EUR/USD analysis: Central Banks' imbalances back in play

Valeria Bednarik FXStreet

EUR/USD Current price: 1.0680

The EUR/USD pair closed the day marginally lower in the 1.0620 region, weighed mostly by the ECB´s latest monetary policy announcement. Mario Draghi offered a quite dovish statement, unimpressed by the up-tick in inflation from last December, acknowledging that it was mainly driven by rising energy prices. After keeping the ongoing policy unchanged, the statement accompanying the decision showed that policy makers believe that risk remains towards the downside, and that QE could be extended "if the outlook becomes less favorable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation." The ECB's stance contrast with FED's hawkish stance, reinforced by comments coming from Janet Yellen late Wednesday and US data released this Thursday.

According to official releases, US weekly jobless claim fell to their lowest since November 1973, down to 234K in the week ending January 13. The Philadelphia Manufacturing Index came in at 23.6 for January from previous 21.5, while Housing Starts advanced in December to 1.226M alongside with Building Permits, although these lasts, rose by 1.210M, less-than-expected.

The EUR/USD pair fell down to 1.0588 as an immediate reaction, but managed to bounce back afterwards, unable however to regain the 1.0650 level. Despite ongoing dollar's weakness amid political uncertainty linked to upcoming Trump´s policy, the case for a bullish EUR has suffered a major setback this Thursday, as Central Bank imbalances have become more evident. Still, and from a technical point of view, the pair needs at least to break below 1.0565, the 23.6% retracement of the November/January decline to get closed to resume its slide. In the 4 hours chart, the price has broken below a bullish 20 SMA, the Momentum indicator heads south within negative territory, whilst the RSI indicator consolidates around 46, increasing chances of a downward continuation for this Friday.

Support levels: 1.0650 1.0610 1.0565

Resistance levels: 1.0710 1.0750 1.0800

View Live Chart for the EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold: Volatility persists in commodity space

After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.

Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms

US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.