The EUR/USD pair was slightly decreased on the Forex during the first half of the Monday session, many traders having remained cross arms before major macroeconomic events later in the week. With American GDP and the Core PCE waiting for the United States, and a rate decision coming from the European Central Bank, the volatility of the EUR/USD pair will clearly be up this week, which will make the pair of currencies of the week.
EUR/USD perspectives: the US dollar extends a positive start
The European Central Bank and two other central banks, as well as the world’s PMI indices, American GDP and the basic PCE, will all be to come
EUR/USD technical analysis and key levels to monitor
The US dollar extends its positive start to the year
Last week was marked by the publication of American data generally better than expected, which contributed to reducing the expectations of a drop in rates in March. Consequently, the US dollar closed the upward week compared to the euro (and a basket of foreign currencies), although apart from its best levels.
Other data published in the United States, retail sales have been beaten, while new evidence of the resilience of the labor market have been published, unemployed registrations that fell at their lowest level for more than a year. Prospective data has been mixed, the UOM consumer consumer survey that increased sharply to 78.8 against 69.7 while inflation expectations were reduced to 2.9% against 3.1% before .
Meanwhile, we heard more bellicist remarks from Fed officials. In fact, the centrist Raphael Bostic was a little more fellows than expected, like several others of his FOMC colleagues who have expressed themselves recently.
EUR/USD perspectives: prospects for the rest of the week
After a quiet start on Monday, things should improve as we advance during the week. There will be three decisions on the monetary policy of future central banks, namely the Bank of Japan, the Bank of Canada and the European Central Bank.
In addition to that, we will have data on market development, including global PMIs, American GDP and the basic PCE price index.
Now let’s talk about the three main relevant data concerning the EUR/USD pair.
European and American PMI
Wednesday January 24
The concerns about the health of Chinese and European economies have slowed down the raw materials and the clues that depends strongly, such as UK 100, China A50 and Hong Kong 50. On the other hand, technology -oriented indices, such as the US Tech 100 and Germany 40 has obtained better results due to the expectations that the global economic slowdown would result in a significant drop in interest rates. The latest prospects of purchasing directors questioned in the manufacturing and services industry sectors will tell us much more about the evolution of the situation at the end of the year. These purchasing directors (PMI) indices are considered to be advanced economic indicators and are deemed more influential by investors. The traders of the EUR/USD pair will be very attentive to the European PMI indices, which have been rather poor for some time already. A positive response of risky assets would probably be advantageous for the Euro, at the start of Wednesday session. In the afternoon, when the American data is published, the reaction of the US dollar on Forex and therefore the EUR/USD pair will then depend quite largely on the management of the surprise.
ECB’s monetary policy decision
Thursday January 25
Before the prohibition period of the European Central Bank (ECB), several officials tried to resist the idea of early rate reductions, like the Fed stakeholders. In the United States, resistance is mainly due to a relatively robust economy, while in other regions, especially in the United Kingdom and in the euro zone, the managers of central banks are struggling with fears concerning persistent inflation and sustained wage pressures. The president of the ECB, Christine Lagarde, suggested that the reduction in borrowing costs could take place this summer rather than in the spring, thus aligning on other officials of the ECB expressing their concerns about inflation salaries. We await the BCE signals at this meeting to discern its position. The more prudent and resistant to the rate drops, the more the euro is likely to receive support.
Advanced GDP in the United States and Basic PCE
Thursday 25 and Friday 26
Following the publication of data generally stronger than expected in the past two weeks, the dollar has increased, now the EUR/USD Pressure pair. The Fed trend to maintain higher interest rates longer has aroused new concerns after the Fed governor Christopher Waller suggested a measured approach. If GDP reveals a new vigor of the US economy, expectations of an imminent reduction in interest rates will be postponed. The EUR/USD pair bulls will seek the weakness of the American data, in particular Thursday GDP and the Core PCE the next day. American GDP should grow at an annualized rate of 2.0% in the fourth quarter, compared to 4.9% in the third quarter. The PCE base price index should have increased by 0.2% m/m against 0.1% in the previous month.
EUR/USD perspectives: technical levels to be monitored
While the ECB is to reduce its rates earlier, the euro has shown better performance on Forex than currencies like the Swiss franc, the central bank of which seems more and more conciliatory. However, to make earnings compared to the US dollar, the euro needs rapid and unfavorable changes in American data. It was only then that he will be able to resume his momentum and cross the barrier of the 1,10 convincingly. Currently, those who are optimistic about the euro must focus on protecting the 200 -day mobile average, a task accomplished successfully during the last sessions, but the lack of bullish follow -up is concern for a point of view of bulls. A potential break below 1.0845 could open the way to a drop to 1.0815, then to the lowest in December to 1.0723.
Fawad is an experienced analyst, a commercial educator and an economist. He produces research and analysis content using his vast knowledge of the global economy and financial markets, which he has acquired over the past 12 years in industry. Fawad specializes in Forex, stock market indices and raw materials markets, using a combination of fundamental and technical analyzes to provide usable commercial ideas and anticipate potential market movements. His macro comments are regularly mentioned by the main financial publications such as Reuters and Market Watch.
