Forex Daily Market Analysis from ForexMart

EUR/USD. January 27, 2021 – Euro declines on negative fundamental background

The EUR/USD pair demonstrates multidirectional trading dynamics on Wednesday, fluctuating in the 1.2100-1.2180 price range. The current quote for the pair is 1.2115.

The euro was under pressure from negative news from Europe. In particular, in Italy, Prime Minister Giuseppe Conte resigned, the index of business sentiment in Germany from IFO dropped again, and Angela Merkel in Germany said that the country's governance had gotten out of control and spoke about the need for stricter restrictions.

Pressure on the European currency is also exerted by Europe's lag behind the United States in the speed of vaccination. Pfizer says it is ready to ship 200 million vaccines to the United States by the end of May (or 2 months ahead of schedule). But the supply of vaccines to Europe is being delayed due to the problems of the Belgian manufacturer AstraZeneca.

Today, the first US Federal Reserve meeting this year will take place and a press conference by Jerome Powell, who is trying to assure the markets of maintaining the monetary policy of the regulator. However, many analysts interviewed are confident that the scale of the QE program needs to be scaled back this year. So, further dynamics of the pair will depend on the results of the meeting.

 

EUR/USD. January 28, 2021 – Euro continues to decline

The euro rate continues to decline on Thursday, the current quotation of the EUR/USD pair is 1.2080. Markets fear that existing vaccines will fail to cope with mutating Covid strains, endangering the prospects for global economic recovery.

Jerome Powell, whose press conference failed to clarify the topic of the Fed's further position and calm the markets, also added negative investors. Although the head of the regulator said that the Fed does not plan to cut QE and will make sure that investors know in advance about the systematic and gradual reduction in the volume of asset purchases. However, market participants did not see a negative assessment of the situation in the general tone of the speech, which provoked dollar purchases.

The euro is also declining in value after the ECB meeting on January 21. Then the regulator announced that it was ready to take action, as it was not satisfied with the high rate of the single currency. And the actions of the ECB are fully justified. According to IMF forecasts, the euro zone will be able to return to pre-crisis levels only by the end of 2022. For comparison, the Chinese economy has already outpaced 2019, and the US economy will return to the trend at the end of this year.

Thus, the pair's downside potential is quite high. During the day we expect further strengthening of the US dollar with the target of 1.2050.

January 28, 2021 – Oil market weakens on concerns about demand prospects

Oil prices began to decline on Thursday amid expectations of a drop in demand due to the continuing rise in the number of Covid-19 diseases and the current restrictive measures. The quotes were not helped either by the data on crude oil reserves in the United States published yesterday: according to the Ministry of Energy, reserves unexpectedly fell by 9.91 million barrels over the week. At the same time, gasoline stocks increased by 2.47 million barrels, while distillate stocks decreased by 815 thousand barrels. Analysts predicted an increase in oil reserves by 430 thousand barrels.

The current Brent quote is $55.18 per barrel. A myriad of concerns about the outlook for demand are putting strong pressure on prices. Moreover, the Chinese authorities are urging their citizens to stop traveling during the Lunar New Year holidays, which is the most active tourist season of the year. And this will inevitably lead to an additional decrease in demand.

Another factor in the weakening of the oil market was a sharp drop in traffic in Los Angeles over the past month due to restrictive measures in California.

 

EUR/USD. February 01, 2021 – Euro declines amid weak statistics

The EUR/USD pair closed last week with a rise to the 1.2150 area. The euro was supported by the GDP data of the leading eurozone countries. In particular, France's GDP growth in December was 23%, exceeding the projected increase by 19%. Spain's GDP in the IV quarter added 0.4%, while experts had expected a decline of 1.5%. Germany's GDP also remained in positive territory at 0.1%. In Germany, in addition, the unemployment rate fell to 6%.

However, today the pair started to decline, which is also explained by the reaction of traders to the latest macro statistics. According to the Federal Bureau of Statistics Destatis, retail sales in Germany were down 9.6% in December from the previous month.

