Quotes of the European currency continue the local downward dynamics around 1.0720 against the backdrop of the recovery of the American dollar after the publication of January inflation data, as well as the deteriorating situation in the EU economy.
Eurozone Gross Domestic Product (GDP) data for the fourth quarter of 2022, released yesterday, showed a 0.1% increase on a monthly basis, which led to a slowdown in annual dynamics from 2.3% to 1.9%. The only positive factor can be considered an increase in Employment in the fourth quarter by 0.4%, which exceeded the 0.2% expected by analysts. As a result, the average Employment Rate in the EU was 165.072 million, higher than the 164.487 million recorded in the previous quarter.
In turn, the American currency stopped growing, holding at 103.300 in the USD Index. Inflation in the US corrected from 6.5% to 6.4%, but the pace of its slowdown was not enough for the US Federal Reserve to soon refuse to further raise the interest rate. Given yesterday's report, the regulator may decide to tighten monetary policy in order to start putting pressure on consumer prices again. Borrowing costs above 5.00% could send the US economy into recession.
On the daily chart, the EUR/USD pair continues its corrective movement, holding below the support line of the local ascending corridor with dynamic boundaries of 1.0850–1.1120.
Technical indicators have already reversed and issued a new sell signal: fast EMAs on the Alligator indicator began to actively move away from the signal line, and the AO histogram is forming new downward bars, falling below the transition level.
Support levels: 1.0650, 1.0520. | Resistance levels: 1.0780, 1.0920.