EURUSD To EXPLODE Higher Ahead Of Core PCE Week? – EURUSD Analysis & Prediction

Key Points

• EURUSD pauses after five bullish weeks.
• Core PCE inflation and GDP looms.
• Dollar clinging on to bullish structure. 
• EURUSD trading at critical order block. 

EURUSD Pauses After Five Weeks of Gains

Last week, EURUSD finally paused after five consecutive weeks of gains, during which the world’s most liquid forex pair gained 300 pips or 2.8%. At one point, EURUSD was down 0.5%, but a late rally on Friday reversed most of the weekly gains.

The pause last week was nothing really to shout about for the bears, but it was certainly welcomed by those who have a more hawkish view on the Federal Reserve than the markets seem to right now. Will this week be another bullish one?

US Core PCE & GDP Looms

This week marks the last in the May calendar, and although this could bring natural volatility as positions are squared off for the month, it is a relatively quiet start to the week. The absolute volatility from a dollar point of view is likely to start on Thursday when US Gross Domestic Product (GDP) data is released. The bar has been set extremely low, with a quarterly growth rate of 1.3% forecasted, and would represent a 2% drop from the previous quarter. This feels set up for an upside surprise, which would likely send EURUSD lower.

The Federal Reserve’s primary gauge of inflation, the Core PCE Price Index, will be released on Friday. Speculation around stagflation in the US is growing and will be heard even louder if this report comes in hot while GDP comes in weaker. This sets up a fascinating end to the week for EURUSD, in which the bulls remain in control. 

EURUSD Trades At Crucial Order Block

The EURUSD hourly time frame shows a market that has been edging lower since last week. However, this “bearish” structure is now under serious threat. The price is currently trading inside an order block, where the reaction has not been convincing.

If the price breaks the critical high at 1.08600, this market could explode to 1.09000 as the dollar’s pressure remains strong. However, watch out for a liquidity sweep at this high, as we could easily see a fakeout here.

Alternatively, the bears may want to exploit the fact that we are trading in a bearish order block and look to send EURUSD back down to 1.08000. The data due out towards the end of the week will likely shape the higher time frames, but we will likely see one of the moves mentioned above before then.