As a result of the strengthening of the US dollar after the publication of strong statistics on the national labor market, the EUR/USD pair fell to the support level of 1.0700. In January, nonfarm payrolls increased by 517.0K, which was higher than the forecast of 185.0K and the previous value of 260.0K, and unemployment fell to a record level of 3.4% with preliminary estimates of 3.6 %. Without cooling the employment market, inflation is unlikely to return to the US Fed's target of 2%, and the longer it is at peak levels, the more stable it becomes. Soon, regulator officials will have to decide what is more important to maintain: price stability or economic growth.
The European currency practically did not react to macroeconomic statistics from Germany, which was better than forecasts: the consumer price index corrected from 8.6% to 8.7% YoY, while analysts expected it to rise to 8.9%, and was 1.0% MoM after –0.8% in December, compared to forecasts of 0.9%. In turn, the harmonized consumer price index in January slowed down from 9.6% to 9.2%, contrary to forecasts of growth to 10.0%. Thus, in Germany, certain tendencies are being formed to slow down inflation, but in general, in the region, it is kept at high levels. The head of the Dutch central bank, Klaas Knot, said there is a possibility that the base value will rise faster than the total. Therefore, the "hawkish" course on tightening monetary stimulus could continue until May.
Thus, the European Central Bank (ECB) and the US Federal Reserve are at different stages of the same economic cycle: the US regulator is approaching interest rate highs, while this potential has not yet been exhausted in the EU.
Summarizing, we can conclude that the long-term uptrend for the euro continues, and if 1.0700 is maintained, growth will continue with the target at the maximum of the month, around 1.1010.
February began with a corrective decline in quotes, as a result of which 1.0700 was reached. If it is held, growth will continue with the targets at 1.1010 and 1.1170; if it is broken, a correction to 1.0500 is likely.
As part of the medium-term uptrend, target zone 6 (1.1023–1.1002) was reached last week, after which market participants closed large long positions, and the price went into a correction, within which it reached the key trend support 1.0821–1.0799. This week the key support was broken down, and the trend reversed downwards with the target in zone 2 (1.0609–1.0587).
Now the trading instrument is being corrected to test the key resistance of the new trend 1.0902–1.0881, after which it is worth considering new sales with the target at the low of the week 1.0675.
Resistance levels: 1.1010, 1.1170. | Support levels: 1.0700, 1.0500, 1.0300.