In the past week:
GBP: Unemployment Rate (Nov)
EUR: ZEW (Jan)
USD: Continuing Jobless Claims (Jan/11)
EUR, GBP, USD: PMI (Jan)
Last week, the currency market witnessed a slight weakening of the US dollar against major global currencies. Considering the significant appreciation of the dollar in recent months, one might speculate whether this could signal a potential trend reversal. This is especially plausible given that much of the dollar's strength stemmed from post-election optimism in the US, which could gradually be replaced by emerging concerns.
EURUSD: Time Frame D1
The Eurozone showed signs of improving sentiment last week, with the ZEW index for the region improving despite weak readings from its largest economy, Germany. Additionally, Friday's PMI releases for key Eurozone economies confirmed a positive trend, with most readings exceeding prior values.
On the EURUSD D1 chart, there was a significant breakout above the 14 SMA, followed by consolidation (holding support) at this level, and subsequently another breakout above the 50 SMA. This second breakout suggests a potential trend reversal, possibly indicating bullish momentum on EURUSD.
After a deeper correction to the 1.02 level, bullish appetite for gains re-emerged, pushing prices toward higher levels. However, economic uncertainty persists, with mixed signals such as improved sentiment in the Eurozone juxtaposed with inflation data hinting at challenges in curbing inflation further, alongside issues in its largest economy.
Thus, potential EURUSD gains may be gradual. It would be prudent to monitor the daily chart for a pullback to the nearest support level or the 14 SMA after this euphoria subsides. Observing how these levels hold could provide insight into subsequent price movements.
GBPUSD: Time Frame D1
On the GBPUSD D1 chart, last week saw an upward trend similar to EURUSD. The initial impulse reached the 14 SMA, followed by a brief consolidation (defending the level) and a second push to the 50 SMA. However, sustaining this bullish momentum may require more than marginal improvements in economic expectations across Europe. For the pound, last week's data were mixed: fewer jobless claims but a rise in unemployment, weaker confidence indicators, yet better PMI figures.
Thus, a pullback to the 14 SMA level seems more likely. The 50 SMA level, which the price reached, may act as resistance. Similar to EURUSD, any initial upward movement during the European session could be tempered. Adapting trading strategies to this scenario and confirming during the day whether this outlook plays out would be advisable.
USDCHF: Time Frame D1
For USDCHF on the D1 chart, we observed a notable rally from 0.84 to nearly 0.92. Such a significant upward move likely consumed considerable resources, making a sharp decline or a drop without resistance less probable. Instead, a short-term upward move during the day to higher levels could precede continued declines.
This aligns with the trends seen in EURUSD and GBPUSD, where caution is warranted regarding the suppression of potential upward movements. For USDCHF, a further attempt to deepen declines could encounter support and turn into a bullish move, at least to the 14 SMA. If the pair fails to generate sufficient upward momentum, it could confirm the dollar's overall weakness.
Additionally, a weaker day in equity markets, particularly for the DAX and US stock indices, could lend support to the dollar.
Economic Calendar
Key economic data next week:
Monday: USD New Home Sales (Dec),
Tuesday: USD Durable Goods Orders (Dec),
Wednesday: AUD CPI (Dec), CAD BoC Interest Rate Decision, USD Fed Interest Rate Decision
Thursday: EUR Unemployment Rate (Dec), EUR GDP (Q4), EUR ECB Interest Rate Decision, USD GDP (Q4), Jobless Claims,
Thursday: CHF Retail Sales MoM (Dec), USD Prersonal Income/Spending MoM (Dec).
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