Euro Asserts Strength Following U.S. Nonfarm Payroll Data
InstaForex Group | Jan 10, 2022 05:58AM ET
The euro managed to add gains following the eurozone macroeconomic stats. However, it started moving up noticeably only after the publication of the US nonfarm payrolls report. Traders seemed to ignore the euro area’s inflation and retail sales data. Inflation grew to 5.0% from 4.9%, while economists had expected a reading of 5.1%. The figure turned out to be quite positive, especially given market fears of inflation constant growth.
Perhaps investors believe that inflation has stabilized and it is unlikely to climb higher. Some analysts even expect its drop in the near future. Apart from that, retail sales jumped as much as 7.8%. Notably, economists predicted a rise to 5.1% from 1.7%. This was the November reading. It means that retail sales could have risen even more in December amid a seasonal surge in consumer activity ahead of the Christmas holiday.h2 EU inflation
The US NFP report stirred up market activity. The single currency resumed an upward movement immediately after its release. It was rather strange given that unemployment dropped to 3.9% from 4.2% versus the forecast reading of 4.0%. Nevertheless, the report turned out to be quite upbeat and the US labor market improved significantly. Market participants paid attention largely to the number of new jobs created outside the agricultural sector.
The economy added only 199,000 jobs instead of 425,000 expected by analysts. Yet, even this increase is quite a positive sign. The labor market has shown levels close to those observed in late 2019 - early 2020. Back then, the labor market was the healthiest and most stable in its entire history. Besides, the current number of new jobs is quite enough to keep unemployment under control. So, conditions in the labor market are unlikely to worsen. Therefore, the content of the report is quite optimistic.
h2 US NFP report:Curiously enough, the euro managed to rise only to the upper limit of the range. It has been unable to break through this range since November. As a result, it was hovering at the same level. Today, it reversed downwards. Like on Friday, traders may ignore economic reports from the eurozone. Thus, the expected positive jobs report from the EU is unlikely to affect the market sentiment. The euro will gradually decline to the levels at which it was trading before the publication of US NFP data.
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The EUR/USD pair failed to break through the 1.1225/1.1355 sideways channel. The quotes are still hovering within the indicated range. It signals uncertainty among market participants who cannot push the price out of the sideways channel for more than 6 weeks.
On the 4H chart, the RSI indicator shows the formation of a flat as there is no intersection of 30 and 70 control lines. At the same time, the Williams Alligator indicator has a constant intersection between moving averages, indicating the lack of a trend.
On the daily chart, the price slowed down its decline due to the sideways movement. However, bears are still holding the upper hand.
h2 Outlook/h2In the current situation, traders should pay attention to the rebound from the sideways range. Thus, there could be a price reversal relative to the recent momentum. As for the breakout strategy, wait until the price approaches either 1.1220 or 1.1400. It will indicate the completion of the sideways movement and the prevailing trend.
The complex indicator analysis gives a sell signal on short-term and intraday charts due to the price rebound from the upper boundary of the sideways channel.
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