Two trades to watch: EUR/USD, Oil

Fiona Cincotta
By :  ,  Market Analyst

EUR/USD falls ahead of euro zone retail sales

EUR/USD is holding steady below 1.08 at the start of the week after falling over 1% on Friday after US nonfarm payrolls smashed expectations with 517,000 jobs added and an expected decline in unemployment to 3.5%, its lowest level since May 1969.

A risk of tone in the market is helping the US dollar and weighing on the euro at the start of the new week as US–China tension escalated over the weekend.

Data from the eurozone it's also in focus today hey and could influence the pair amid a quiet U.S. economic calendar.

German factory orders rose by 3.2% MoM, ahead of expectations of 2% and up from -4.4% in November.

Looking ahead, eurozone retail sales are expected to drop in December by 2.5%, down from an 0.8% rise in November, as consumers remain squeezed by high inflation and rising interest rates.

Meanwhile, Sentix investor sentiment is expected to improve again to -11.8, up from -17.5.

Where next for EUR/USD?

EUR/USD has broken below the rising trendline dating back to early November but is holding above key support at 1.0765, the May high and the mid-January low. The RSI is neutral at 50, but the bearish crossover on the MACD could hint to further downside.

Sellers would need to break below 1.0760 to extend losses towards 1.0690, the December high. A break below here could bring the 2023 low at 1.0480 into target.

However, if buyers successfully defend 1.0760 then a rise towards 1.0920 could be on the cards, the January high ahead of 1.1033, the 2023 high.

 

eurusd chart

Oil fell 7% last week; where next for the black gold?

Oil prices are edging high after falling over 7.5% last week in its worst weekly performance since the first week of January. The decline marked the second straight week of declines.

Oil prices fell last week as central banks hiked interest rates and after U.S. jobs data smashed expectations raising concerns that hawkish central bank policy could slow global growth. The stronger US dollar, in addition to much higher-than-expected oil inventory data, also dragged on oil prices and overshadowed optimism surrounding the reopening in China. Last week EIA data showed a 6th straight week of inventory build-up.

Today, the price s rising cautiously higher, boosted by comments from EIA Executive Director Faith Birol, who highlighted China’s reopening as a key driver for oil prices. That said, USD strength could limit the tepid gains seen in oil, as risk-off trade boosts the greenback

Where next for oil prices?

After running into resistance at 82.50 at the end of January, the oil price has fallen, breaking below the 50 sma and the multi-month falling trendline. Support at 72,50, the 2023 low has held so far, while the RSI supports further downside.

Sellers would look for a break below 72.50 to extend the selloff to wards 70.30, the December low.

Meanwhile, buyers would first look for a rise back above the falling trendline support at 75.80 and the 50 sma at 77.40 to bring 80.00 the psychological level into focus ahead of 82.50 the 2023 high.

 

 

 

oil chart

 

Related tags: Trade Ideas Oil EUR/USD

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