Today, the foreign exchange market is "semi-exiting": The United States celebrates the Day of the Presidents, and China continues to celebrate the Spring Holiday (Chinese New Year). Therefore, the main dollar currency pairs started the trading week with a flat - with the exception of the pound-dollar currency pair which is already testing the 39th figure. The Briton reacted positively to the reports from the front of the fight against coronavirus: the rate of spread of coronavirus in the country is gradually slowing down, while the number of vaccinated people, on the contrary, is growing. In response to such trends, the authorities have already started talking about easing the quarantine restrictions that have been in effect since the beginning of November.
In Europe, the incidence of coronavirus is also declining: a downward trend has been recorded over the past four weeks. But this fundamental factor has a limited impact on the EUR / USD currency pair, as many European countries have decided to extend the quarantine until at least March, despite the positive trends. Therefore, traders of the pair are now focused on other fundamental factors. First, this is the general level of interest in risk and anti-risk assets; second, the macroeconomic reports from Europe and the United States.
As for the political factors, the situation is unipolar: in favor of the risky euro and against the safe dollar. In particular, the short-lived impeachment process of Donald Trump has ended in the United States. The senators expectedly acquitted the 45th president, clearing him of all charges. Now Trump will be able to run for the # 1 post again in 2024. But in Europe, another political drama ended with a "happy ending". Former ECB president Mario Draghi "stitched" a broad coalition, formed and headed by the government, preventing the dissolution of parliament and early elections. In other words, Italy was able to avoid the worst-case political scenario, thereby supporting the euro.
Against the background of such news, the US dollar index continued to decline at the start of trading following the trends of the past week. The indicator is heading towards the bottom of the 90th figure, reflecting the weak position of the greenback throughout the market. And if the macroeconomic reports of the coming days are also "unipolar", the index will go below the psychologically important mark of 90.00.
As mentioned above, today the American and Chinese trading platforms are closed. This means that the market will start working in full force tomorrow - even though on Tuesday the economic calendar for the pair is not eventful. The main macroeconomic news will come from Europe, where the February ZEW indices will be published. Both in Germany and in the eurozone as a whole, negative dynamics are expected.
Thus, the German index has consistently increased since November, reaching 61.8 points. Today, experts are pessimistic: the prolongation of the lockdown, Lagarde's "dovish" rhetoric, slowing inflation, weak German data - all these circumstances cannot but affect the mood of entrepreneurs. Therefore, according to the general opinion of experts, the indicator will slow down to 60 points. The pan-European indicator has been growing in the same way for three months, but a slight pullback is expected in February to 57.8 points. But here it is worth noting that if the real figures coincide with the forecast values, the European currency will stay afloat. If the downward trend is more extensive, the EUR / USD pair will get a reason for its corrective decline.
The US will publish data on retail sales on Wednesday. In December, this remained indicator in the negative area, reflecting the weak consumer activity of Americans. In January, it is expected to grow: the overall indicator should increase to 1.1%, excluding car sales to 0.9%. If this indicator again comes out in the "red zone", the dollar will definitely fall under the wave of sales. Also on Wednesday, the Producer Price Index (PPI) will be published, which is an early signal of changes in inflationary trends. Recently, it has been showing positive dynamics, and in January, again, a small increase is expected - both in monthly and annual terms. Excluding food and energy prices, this indicator should also remain above zero (0.2% mom and 1.3 yoy).
Another important document will be published on February 17. We are talking about the minutes of the January meeting of the Federal Reserve. Here it is necessary to recall the last speech of Jerome Powell. Speaking at the economic forum last week, the head of the Federal Reserve did not sound any clear signals. His speech was balanced: on the one hand, he did not announce an expansion of QE, on the other hand, he made it clear that the current situation does not encourage talk about curtailing incentives. If the Fed minutes are balanced in a similar way, the dollar is likely to ignore the release. But if the balance is shifted to one side (hints of QE expansion or early termination of stimulus programs), the greenback will react accordingly. Given the previous macroeconomic reports and the rhetoric of most representatives of the Federal Reserve, we can assume that the minutes of the January meeting will be "dovish" in nature. It is also worth noting that this week, as part of various events, many representatives of the US regulator will speak such as: the heads of the Federal Reserve Bank of Atlanta, Kansas City, Dallas, San Francisco, Richmond and Boston.
The final chord of the trading week will be the PMI indices. If these releases follow the ZEW trajectory, the euro will be under additional pressure. In general, experts expect a negative trend especially in the service sector. As for the manufacturing sector, there is a minimal slowdown compared to the previous month because the indices will still remain above the key 50-point level. The very fact of a negative trend may slightly increase the pressure on the single currency. But if the release is in the "green zone", then in this case, the single currency will receive broad support, due to the surprise factor (while the pessimistic result is already partially taken into account in prices).
From the technical point of view, buyers of the EUR/USD pair still need to overcome the resistance level of 1.2150 (the upper line of the Bollinger Bands indicator on the four-hour chart) to open the way to the main goal of the northern movement – the mark of 1.2200 (the upper line of the Bollinger Bands on the daily chart, coinciding with the upper border of the Kumo cloud). After overcoming this target, the Ichimoku indicator will form a bullish signal "Line Parade": in this case, we can talk about reaching the upper line of the Bollinger Bands already on the weekly chart (1.2350). It is advisable to open longs after the EUR/USD bulls gain a foothold above the first resistance level, that is, above the 1.2150 mark.
