EURUSD: Weekly Review 09-13 January

Last week EURUSD saw a loss of -0.48%, after Friday’s increase of +1.19% in the weekly single hanging man candle pattern. The Euro recovered from a 4-week low and rallied sharply, after the Dollar was sold on the weak US December ISM services report. EURUSD initially fell to a 4-week low in previous trades, after the Eurozone December CPI rose less than expected, which is dovish for ECB policy.

December Eurozone economic confidence rose +1.8 to a 4-month high of 95.8, stronger than the expected 94.7. Eurozone December CPI fell to 9.2% y/y from 10.1% y/y in November, weaker than the expected +9.5% y/y. However, December Core CPI rose to 5.2% y/y, stronger than the expected +5.1% y/y. November Eurozone retail sales rose +0.8% m/m, stronger than the expected +0.6% m/m and November German factory orders fell -5.3% m/m, weaker than the expected -0.5 % m/m and the biggest drop in 13 months.

Sunday’s data calendar was subdued, with only a few relatively minor data points, mostly second-tier releases for the euro area, with the main ones being German industrial output for November on Monday and eurozone-wide prints on Friday. Like the Pound, the Euro has shed some of its gains and is off its December highs, but has been more resilient overall, maintaining some of its upward thrust. If the US inflation data misses expectations, the Euro may be able to break the 1.0735 barrier.

All eyes will now be on the ECB meeting early next month, after December inflation data showed price growth slowed significantly but underlying core prices rose.

Technical Review

EURUSD hovered below 1.0500 for the first time since early December ahead of the payrolls report, but rebounded above 1.0600 afterward. Last week, EURUSD fell to 1.0481 due to an extension of consolidation from 1.0735. On the downside it held the resistance-support 1.0481. Bias early this week remains neutral with a strong break of 1.0735 likely to continue the entire 0.9535 rebound with a potential to test the 50.0% FR level (1.0941). Nevertheless, a sustained break of 1.0481 would extend the correction to the 1.0289 support and below.

Technically, the corrective wave 0.9535 is still supported, as the price moves above the Kumo and 200-day EMA, while RSI at 57 and MACD divergence bias in the buy zone suggest a temporary weak rally momentum.

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Ady Phangestu

Market Analyst – HF Educational Office – Indonesia

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