policy or external economic challenges exacerbated by geopolitical risks, among other factors.

Technical Analysis

The EURUSD pair faced significant pressure after touching the 50-day SMA, nearly erasing all the gains made in the week prior to the ECB policy announcement.

From a technical perspective, the EURUSD encountered a short-term bullish channel in the chart after being rejected by the 55-day SMA, and there's potential for a rebound from 1.0522 to 1.0640. The downside pressure is currently being defended around 1.0540. The upper limit of the previous bearish channel may also halt selling pressure around 1.0508.

Today's key focus is the minor support at 1.0522. A firm break below this level should reinforce the bearish scenario. Further breaking below 1.0448 would resume the overall decline from 1.1274, with the next target being the 61.8% Fibonacci retracement level of 0.9534 to 1.1274 at 1.0199.

Overall, the recent significant correction in the EURUSD has yet to confirm a bearish bias. For this, the asset may need to regroup bullish hopes within the channel. In terms of trading strategy, it is recommended to buy low and sell high.

Trading Recommendations

Trading Direction: Short

Entry Price: 1.0630

Target Price: 1.0382

Stop Loss: 1.0680

Valid Until: 2023-11-09 23:55:00

Support: 1.0522, 1.0495, 1.0472

Resistance: 1.0639, 1.0694, 1.0718