At the same time, the US continues to discuss a new package of measures to help the economy, which puts general pressure on the dollar. Market participants believe that the project will be criticized by the Republicans, who are unhappy with the huge volume and want to reduce it to $600 billion. However, the Ministry of Finance and the Federal Reserve still insist on the need for new incentives. In this case, the pair's rate can rush to new highs.

 

EUR/USD. February 2, 2021 – Euro falls on weak data from Germany

The US dollar continues to trade near local highs in the 1.2050 area. Weak macroeconomic data from Germany put pressure on the European currency.

According to the European statistical agency Eurostat, unemployment in the region remained at 8.3% in December, in line with market expectations. At the same time, the volume of retail sales fell by 9.6% in December after growing by 1.1% a month earlier. Analysts had expected a 2.6% decline. On an annualized basis, sales growth was 1.5% against the forecast of 5%.

Today, the dynamics of the pair will be influenced by the report on the eurozone GDP. Analysts predict that the pace of economic decline in the region in the IV quarter should accelerate from -4.3% to -6.0%, which may provoke further sales of the single currency.

 

EUR/USD. February 3, 2021 – Euro near 2-month lows

The euro continues to decline paired with the dollar, reaching 1.20. The last time the single currency traded at such levels was at the beginning of December 2020. The weak rates of vaccination in Europe and the ECB's dissatisfaction with the high rate of the European currency remain negative factors for the euro. The regulator noted that it is closely monitoring the dynamics of the exchange rate and does not exclude a decrease in the rate on deposits, if this will help to accelerate inflation.

Macroeconomic indicators of the euro area are also not encouraging. Although earlier data on GDP for the IV quarter showed a decrease in the economy by 0.7% (q / q) and by 5.1% on an annualized basis, which turned out to be better than forecasts (a decrease by 0.9% and 5.4%, respectively).

Today we should pay attention to the report of the American labor market from ADP, as well as the index of business activity in the service sector ISM. Experts do not expect strong indicators, which may provoke a weakening of the dollar. Moreover, today's statistics may influence the decision in the Congress on incentives, which, if the package of assistance measures is approved, will entail further sales of the American currency.

 

EUR/USD. February 04, 2021 – Euro remains weak at 1.20

The EUR/USD pair continues to update local lows, trading below 1.20. Market participants continue to monitor forecasts for GDP growth in the eurozone and the United States, where European countries are clearly losing. Last week, worsened expectations for German GDP this year were published, and traders are now very attentive to any data from the FRG, projecting them to the entire eurozone as a whole.

Earlier Germany published the final data on the index of business activity in the service sector for January, where the indicator was 46.7 points against the previous level of 46.8. The same figure for the euro area rose to 45.4 points from the December value of 45.0.

The preliminary calculation of inflation in the euro area reflected an increase in the indicator by 0.9% (y/y), while the forecast assumed an increase of 0.6%. Core inflation in the region accelerated even more – by 1.4% y/y, while expected to rise by 0.9%.

At the same time, the US dollar was supported by yesterday's positive statistics from ADP. The January report on the number of jobs in the private sector showed an increase of 174 thousand against the forecast of 48 thousand. It should be assumed that tomorrow's report on the US labor market will also exceed the expectations of traders

 

EUR/USD. February 05, 2021 – Euro keeps updating new lows

The euro continues to decline at the end of the first week of February: the current quotation of the EUR/USD pair is 1.1950. The main pressure on the European currency rate is exerted by weak economic indicators from Europe and pessimistic forecasts regarding further economic recovery due to the preservation of lockdown regimes in some eurozone countries.

At the same time, the US dollar was supported by yesterday's data on the number of applications for unemployment benefits: the figure fell to 779 thousand against the forecast of 828 thousand and the previous value of 812 thousand. Such figures are a very positive signal for the American economy.

