Yesterday, the dollar reacted calmly to the data on US producer prices, as well as to the report of the Fed. Meanwhile, the overall downward trend of EUR/USD remains, even though a nondescript attempt for a correction was made at the end of the North American session on Wednesday, February 19.

EUR/USD

The producer price index (PPI) in the US showed an increase in January. According to the US Department of Labor, compared to the previous month, producer prices rose by 0.5% in January, while economists had expected it to rise by only 0.1%. As for the basic value of the indicator, the growth amounted to 0.5%. It grew by 2.1%, as compared with January 2019, while in November, the annual growth was 1.1%. Although the increase in inflation after the Fed lowered the interest rates last year is quite reasonable, the longer-term outlook for the indicator is more important.

Yesterday, the minutes of the Fed's January meeting was published. Executives labeled the coronavirus as a new risk to the global economic outlook. Trade was also discussed, as despite the first phase of the agreement between US and China, the spread of the virus may create additional uncertainty in this area. As for the future of interest rates, the views within the Committee have not changed. Decisions will be made based on the analysis of incoming data, since the current monetary policy has a positive impact on the economy so far.

As for REPO operations, several Fed officials noted the possibility of keeping them on a permanent basis, as this will significantly reduce the demand for reserves, as well as not have a serious impact on the monetary policy. Fed economists also revised their forecasts for US GDP growth in 2020 and 2021, after reaching a first-phase trade agreement with China. They also expect a further drop in the unemployment rate this year.

A number of reports on the US construction sector were also published yesterday. According to the U.S. Department of Commerce, compared to the previous month, new home sales in the United States fell by 3.6% in January, and amounted to 1.567 million homes a year. Economists had expected that it will fall by 11.7% and amount to 1.42 million. Meanwhile, compared to the previous month, the number of permits increased by 9.2%, and amounted to 1.551 million homes per year.

The report from Redbook regarding the retail sales did not affect the market. According to the data, compared to the same period in 2019, retail sales in the United States, for the first 2 weeks of February, decreased by 0.2%, while for the week of February 9 to 15, it increased by 5.7%.

From a technical point of view, nothing has changed in the EUR/USD pair. All that can be expected is the pair's return to the resistance area of 1.0830, since it is only above this range can a larger growth in the area of the highs of 1.0860 and 1.0890 happen. However, if the pressure on the pair continues, the breakout of the support at 1.0780 will lead to an update of the lows at 1.0740 and 1.0680.

GBP/USD

The British pound is acting opposite the expectations of the market participants. After yesterday's inflation data, many people assumed that the Bank of England will leave interest rates unchanged, as it is likely that the country will have enough new fiscal stimulus measures, which will soon be announced by the new Finance Minister. According to the CME Group report, market participants estimate a 27% probability that in May, the Bank of England will decrease the key rate from the current level of 0.75% to 0.50%. Regardless, a number of experts still expect the central bank to resort to monetary easing, although much will depend on the development of the negotiations between UK and EU regarding their trade agreement.

Meanwhile, the pound has shown a sharp decline. If the bulls do not receive the necessary support after good statistics, we can expect a further decline in the pound to the lows of 1.2830 and 1.2760. Although the return of the pair to the resistance area of 1.2970 may slightly improve the overall picture, the market will remain on the sellers' side.

CAD

The loonie positively accepted the report that the annual inflation rate in Canada accelerated in January. According to the data, Canada's overall consumer price index rose by 2.4% in January 2020, while economists had expected it to increase by 2.3%. Going beyond the target level is a bad signal for the Bank of Canada, which in January, following the results of the next meeting, left its key rate unchanged at around 1.75%. Its further decline may add to inflationary pressure. The Central Bank Governor, Stephen Poloz, pointed to the possibility of lowering rates, if the prospects for the Canadian economy worsens.

As for the technical picture of the USD/CAD pair, the bears became less active after the downward correction, which has been observed since February 10 this year at the level of 1.3215. Apparently, the fight for the resistance level of 1.3240 is now developing, wherein a breakout of which will open the possibility of an upward correction to the area of the highs at 1.3280 and 1.3305. An unsuccessful attempt to rise above 1.3240 will lead to a decline once again in the area of the week's lows, as well as to their update in the support area of 1.3190.