The medium term setup is still clear that the pair had a nice orderly consolidation that tested just below the 38.2% retracement of the large rally wave from late last year (1.2050 ), which is the tactical support for remounting a charge on the highs for the cycle, and if we avoid an uglier deleveraging event here, the EURUSD higher trade is a less volatile way to trade for a resumption of the USD bear market, adding possibly EM and commodity dollar trades to the mix next week if those recovery smartly versus the USD into the close of the day and week today and into early next week. The key upside objective to take out is the 1.2200 area for the bulls.
Data wise, European figures were generally discouraging. German published the IFO Business Climate, which contracted to 90.1 in January, while the GFK Consumer Confidence Survey resulted at -15.6 in February, much worse than anticipated. Inflation in the country picked up modestly in January, as it printed at 1.0% YoY, according to preliminary estimates. Also, the economy grew 0.1% QoQ in the last quarter of the year, better than anticipated but way below the previous 8.5%.
On the other hand, US data was mostly upbeat. Durable Goods Orders were the only down note, as they rose by a modest 0.2% in January. Q4 Gross Domestic Product resulted at 4.0%, beating expectations, while weekly unemployment claims continued shrinking, down to 875K in the week ended January 22.
Still, macroeconomic figures indicate shy economic progress. It seems that investors still believe that growth will return in the second half of the year.
The Federal Reserve announced its latest decision on monetary policy, and as widely estimated, they left rates and bond-buying programs unchanged. The central bank reiterated that the “path of the economy would depend significantly on the course of the virus, including progress on vaccinations,” while adding that the pace of the recovery in economic activity and employment has moderated in recent months. A generally dovish statement maintained markets in risk-off mode.
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