Today it is worth paying attention to the publication of data on the employment market for January. The forecast assumes that unemployment will remain unchanged at 6.7%, and the number of jobs outside the agricultural sector will increase by 85 thousand after a decline in December by 140 thousand. Average hourly wages may rise by 0.3% m/m after the previous growth of 0.8%. Thus, the stronger this statistic is, the more confident the dollar will feel.

 

GBP/USD. February 08, 2021 – Sterling holds positions in highs

Quotes of the GBP/USD pair have continued to trade in a wide range of 1.3560-1.3760 for three weeks already. The current quote for the pair is 1.3700.

The pound managed to move away from the lows last week after the Bank of England meeting. The regulator said that the nationwide lockdown, which will last for almost two months, will have no impact on the economic outlook in the future, and the UK GDP will recover by the first quarter of 2022.

Moreover, the regulator noted that there is some discomfort from an overly inflated balance sheet, and this raises expectations of a faster decline in government bond purchases. This speaks of the likely further tightening of the monetary policy of the Central Bank, which will inevitably lead to a strengthening of the British currency.

Today the macroeconomic calendar is empty, so the pair will continue to trade near the 1.3700 level.

EUR/USD. February 08, 2021 – Consolidation just above the 1.20 level

On Monday, the euro is falling moderately after the publication of economic reports from the euro area. In particular, the Sentix index of investor confidence in the eurozone economy in February fell by 0.2 points against the forecasted growth of 1.9 points. Industrial production in Germany in December remained at the level of November, while analysts had expected an increase of 0.3%.

Last Friday, it became known that the US Senate passed a bill allowing the adoption of a $1.9 trillion stimulus plan proposed by President Joe Biden without Republican support. This suggests that the final version of the stimulus bill may be agreed upon in March.

At the same time, weak statistics on the US employment market only accelerates the process of agreeing on the aid package. In January, the unemployment rate fell to 6.3% from 6.7% earlier, but this is where all the positive ends. Only 49 thousand new jobs were created outside the agricultural sector, with a forecast of an increase of 85 thousand.Average hourly wages in January grew by only 0.2% m / m against the forecast of growth by 0.3% and growth by 1.0 %.

The current quote for the EUR/USD pair is 1.2020. The macroeconomic calendar is empty for today, so the instrument will continue to move almost horizontally in the area just above 1.20.

 

EUR/USD. February 09, 2021 – Euro is stable around 1.2100

The euro continues to trade in the area of local highs near 1.2100. The European currency is growing, despite weak statistics from the eurozone. Sentix investor confidence index in February fell to -0.2 points against 1.3 in January. At the same time, the forecast assumed an increase to 4.1 points.

Data from Germany also turned out to be worse than forecasted: the statistics on industrial production reflected a zero change in the indicator against the forecast of growth by 0.1% m/m and the previous fact of increase by 1.5%.

So, we can say that the EUR/USD pair is growing mainly due to the general weakness of the US dollar in the Forex market. The American currency is weakening amid the process of adopting the stimulus package in the United States. Some days before, a bill was passed to approve Joe Biden's $1.9 trillion anti-crisis program without Republican support in the Senate.

Today the macroeconomic calendar is empty, so the pair will move moderately near the 1.2100 level.

 

EUR/USD. February 10, 2021 – Euro consolidated above 1.2100

The EUR/USD pair continues to trade above 1.2100 and is not going to give up the pace for now. The current quote for the pair is 1.2125. There were very few macroeconomic statistics on Monday and Tuesday, it is worth noting only the data on the index of optimism in small business in the United States. The indicator fell to 95.0 points, while analysts predicted growth to 96.6.

Today, all the attention of the markets is drawn to the publication of data on inflation in the US for January. The significance of this report is quite large: it will either give the White House an excuse to speed up the process of agreeing on the aid package, or it will allow it to take the time to make important decisions.

Analysts expect the US CPI to rise 0.3% mom, after rising 0.4% in December. Core inflation in January could have increased by 0.2% MoM after increasing by 0.1% in December.

