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.
The EURUSD pair corrects, trading around the level of 1.1231.
The EURUSD pair corrects, trading around the level of 1.1231.
The European currency received some support after the data on business activity in the EU was released. French Manufacturing PMI for November reached 54.6 points instead of 53.6 for October. A similar indicator in Germany was 57.6 points, which corresponds to 57.8 points a month earlier. Manufacturing PMI in the EU countries is at 58.6 points, higher than 58.3 points for the previous period. Service PMI in France increased to 58.2 points from 56.6 points earlier. The same figure in Germany was 53.4 points, up from 52.4 points earlier. Finally, the EU Service PMI stood at 56.6 points, significantly better than the 54.6 points for October.
The positive trend of the European currency could not reverse the downtrend of the pair, which is under pressure from the growing US dollar. Yesterday, the American currency index renewed its year’s high around 96.560, when it became known that the candidacy of the incumbent head of the US Federal Reserve, Jerome Powell, was nominated for a second term. According to US President Joe Biden, the department under the leadership of Powell operates most effectively.
Support and resistance
On the global chart, the price moves below the support line of the global downtrend channel, and the sell signal from the indicators is strengthening: indicator Alligator’s EMA fluctuations range expands, and the AO oscillator histogram decreases in the sell zone.
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.
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.
Like most of the major currency pairs, the pound also lost ground against the U.S. dollar during last week. The bears lost momentum around the support zone of 1.3360, where the bulls intervened and tested the resistance of 1.3427. The current breach of the mentioned resistance cannot be considered as completed and, in case we do not receive confirmation, the most probable scenario would be for a second reduction and a test of the 1.3360 support area.
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).
EURUSD World Bank expects a slowdown in the EU economy
EURUSD World Bank expects a slowdown in the EU economy. The European currency remains under pressure, and the EUR/USD pair trades unstably, correcting within a sideways trend around 1.1373.
According to the renewed January report of the World Bank, in 2022, the growth rate of the world economy will decline to 3.2% after growing by 4.1% in 2021. EU GDP growth forecast dropped from 4.4% to 4.2%, although in 2021, it climbed 5.1%. Among the main reasons for the negative dynamics, the bank calls the high degree of spread of the Omicron coronavirus strain and an increase in the growth rate of world inflation.
Data on the volume of industrial production in the EU will be published today. According to analysts, the indicator will decline to 0.6% from 3.3% a month earlier, putting additional pressure on the euro.
The USD Index declines, reaching the lower border of the global corridor at 95.500. Investors reacted negatively to the statement of the head of the US Federal Reserve Jerome Powell during a speech in Congress, who noted that high current inflation was a consequence of a disruption in supply chains that led to an imbalance in supply and demand, and this process would be regulated on its own. In these words, some experts caught the official’s reluctance to tighten monetary policy soon.
Support and resistance
On the global chart, the price moves within the local Flag trend continuation pattern, the implementation of which has not yet begun. The fluctuation range of the EMA on the Alligator indicator has narrowed almost completely, while the histogram of the AO oscillator remains close to the transition level.
