Daily Price Outlook
The EUR/USD is currently trading at 1.0547, attempting to extend the recovery from a two-month low achieved on the previous day. However, mixed data from the US and the Eurozone, combined with the cautious sentiment surrounding Friday's employment report, have limited the recent movements of the Euro currency pair.
ECB Rate Hikes Expectations
On Wednesday, the focus was on the European economy, with several reports being closely watched. In January, German retail sales saw a decline to -6.9% YoY from -6.4% in December, but industrial production growth surged to 3.5% from the predicted 1.4% and -2.4% in December, indicating a robust recovery.
On the other hand, Eurozone's Q4 Employment Change dropped to 0.3% QoQ, falling below market predictions of 0.4% and previous readings. Additionally, the seasonally adjusted GDP eased to 1.8% YoY in the same period, compared to market predictions of 1.9%.
Following these statistics, ECB Governing Council member Ignazio Visco emphasized the importance of prudent monetary policy and stated that data should be used to influence monetary policy.
Despite his hawkish stance and support for gradual rate rises, Christine Lagarde, the president of the European Central Bank, has already announced an increase in rates by 50 basis points at the March monetary policy meeting, citing concerns about high inflation.
With rising concerns about inflation in the Eurozone, investors are anticipating further rate hikes from the ECB, resulting in significant bids for the Euro.
Jerome Powell Testimony
On the other hand, the US Goods and Services Trade Balance decreased to -$68.3B, compared to analysts' estimates of -$68.9B and the prior reading of -$ 67.2 B. The US JOLTS Job Openings for January increased to 10.824 million, exceeding the anticipated 10.6 million but down from the previously revised 11.234 million.
The US dollar remained steady throughout the day, although it has fallen from its three-month high, as Federal Reserve Chairman Jerome Powell did not provide any new information during his second day of testimony before Congress. As of now, the US Dollar Index (DXY) is trading at 105.61.
BlackRock, the largest asset manager in the world, predicts that the US federal funds rate will reach its peak at 6%, following a warning from Fed Chairman Jerome Powell that interest rates are likely to rise more than initially anticipated by the central bank.
Federal Reserve Chair Jerome Powell reiterated his hawkish stance during his testimony in front of the House Financial Services Committee. Powell indicated that the central bank had misjudged the strength of GDP and inflation, emphasizing the importance of data in the Fed's decision-making process.
EUR/USD traders are eagerly anticipating Friday's US jobs data, which may provide further clarity on the direction of the pair.
EUR/USD Intraday Technical Levels
Pivot Point: 1.0549
EUR/USD – Technical Outlook
The EUR/USD pair tested the exponential moving average (EMA) 50 in mildly bearish trading yesterday. However, stochastic is now gaining positive momentum, indicating a potential resumption of the main bullish trend with a next target of 1.1030.
We maintain a positive outlook for the near future, but it should be noted that a break below 1.0845 could lead to a test of the 1.0745 zones before attempting to rise again.
Today's trading may vary between the support level of 1.0800 and the resistance level of 1.0970.
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