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The EURUSD rose by +0.22% on Friday as the Euro-Area economic data delivered better-than-expected data. The Trade balance data rose to 16.7B against 11.0B surveyed, while Spanish Services PMI for January came in at 56.7 against 54.3 forecasted. Markets continue to price in a tighter monetary policy by the ECB as Euro-area CPI data rose to 8.5% against 8.2% surveyed, lifting sentiment for the Euro in the near term.
The US index plunged by -0.23% ahead of a slew of US economic data. The bulls retracted from the 105.00 level following a cautious tone by the Fed members yesterday. Earlier in the week, the markets witnessed a drop in the US CB Consumer Confidence to 102.9 vs 108.5 forecasted. Traders take a side watch ahead of the FOMC members Bowman and Bostic’s speeches later in the New York session.
However, upside gains remain limited as investors digest mixed signals between the 2 economies ahead of the Fed rate decision this month. Key data is due for release such as Fed Chair Powell’s testimony scheduled for next week along Euro-Area GDP data. The ISM Manufacturing data will dominate the US economic docket, to the close of the week.
Weekly Chart Analysis
The EURUSD recovered last week’s losses following a bullish bounce at the 1.0550 level, an immediate support level coinciding with a Bollinger Band baseline. The RSI indicator is trading slightly above the 50.00 level suggesting that the pair remains in a bullish momentum although upside gains are capped by the 1.1150 level. A break above that level could reinforce bullish momentum towards the 1.1600 level
However, a break below the 1.0500 level could invalidate the current outlook and turns bias towards a bearish outlook. The next key support levels could be 1.0000, parity level and 0.95200. The 1.0700 level remains a near-term resistance for upside gains and a failure to break above that level could strengthen downside pressure.
The ActivTrader Sentiment tool suggests that 51% of Retail traders are bearish on the EURUSD pair. The bears are pricing in on a stronger dollar following the release of better-than-expected US Jobs data on Thursday. The Euro-Area data released early Friday send mixed signals to investors and maintains a tight cap to upside movement.
However, Euro has steadily recovered following the better-than-expected German Trade Balance for January adding to the positive German Inflation data and Euro-Area CPI. Bulls continue to price in a hawkish stance by the ECB amidst rising inflationary pressure. A hold above 1.0500 could act as a near-term boost for bulls.
Daily Chart Analysis
The EURUSD trimmed major gains from the 1.1000 level towards the 1.0500 level, near-term support. The pair is currently in a corrective phase inside the rising channel and the 1.0500 level remains a key support for a bullish outlook. Extended gains could be expected if bulls challenge the 1.100 level and the next key levels are 1.1200 and 1.1600. The MACD indicator volume bars are currently trading at 0.000 neutral level and a break above that level could suggest a bullish outlook.
However, a break below the 1.0500 could trigger selling pressure towards the 1.0300 level, coinciding with a 200-day moving average. The 50-day moving average remains a dynamic resistance level for bulls trading at the 1.0750 level and a failure to break above that could leave EURUSD susceptible to downward pressure.
