Market Analysis – EURUSD
The EURUSD is correcting slightly against the US Dollar during today’s Asian session, trying to recover from a three-day “bearish” rally, which resulted in the instrument renewing its lows since November 11, 2020. Even with the bullish movement seen this morning the price action is still bearish when looking at the larger time frames such as the 4 hour and daily charts. The movement may also be partially technical as the instrument has been declining since the 18th of March. Traders are now concentrating on whether the movement will remain as a retracement or develop into a correction.
Some support for the pair is still provided by macroeconomic data from the Eurozone on business activity, which stand out especially against the background of the difficult epidemiological situation in the region. Many European countries are forced to maintain significant restrictions on travelling and the work of small and medium-sized businesses, which slows down the process of economic recovery. Problems with vaccination against the background of the temporary ban of the drug from AstraZeneca and the bureaucratic delays in the process of approving the Russian Sputnik V vaccine have negative effects as well.
Investors are currently focused on the European Council summit, where on Thursday the prospects for maintaining the current restrictions were actively discussed. The leaders of European states preferred to abandon secondary political issues and concentrate on the problems of vaccination and the pandemic in general. Gfk (Germany’s largest market research institution) spokesman Rolf Bürkl said that a new round of tightening quarantine measures could undermine consumer confidence and the current improvement will go unnoticed. Bürkl said it will take a long time to rebuild trust, and retailers and manufacturers are facing tough times ahead.
Investors are focused on the comments of the US Fed Chairman Jerome Powell and the release of positive economic statistics. Powell said the launch of the bailout program and the widespread distribution of the vaccine is allowing the US economy to recover faster than expected. As employment and inflation rates begin to approach targets, the regulator will gradually reduce the number of purchased Treasury bonds and mortgage-backed securities. However, Powell estimates that the process will be “very gradual”. He also noted that now the debt burden on the economy is not critical, but later Congress will have to deal with this issue
US GDP data for Q4 2020 released yesterday was above investor expectations, a major positive for the US and its economy. The economy grew by 4.3% instead of the expected 4.1%. The number of initial jobless claims also fell more than the market expected, from 781,000 to 684,000, again another major win for the USA. Experts believe the government aid package has spurred an increase in hiring, which will result in a revival in the labour market. In addition to this, the stimulus has also changed the consumer confidence levels as well as the lower and lower-middle-class family financial confidence levels.
Yesterday the US Dollar had completed the day on a major win with the index closing at a new year high of 92.885. Over the last 24 hours, the Euro strengthens against the Yen but is weakening against the Pound, Australian and New Zealand Dollar. The price movement of the EURUSD itself has not yet passed any major significant price levels during its bullish movement over the past few hours. Significant levels are stated below via support and resistance levels.
Resistance levels: 1.17875, 1.1800, 1.1834, 1.1900, 1.1950.
Support levels: 1.1744, 1.1700, 1.1657, 1.1600.