19.02.2021: USD to end week lower? Outlook for EUR/USD and GBP/USD
During the European session, traders had the same mood as yesterday in the evening. After the publication of the disappointing data on the US labor market, the greenback began falling against all major currencies.
The British pound is ignoring the current state of affairs in the UK economy. The fact is that it continues gaining in value despite the weak retail sales figures. The indicator dropped by 5.9% after a rise of 3.1% in the previous period. On a monthly basis, the UK retail sales slumped by 8.2%. This, in turn, led to a significant decline in the yearly reading. Moreover, the real data is well below the forecast. Even in the worst-case scenario, economists had expected a slide of 1.3%.
The euro also followed the British pound’s dynamic. It began rising long before the publication of the preliminary PMI data. Importantly, the data exceeded the forecast. The services PMI declined to 44.7 points whereas economists had foreseen an increase to 45.6 points. However, the eurozone manufacturing PMI jumped to 57.7 points. Analysts had expected a drop to 54.5 points. As a result, the composite PMI grew to 48.1 points instead of 48.0 points.
The UK business activity reports turned out to be better than in the eurozone. All three indicators showed a rise. Thus, the UK services PMI advanced to 49.7 points whereas the manufacturing PMI climbed to 54.9 points. As a result, the composite PMI surged to 49.8 points. That is why the ongoing increase in the euro could be explained by such positive data. Notably, both the euro and the pound sterling started gaining in value long before the publication. At the moment of the report release, the dynamic was not that high.
What is more, the European currencies are likely to go on climbing until the end of the trading week. The fact is that the US business activity is expected to decrease. However, despite the drop, the US PMI will still remain higher than the same indicator in the eurozone. This will limit the rally of the European currencies. Now let’s take a look at the trading charts.
The euro/dollar pair failed to keep its downward movement and recouped almost all the losses it has suffered since the beginning of the week.
Analyzing the current chart, we can see that the quote has almost approached the resistance level of 1.2150. This may put pressure on buyers and lead to a decline in the volume of long positions. After that, the pair may slide.
At the same time, some traders expect a signal of the market recovery. However, traders will receive a strong buy signal, only when the pair consolidates above 1.2190 on the four-hour chart.
The pound/dollar pair continues reaching fresh highs of the mid-term trend. It has already touched the psychological level of 1.4000. Such a high speculative activity around the pound sterling has overshadowed all technical and fundamental factors. On the chart, we can see that the quote is hovering within the limits of the psychological level. It is quite possible that the pair will continue trading between the levels of 1.3950 and 1.4050. Traders should enter the market after the price fixes beyond either limit on the four-hour chart.
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