FUNDAMENTAL
OVERVIEW
USD:
The US Dollar rebounded in
the final part of last week with analysts pointing to the nomination of Kevin
Warsh as the next Fed chair as the main catalyst. The reality is that the selloff
in the greenback wasn’t backed by fundamentals in the first place. The
greenback didn’t have strong reasons to appreciate, but there wasn’t a reason
for such a strong selloff either.
The US data continues to
improve, especially on the labour market side as the US Jobless Claims seem to
suggest a re-acceleration in activity. February might be the month when the US
Dollar comes back with a vengeance if we get another strong set of economic
data.
The NFP report is certainly
the main highlight of this week, but we will get many other top tier data that
could give the greenback a boost. The market is pricing 55 bps of easing by
year-end and those bets will be pared back in case the data strengthens. Conversely,
if the data comes out softer than expected, then we could see the US Dollar
coming back under pressure, although the momentum shouldn’t be as strong as the
prior weeks.
EUR:
On the EUR side, the ECB
members started to feel uneasy as EUR/USD crossed the 1.20 level
last week. This is kind of a line in the sand as ECB’s Vice President de
Guindos last year said that a rise above 1.20 would complicate things for them.
This week, we have the ECB
policy decision where the central bank is expected to keep interest rates
unchanged and reaffirm their neutral stance. The risk is that the ECB jawbones
the euro more heavily although they don’t have a reason to do so yet given that
the recent data has been stronger than expected.
EURUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that EURUSD broke through the 1.20 level
but eventually erased the gains as ECB policymakers jawboned the currency and
the US data continued to improve. We have a key swing level near the 1.18
handle which could act as support. The buyers will likely step in there with a defined
risk below the support to position for a rally into new highs. The sellers, on
the other hand, will look for a break lower to increase the bearish bets into
the 1.16 handle next.
EURUSD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can
see that we have a downward trendline defining the current bearish momentum. If
we get a pullback, we can expect the sellers to lean on the trendline with a
defined risk above it to keep pushing into new lows. The buyers, on the other
hand, will look for a break higher to pile in for a rally into new cycle highs.
EURUSD TECHNICAL ANALYSIS –
1 HOUR TIMEFRAME
On the 1 hour chart, we can see more clearly the resistance zone around the
1.19 handle where we can find the downward trendline. That’s where we can
expect the sellers to step in to keep pushing into new lows, while the buyers
will look for a break higher to extend the gains into new highs. The red line
define the average daily range for today.
UPCOMING CATALYSTS
Today we have the US ISM Manufacturing PMI. Tomorrow, we get the US Job
Openings data. On Wednesday, we have the Eurozone Flash CPI, the US ADP and the
US ISM Services PMI. On Thursday, we have the ECB policy decision and the US
Jobless Claims figures. On Friday, we conclude the week with the US NFP report
and the University of Michigan Consumer Sentiment data.
This article was written by Giuseppe Dellamotta at investinglive.com.