The EUR/USD currency pair fell to its lowest level of the year following positive fundamental US economic data as the latest attempt of risky asset buyers to build an upward correction failed. The correction has not been seen since the beginning of February this year.
The manufacturing activity in Philadelphia grew at a faster pace which helped the US dollar to strengthen against the euro and other currencies. According to the report, manufacturing activity skyrocketed to 36.7 in February from 17 in January indicating the highest growth in three years. Economists expected the index to fall to 8 points. Fed's index for future business activity for the next six months climbed to 45 points.
The Conference Board also released a report that showed good economic performance in the US. The Fed representatives have been constantly mentioning this fact lately. According to the Conference Board, the index climbed to 112.1 points, or by 0.8 percent in January after falling by 0.3 percent in December 2019. The Conference Board said that the growth was influenced by the good situation on the labor market, as well as by increased consumer expectations for the economic outlook.
The data on the number of initial jobless claims in the US last week did not affect the market. Despite a slight uptick, unemployment remained at historically low levels. According to the US Labor Department, initial jobless claims increased by 4,000 to 210,000 for the week ended on February 15. Economists had expected jobless claims to inch up to 210,000. The number of people receiving ongoing unemployment assistance rose by 25,000 to 1.726 million in the week ended on February 8.
As I mentioned above, the Fed representatives reported again on the good economic situation in the US. Richard H. Clarida, Federal Reserve Vice Chairman, said yesterday that the economic and fundamental data in the US, as well as the labour market, are strong, reflecting the good state of the US economy. However, the monetary policy will remain loose, despite the fact that the uncertainty surrounding the trade policy has decreased, and the impact of the coronavirus on the economy will be insignificant.
As for technical analysis for the EUR/USD pair, the bulls are protecting the level of 1.0785. No active purchases by major market players are observed. If the price breaks through the level of 1.0785, the downward trend may resume which will push the pair to test the lows of 1.0740 and 1.0700. The long-term bearish target is 1.0500, the lowest level of 2017. The formation of the upward correction will be possible only after the pullback to the level of 1.0820. Risky assets will be able to get to the highs of 1.0860 and 1.0890.
Today, a report on business activity in the manufacturing and services sector of the eurozone is likely to shape the trend in the EUR/USD pair. Weak data can become another catalyst for a sale-off in the risky assets. Reports will be released during the first half of the day.
