EUR/USD analysis: weakness will likely persist

Valeria Bednarik FXStreet

EUR/USD Current price: 1.0530

The negative impact of the FOMC's Minutes on the dollar, was partially offset by a mixed employment report, released on Friday. The US created 156,000 new jobs last December, below market's expectations of 178K, whilst the unemployment rate ticked up from 4.6% to 4.7%. Wages, however, surprised to the upside, as average hourly earnings grew by 2.9% in December from previous 2.6%, its highest rate of growth since June 2009. On a monthly basis, hourly earnings rose by 0.4%, against previous month's decline of -0.1%. Gains in salaries somehow reaffirmed FED's conviction of the labour market's strength.

The EUR/USD pair initially advanced to 1.0619 with the news, its highest for the week, but finally ended the day around 1.0530, as dollar buyers returned once the dust settled and realizing that the figures are not enough to take the FED out of the tightening path presented last December. News coming from the EU on Friday showed that business and consumers sentiment for December remains strong, as the Economic Sentiment Indicator for the region increased to 107.8 from an upwardly revised 106.6, in line with the upward momentum of the economy seen late 2016.

From a technical point of view, the pair failed to hold on to gains above 1.0600 for a second consecutive week, whilst posting a lower high. Additionally, the price was unable to establish above the 23.6% retracement of the November/January decline, at 1.0565, suggesting that weakness will likely persist. In the daily chart, the price is currently above a bearish 20 DMA, around 1.0445, but far below sharply bearish 100 and 200 DMAs, whist technical indicators have turned modestly lower within positive territory, indicating that the pair may resume its decline on a break below the mentioned 1.0445 dynamic support. In the 4 hours chart, a bullish 20 SMA stands a few pips below the current price, the RSI indicator has lost directional strength within neutral territory, while the Momentum indicator retreated sharply from overbought territory, but still holds above 100, also suggesting that further signs are needed to confirm a steeper decline.

Support levels: 1.0530 1.0490 1.0445

Resistance levels: 1.0565 1.0615 1.0650

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.

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