EURUSD, GBPUSD, USDJPY
Weekly Forex Analysis
(February 10 - February 14, 2020)
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US Dollar Fundamental Outlook: Mighty King Dollar Rises Again On Robust ISM & Non-Farm Payrolls Data
King Dollar resurges again as the frontrunner after the strong US data released over the past week showed the US economy stays ahead of the pack. Not many expected such a robust rebound in all three pieces of key US data last week. The ISM manufacturing was the biggest surprise - coming back into positive territory above 50. The ISM services and much better than expected Non-Farm Payrolls confirmed the rosy picture for the US economy.
Fed officials will be pleased with these numbers also. Fed Chairman Powell semi-annual testimony before Congress on Tuesday and Wednesday, as well as speeches by several Fed Presidents throughout the week, will be among the events watched by Forex traders this week. But, in all likelihood, these events will not cause much volatility, and may even play in favor of the Dollar on some possible hawkish comments, considering the strong data last week. Though unlikely, possible dovish remarks from
Powell could be about risks to the economy with the coronavirus in frontal focus in this regard.
The week ahead features no big tests for the Dollar, and thus, the positive momentum from last week is likely to carry on. There is, however, the release of CPI inflation, retail sales, and the UoM consumer sentiment index at the end of the week (Thursday and Friday).
Barring any big disappointments in these reports, King Dollar is likely to extend the move higher sooner or later. The retail sales report will be most closely watch, where a strong reading should confirm the USD rally. The DXY (Dollar) Index looks poised to reconquer the September/October 99.25 highs and even exceed them.
Euro Fundamental Outlook: Slump In German Manufacturing Persists; EUR Slips
The Euro was, among else, hit last week by bad German factory orders and industrial production data. The industrial production release for the whole of the Eurozone is due this Wednesday, but chances are it will confirm the weakness seen in the German report.
The focus on the EUR calendar this week will be on the flash GDP reports from Germany and for the whole Eurozone on Friday. There is not much hope for positive surprises here, and in fact, traders will be watching for possible worse than expected numbers that may add fuel to the Euro’s downtrend.
ECB President Lagarde will also speak before the European Parliament on Tuesday. So far, we learned that she doesn’t like to give off cues or biases before the facts are straight and clear, so this event is unlikely to trigger large moves in markets.
The coronavirus is something that everyone is closely watching, including European policymakers. Any significant hit on the Chinese economy from the coronavirus will likely transfer into the European economy to a large extent, mainly because of the close trade links between the two economies.
Overall, trading sentiment toward the Euro currency is negative and is likely to persist this week, unless some unexpected event/development changes that.
EURUSD Technical Outlook:
The weekly timeframe is clearly bearish and points to further losses for the EURUSD pair this week. Technical support levels were broken in recent weeks, and now the road to lower prices is clear.
We should be careful at these levels in EURUSD, though, as previous such instances in the past 18 months resulted in bounces as soon as new lows were achieved. Nonetheless, the recent price action does suggest that new lows for the cycle will be reached and that puts 1.0850 at least as a realistically reachable level.
Looking at technical levels, the September/October lows around 1.09 are the first notable support to the downside, ahead of the 1.08 zone. The support trendline of the 18-month bearish channel is also near the 1.08 level, although it runs slightly below it.
To the upside, the 1.10 and 1.11 levels are the key resistances, with 1.11 becoming increasingly important as the falling trendline of the weekly channel closes in on it.
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