The logistical chaos and restrictions on mobility in the EU because of the new mutation of the virus continue to weigh heavily on the euro. This helped the bears prevail and the support zone at 1.2206 could not hold the negative impulse. The price dropped and headed for a test of the major target at 1.2161. A successful breach of the aforementioned zone would easily lead to future losses for the EUR against the USD and would pave the way to the lower support level at 1.2084. At the time of writing, the most probable scenario is for a retracement towards the level of 1.2206, which is now acting as a resistance. If the push is successful, we should see an attack of the upper target at 1.2268. Today, investors would be keeping an eye on the initial jobless claims data (13:30 GMT) and the new home sales data (15:00 GMT).
USDCAD Canadian inflation hits 1991 levels. Against the backdrop of Canadian macroeconomic statistics, the USD/CAD pair shows local sideways dynamics, trading at 1.2691.
According to the January report, Canada’s consumer price index rose by 0.9% MoM instead of 0.6% expected, which contributed to the growth of the annual rate to 5.1%, which is higher than 4.8% in December. The same index, excluding prices for raw materials and food products, was 4.3%, rising from 4.0% a month earlier. According to a report released Wednesday by the National Bureau of Statistics, Canada’s inflation rate rose to 5.1% last year, the highest since September 1991. With labor market indicators, this growth is not as critical as in the US, and the Bank of Canada has the time and opportunity to control the situation.
The American currency continues to trade without pronounced dynamics, as declines due to ambiguous macroeconomic statistics replace the rises almost the next day. The current local weakening is associated with another increase in the number of people receiving unemployment benefits, which this week amounted to 248K against 225K a week earlier. Analysts had expected a decline to 219K, and the final result disappointed the market. We should also note a significant reduction in the index of manufacturing activity from the Philadelphia Fed, which fell to 16.0 points in February from 23.2 points a month earlier.
Support and resistance
On the global chart, the price moves within the local triangle pattern. Technical indicators are in the state of a local buy signal: the range of EMA fluctuations on the Alligator indicator is directed upwards, and the AO oscillator histogram forms ascending bars in the buying zone.
The common European currency’s appreciation against the Greenback, which we observed in the past couple of days, was halted yesterday by the resistance at 1.1920. At the time of writing, the currency pair is looking to reach the support around the 1.1800 zone. If the support at 1.1800 holds, then the bullish sentiment would be retained and the EUR/USD should attempt another test of 1.1920, possibly followed by a test of the local high at 1.2010. Volatility could pick up after the announcement of the German ZEW economic sentiment at 10:00 GMT.
Bulls amassed positions around the support zones of 1.1760 and 1.1800 as sentiment remains positive – for a charge at the resistance level at 1.1892. If this zone is breached the rally might take off, with the first target being the resistance at 1.2010. Bulls can expect intraday support at around 1.1840, while the more substantial one can be found at 1.1800. The Dollar slid mainly due to concerns regarding rising COVID-19 cases and the gradual transition of power to president-elect Biden. Today, higher volatility can be expected around the announcement of the retail sales (13:30 GMT) and industrial production (14:15 GMT) data for the U.S.
GBPUSD British currency is trying to grow. GBP/USD is developing the upward trading dynamics against the background of the depreciation of the US dollar and is currently at around 1.3546.
The pound quotes reacted with growth to the statements of British Prime Minister Boris Johnson that the high rates of revaccination of the population make it possible to avoid severe restrictive measures and the introduction of a lockdown is not planned in the near future, despite the fact that the UK, like many other European states, is faced with another wave of coronavirus caused by the Omicron mutation. According to Johnson, an increase in the incidence will be observed in the coming weeks, and the load on the national health system will increase significantly, but the country, in his opinion, will be able to overcome the fourth wave of the epidemic without resorting to quarantine.
The authorities’ refusal to tighten sanitary standards has inspired investors, who hope that the epidemiological situation will not affect the pace of economic recovery. The pound was also supported by the December data on business activity indices: in the services sector, the indicator was 53.6 points, which is higher than the 53.2 points predicted by analysts, as well as the composite PMI index, which showed absolutely identical values.
The positions of the US dollar slightly corrected after the indicator of Initial Jobless Claims again exceeded the threshold of 200K, amounting to 207K against the background of 197K expected by analysts. The number of Continuing Jobless Claims also increased to 1.754M, higher than the market’s preliminary estimates of 1.688M. The final data on Nonfarm Payrolls are due today and if the number of jobs falls below the forecast, the US dollar may continue the downtrend.
Support and resistance
GBP/USD is trading within the global downtrend channel, having approached the resistance line. Technical indicators are holding a signal to open long positions: the fast EMAs of the Alligator indicator is above the signal line, and the histogram of the AO oscillator is trading in the buy zone, forming ascending bars.
The uptrend for EUR/USD continues as the pair reached values above 1.2100 in the late hours of yesterday’s trading session. The sentiment remains positive and the pair is expected to test the next resistance level at 1.2150, with a minor correction towards the first important support at 1.2012 remaining a possibility due to the fast rate at which the euro appreciated against the dollar. During today’s session, volatility could pick up at 13:30 GMT when the U.S. initial jobless claims data will be announced.
The negative move of the pound against the U.S. dollar continues as trading remains above the support of 1.3575. If the bulls manage to gain enough momentum and successfully lead the currency pair above the resistance of 1.3665, it could spell the end of the downward movement. Otherwise, a drop below the 1.3575 support level could lead to a deepening of the sell-off. The PMI services data for the UK (09:30 GMT), as well as the news mentioned in the EUR/USD analysis, could lead to increased volatility during today’s session.