The EURUSD exchange rate was threatening a high at the resistance level. However, Wednesday has highlighted a sharp U-turn effort for the euro.
EURUSD – Daily Chart
EURUSD has resistance at the 1.106 level, and observance over the next 24 hours will be necessary for trading the path ahead.
Traders should watch the price action around this level closely as the US releases GDP growth data on Thursday. Analysts expect a decline from 2.6% to 2% in the advance reading for Q1.
There are concerns about a US recession, with the country’s trucking industry showing signs of flagging demand. A recession for freight has hit diesel prices with a 50% drop since last year, signalling a widespread slowdown of the economy.
According to the Wall Street Journal, diesel started to drop after a warmer-than-expected winter but has worsened with slower factory output and weakened demand for on-hire trucks.
Meanwhile, different indicators show steep declines in freight activity, with the American Trucking Association’s for-hire contract tonnage index dropping to 95.8 in March from 101.3 in the previous month, the lowest level since August 2021.
US delivery firm UPS warns of a slowdown:
“In the first quarter, deceleration in US retail sales resulted in lower volume than we anticipated, and we faced ongoing demand weakness in Asia,” the company said. “Given current macro conditions, we expect volume to remain under pressure.”
They added that although January volumes were near expectations, the macroeconomic environment weakened, leading to a 7% drop in March compared to a year ago. That drop in volume “caused us a pause,” said UPS CEO Carole Tome.
EURUSD Forecast
In the broader economy, other recession signals continue to give warnings. The Conference Board’s Leading Economic Index declined further in March, hinting that a recession will hit in the middle of this year. The most recent reading for the New York Fed’s Recession Probabilities Model now has the odds of a downturn at 57.7%, the highest since 1982.
That poses a significant risk for US GDP levels. Traders should prepare for the EURUSD breakout being legitimised by a disappointment in the latest growth figure. The US economy faces other headwinds with the debt ceiling limit and the regional bank stress.
