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EURUSD Market Update

2/1/2023 1:43 PM

This week, the EUR/USD pair has corrected down to the middle line of the Bollinger Bands around 1.0860 and is currently trying to resume growth.

The euro's position is strengthened by the differing monetary approaches of the European Central Bank (ECB) and the US Fed. The US regulator, whose meeting will end today, may significantly slow down the pace of interest rate hikes from 50.0 basis percentage points to 25.0 basis percentage points, while the ECB on Thursday is likely to maintain the previous adjustment step of 50.0 basis percentage points. Investors will be more interested in hints about the duration of the tightening cycle of monetary policy in the USA and the EU, which may also differ significantly. Experts believe that, despite the current slowdown in price growth, the US labor market is still too strong and retains the prerequisites for inflationary pressure, so the US Fed may go for two more moderate interest rate hikes (in March and May) before bringing it to a peak level of 5.00-5.25%. Due to high core inflation in the eurozone, the ECB may adjust the value at the same pace during the first half of this year and even further.  In general, the pace of monetary policy tightening and its duration may be more significant for the ECB than for the US Fed, which in the long term will provide greater support for the euro.

We also note that a number of important economic data is expected to be published today. So, in the eurozone, January statistics on consumer prices will be released, which will probably reflect a reduction in the index from 9.2% to 9.0%, and in the USA – on employment from Automatic Data Processing (APD), and, according to forecasts, the indicator will decrease from 235.0K to 178.0K. These results are unlikely to have a serious impact on the market, since they will no longer be taken into account by regulators when making the next decisions.  

Technically, the price is close to 1.0930 (Fibo retracement 50.0%), a breakout of which will give the prospect of further growth to the levels of 1.1100 and 1.1230 (Fibo retracement 61.8%, Murray level [6/8] for W1). The key for the "bears" is the level of 1.0742 (Murray level [8/8]), below the middle line of the Bollinger Bands, when it is broken down, a decline will be possible to the area of 1.0620 (Murray level [7/8], Fibo retracement 38.2%) and 1.0498 (Murray level [6/8]), however, this movement option is seen less likely, since technical indicators point out the continuation of the upward trend: the Bollinger Bands are directed upwards, the MACD histogram is stable in the positive zone, the Stochastic also attempts an upward reversal.

Resistance levels: 1.0930, 1.1100, 1.1200. | Support levels: 1.0742, 1.0620, 1.0498.

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