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EURUSD: price stabilising near the balance line

On Thursday, January 30, the euro was up at the close of trading. In the American session, the rate rose to 1.1039. This was down to the strengthening of the British pound against the US dollar, a reaction to announcements made by the Bank of England concerning interest rates.

The decided to keep the basic rate at 0.75% per annum and maintain the current duration of the government bond purchase program. It had been expected that three members of the Monetary Policy Committee would vote for the rate to be cut, in fact only two voted for a cut. Also, interest rate futures showed a probability of a 25bp decrease, which did not happen. Bank of England Governor Mark Carney said the rate cut many investors predicted would increase inflation above a key level. The regulator’s report notes that after the December parliamentary elections, there has been an acceleration in economic growth.

Q4 GDP coincided with market expectations. Investors were disappointed that the US economy showed sluggish annual growth. After the Bank of England meeting, the report had a mild impact on the foreign exchange market.

Today’s news (GMT 3):

  • 09:30 France: Gross Domestic Product (QoQ) (Q4).
  • 10:30 Switzerland: Real Retail Sales (YoY) (Dec).
  • 12:30 UK: Net Lending to Individuals (MoM) (Dec), Mortgage Approvals (Dec).
  • 13:00 Eurozone: Gross Domestic Product s.a. (QoQ) (Q4), Consumer Price Index (YoY) (Jan).
  • 16:30 Canada: Gross Domestic Product (MoM) (Nov).
  • 16:30 USA: Core Personal Consumption Expenditure - Price Index (MoM) (Dec), Personal Spending (Dec), Personal Income (MoM) (Dec).
  • 17:45 USA: Chicago Purchasing Managers' Index (Jan), Michigan Consumer Sentiment Index (Jan).
  • 21:00 USA: Baker Hughes US Oil Rig Count.

Рис. 1

Current situation:

Expectations for yesterday's movement were fully justified. The price technically recovered to the trend line (1.1039), from which it returned to the 1.1017 mark. The pullback amounted to 50% of the growth from 1.0992 to 1.1039. The 50-percent level was strengthened by the balance line. At the time of writing, the euro is worth 1.1023. Technically, continued growth should be considered, however today is Friday, and given the difficult situation in China, pressure on the euro may increase. According to the latest data published by the Ministry of Health of the People's Republic of China, the number of people infected with viral pneumonia has reached 9,776 people ( 25.6%). The number of deaths from the disease rose to 213 ( 25.2%).

At an emergency meeting, the World Health Organization (WHO) recognized the novel coronavirus as a international emergency. Many airlines around the world decided to partially cancel flights to China.

The background news isn’t helpful for the single currency, but according to technical analysis, growth should be considered. Since the stochastic is in the oversell (buy) zone, according to the forecast, we can expect growth to the trend line, before seeing a decline back down to 1.1008 in the US session.

It is not known how market participants will react to the publication of the Eurozone Q4 GDP data and Consumer Price Index for January, which will be released at 13:00 Moscow time. Both will have a strong impact on the market.

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