EUR/USD is trading on high ground after Mario Draghi gave the common currency a boost with his confident message and the denial of deflation. However, the pair did not manage to conquer the 1.3615 and remains cautious ahead of another big event: the US Non-Farm Payrolls. Markets are holding their breath and the pair is trading in tight range – the calm before the storm. Fasten your seatbelts.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
- EUR/USD traded in a very narrow range under 1.36 after storming higher in the previous session..
Current range: 1.3580 to 1.3615
Further levels in both directions:
- Below: 1.3580, 1.3515, 1.3450, 1.34, 1.3320, 1.3240, 1.3175 and 1.31.
- Above: 1.3615, 1.3650, 1.37 and 1.3800.
- 1.3515 has switched to support and is a weak line. 1.3450 is stronger.
- 1.3615 returns to center stage after successfully capping the pair.
- 11:00 German Industrial Production. Exp. +0.5%
- 13:30 US Non-Farm Payrolls. Exp. +185K to 200K. See how to trade the US Non-Farm Payrolls with EURUSD.
- 13:30 US Unemployment rate. Exp. 6.7%.
- 20:00 US Consumer Credit. Exp. 12.4 billion.
*All times are GMT
For more events and lines, see the Euro to dollar forecast.
- Draghi’s euro-rally: Leaving the rates unchanged was certainly expected, but the upbeat message was certainly not, and the euro rallied. Not only did Draghi deny deflation, but he also found a reason for every malaise: low headline inflation is due to energy prices, low core inflation is due to the program countries (Greece, Portugal, etc.), and even the squeeze in money supply, M3, is a result of the upcoming stress tests. Draghi expects the latter to improve shortly. However, he also said that more data is awaited in early March. The high exchange rate could result in even lower inflation and a move in March cannot be ruled out.
- Time for NFP correction: After the weak report for December, markets are expecting a revision for those numbers in addition to a return to normal gains, around 200K, for January. Bad weather was blamed for December’s weakness, and the snow continued into January. However, the week of the survey was a a warm one, raising expectations. See how to trade the US Non-Farm Payrolls with EURUSD
- Taper train on track: Only really bad figures can stop the Fed from tapering bond buys, $10 billion / meeting. The Fed took its time with making the decision, and it will be hard to stop it now, even if emerging markets crumble again. Another reason for pushing on with the move is that the Fed is more hawkish now.
- Euro-zone PMIs look good, but retail sales are poor: Eurozone Services PMIs were positive in January. The Spanish and Eurozone numbers came in above the 50-point line, pointing to expansion. Italian Services PMI also improved, but remains in contraction mode. These numbers come on the heels of Manufacturing PMIs which also looked solid. However, Eurozone Retail Sales looked weak, dropping by 1.6%, well off the estimate of a 0.7% decline. This key consumer spending indicator has posted declines in three of the past four readings, pointing to weak consumer spending, which is a key component of economic growth.