EUR/USD Pressured After its Best Week in Nearly 2 Years
ECB
The European Central Bank (ECB) did not make any changes to its policy on Thursday but Ms Lagarde appeared more worried about Inflation and did not rule out rate hikes this year, refraining from repeating her June comment, that rate hikes would be very unlikely in 2022.
This constitutes a significant shift in rhetoric that perhaps open the door for lift-off this year, which caused the common currency to rally.
As reported by Reuters, Dutch Central Bank President and ECB member Klaas Knot, pressed on that front on Sunday, saying that he expects the ECB to raise interest rates in the fourth quarter of this year.[1]
US NFPs
The ECB remains far behind its US counterpart on the monetary normalization process, since the Fed is expected to end its asset purchases and hike rates next month. The conversation has been shifting towards the size of that increase and Friday's NFPs results help the case for a larger 50 basis point hike.
The US economy added 467K jobs in January, blowing past estimates, while December's disappointing +199K print revised higher, to +510K.
The participation rate picked up to 62.2%, while average hourly earnings rose 5.7% year-over-year, further fueling inflation fears.
EUR/USD
The US jobs report boosted the greenback on Friday, but it wasn't enough to spoil the Euro's party, since it did not avert a profitable day and the best week since March 2020.
Today however, the pair comes under pressure and the Relative Strength index breaks below 50. Furthermore, its previous failed push for the 1.1500 in January, had sparked a decline and new 2022 lows.
As such, it is vulnerable to the EMA100 (1.1370), although it may be early for a deeper correction below the 38.2% Fibonacci of the "January Low/February High" advance at 1.1345
Despite today's slide, bulls now have near-term control and above the 1.1370-45 area, they can push for fresh highs, towards 1.1523, but we remain cautious about the upside.
After an eventful week, the new one starts with no major economic releases, but Ms Lagarde testifies in the European Parliament later in the day.
Nikos Tzabouras
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 27 May 2023 https://www.reuters.com/business/finance/ecbs-knot-sees-first-interest-rate-hike-fourth-quarter-2022-2022-02-06/ |
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