EURUSD closed the week with a -0.61% decline after reversing some of its losses on Friday by gaining +0.31% to close at 1.1343. The pair recovered from 1-week lows and moved slightly higher as the weaker US Dollar and January eurozone consumer confidence data fell -0.1 to -8.5, stronger than expectations at -9.0.
The euro area’s economic recovery has been somewhat hampered by the recent reintroduction of COVID-19 restrictions in several countries. The unemployment rate is still high at 7.2% and inflation has skyrocketed. Consumer prices rose at the fastest clip in decades, fueling speculation that the ECB will be forced to raise interest rates soon. Although bank officials are still stressing temporary inflation and a rate hike this year is unlikely, this could change depending on future developments. ECB President Lagarde suggested this week that the economic recovery cycle in the US is faster than Europe’s, so they have every reason not to act as quickly and mercilessly as the Fed.
Next week’s business survey is expected to confirm this narrative. Both the manufacturing and services indexes are expected to fall a little further in January, which would signal that economic growth is slowing as measures to combat Omicron take a bite. On the bright side, the numbers would imply that growth at least remains positive, so the economy might absorb the latest round of restrictions with less damage than the previous wave. For data that will affect the movement of the EUR, please read our article.
EURUSD on the weekly period is showing a flag pattern, below the 26-week moving average (50.0% FR). Technically, this asset is still under seller pressure, because it is below that level. This can also be seen from the asset price moving below the Kumo, while MACD positions reflect signal crossing to the upside from the whipsaw readings of the last few weeks, and the RSI also appears to be still weakening below its mid-level.
In the 4-hour period, the asset price is stuck below the 120 EMA, which means the price has re-entered the equilibrium zone at the intraday level. RSI is neutral below its midline, and MACD is likely to form a short histogram to the neutral side, but still the price is stuck below a bearish Kumo. Movement under the 1.1300 psychological level will erase buyers’ dreams for the time being, as the price will return to the downside for 1.1221 and 1.1185. Meanwhile a move above the minor resistance 1.1369 will target 1.1433 and 1.1482. A move above 1.1482 would confirm a corrective wave to the upside to 1.1691.
Click here to access our Economic Calendar
Ady Phangestu
Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
