EUR/USD hangs in balance ahead of Fed, NFP and Eurozone data
Fawad Razaqzada January 30, 2019 7:35 AM
The FX markets have been rather quiet so far this week. However there have been a couple of exceptions. The pound, for example, fell noticeably yesterday after MPs backed a plan to renegotiate Theresa May’s Brexit deal with the EU, while the Australian dollar jumped on the back of slightly stronger Aussie inflation data overnight. However, the price action on all the other major currencies has been like watching paint dry, not least the EUR/USD. Indeed, the Dollar Index’s range so far this week has been a grand total of… 30 pips. Clearly, market participants have been in no rush to open meaningful positions in FX ahead of the FOMC rate decision tonight and Friday’s US jobs report, not to mention the upcoming Eurozone data, including GDP (Thursday) and CPI (Friday). These events have the potential to move the FX markets sharply, so this could just be the quiet before the storm.
From a technical point of view, we already think that the Dollar Index is looking bearish in the short-term outlook. This makes us slightly bullish on the EUR/USD by default. But taking a closer look at the EUR/USD and we note that the sharp reversal we saw on Friday may have been a game-changer. The brief drop below the 1.13 handle took us to a new low for the year, before rates reversed sharply to rally above the previous resistance at 1.1390. At the start of this week, the EUR/USD has held above this pivotal level but hasn’t exactly rallied away from it. The fading bullish momentum must be disheartening for the bulls. This is typical of a market being stuck in an ugly range, with both the bulls and bears not being in full control. Nonetheless, we have seen two further green closes after Friday’s reversal. The bears would be happy again should rates break below that 1.1390 level again. So far this week, they have just about managed to defend the 1.1440 resistance level. But a potential break through this area could pave the way for a more meaningful rally later on in the week.
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