General analysis EURUSD for 08.02.2022
Current dynamics
The European currency is showing a minimal decline against the U.S. dollar this week. This dynamic may be considered as a correction of the uptrend, but several arguments are pointing to a larger price movement within 1-2 weeks. The pair gained heavily on Thursday after ECB head Christine Lagarde acknowledged the inflationary risks and said she was ready to introduce changes to the monetary policy.
Five rounds of monetary tightening by the Fed are already priced into the market dynamics. The strong labor market statistics, hawkish statements of the Fed officials as well as high inflationary expectations have not influenced the USD upside at the moment. At the same time yesterday, Christine Lagarde was more cautious in her speech than on Thursday. The head of ECB avoided the issue of an interest rate increase, saying that a gradual withdrawal of QE would be enough for the economic recovery, which led to a slight recovery of the Eurozone bonds, as well as a slowdown in the pair's growth. Of course, the monetary policy of the ECB and the Fed are quite different but it is impossible not to take into account the different fundamental conditions, e.g. the labor market. The US labor market is quite active, employers are hiring and firing much more often than in the EU, which has implemented a program to save jobs during the pandemic. U.S. employers are forced to raise wages, increasing the price pressure in the economy, while labor market conditions in the Eurozone did not require employers to incur additional costs.
Today at 3:30 p.m. (GMT+2), the U.S. trade balance data for December will be released. Germany will publish similar statistics tomorrow at 09:00 (GMT+2). U.S. employment and inflation data will be released on Friday.
Support and resistance levels
On the 4-hour chart, the instrument is testing the Bollinger Bands Moving Average, which is a strong resistance level. The indicator is directed upward and the price range remains wide, indicating a continuation of the uptrend. MACD histogram is in the positive zone, maintaining a weak buy signal. Stochastic is preparing to enter the oversold area, a strong buy signal may be formed within 1-2 days.
- Support levels: 1.1305, 1.1345, 1.1375, 1.1400.
- Resistance levels: 1.1425, 1.1460, 1.1480, 1.1500.
Trading scenarios
- Long positions can be opened above the level of 1.1435 with a target of 1.1500 and a stop-loss at the level of 1.1390. Implementation period: 1-2 days.
- Short positions should be opened below the level of 1.1395 with a target of 1.1345 and a stop-loss at the level of 1.1425. Implementation period: 1-2 days.