In the evening hours, you should pay attention to the speech of the head of the US Federal Reserve System Jerome Powell. It is expected that the politician will give his assessments to the published statistics on inflation and touch on some of the nuances of the regulator's monetary policy.

 

EUR/USD. 11.02 | European currency continues to dominate

The euro/dollar continues to maintain potential for growth: the current quotation of the pair is 1.2125.

Inflation statistics were released yesterday: US CPI rose 0.3% mom in January, in line with forecasts after expanding 0.4% mom in December. Annual inflation is estimated at 1.4% against 1.5% earlier. The core consumer price index did not change at the beginning of the year.

The head of the US Federal Reserve System also made a speech yesterday. Jerome Powell noted that plans for a global stimulus remain unchanged. This suggests that nothing threatens interest rates for a long time. Moreover, the regulator hinted that inflation could exceed the target level of 2%, and this is quite acceptable, since the economy should try to grow on its own.

Today the macroeconomic calendar is not rich in publications. Attention should be paid only to the weekly report on the number of applications for unemployment benefits, which may support the position of the greenback.

GBP/USD. February 11, 2021 – The pair is stable above 1.38 level

On Thursday, the pound declines moderately from highs near 1.3870 to 1.3800.

The recent strengthening of the British currency was supported by the growing demand for risky assets and the general weakening of the US dollar amid expectations of a decision on fiscal stimulus. Market participants are almost certain that the program proposed by Joe Biden will get approval in Congress anyway, despite the resistance of the Republicans, who demand a reduction in the aid package.

The dollar is also under pressure after Jerome Powell's speech yesterday. The head of the Fed said that it may take years for the full recovery of the labor market, as the consequences of the pandemic turned out to be more devastating than initial forecasts. Powell also noted that the regulator does not intend to abandon the course of super-soft monetary policy.

Today the macroeconomic calendar is not rich in publications. Attention should be paid only to the data on the number of initial applications for unemployment benefits in the United States. And tomorrow will be published reports on the dynamics of British GDP and industrial production data. The economy is expected to grow 0.5% qoq in Q4 2020. Industrial production may show the same growth of 0.5% in December last year.

 

EUR/USD. February 12, 2021 – The pair consolidates at 1.2100

The EUR/USD pair continues to consolidate in the 1.2100 area. Experts note that the instrument has already strengthened enough for traders to «take a break and look around».

Yesterday was published data on the number of applications for unemployment benefits in the United States: the indicator fell to 793 thousand against the level of last week at 812 thousand, while the forecast assumed a reduction in the indicator to 755 thousand. Analysts note that although statistics on the employment sector are not uniform, there are more and more positive facts in it.

As for the eurozone, here the short-term outlook looks worse than previously thought. According to experts' expectations, the eurozone's GDP in 2021 will grow by 3.8% against earlier expectations of a rise of 4.2%. At the same time, long-term expectations have improved: next year the European economy may grow by 3.8% instead of the previous forecast of 3.0%.

Today you should pay attention to the report on December industrial production in the euro area, as well as preliminary data on the consumer confidence index in the US for February. The forecast assumes growth to 80.8 points from 79.0 points earlier.

 

EUR/USD. February 15, 2021 – Euro is stable at local highs

The EUR/USD pair continues to hold in positive territory above the 1.2100 level. The current quotation of the asset is 1.2135.

Today in the United States is a day off in honor of the President's Day, so the day promises to be calm. From economic statistics, it is worth highlighting only the publication on industrial production in January in the euro area: the decline in industrial production amounted to 1.6% after an increase of 2.6% mom in December. In addition, a meeting of the Eurozone finance ministers kicks off today. And Germany will publish a monthly economic report.

Friday's statistics from the US showed that the consumer confidence index from the University of Michigan fell to 76.2 points in February against the previous value of 79.0 and the forecast of growth to 80.8 points. Such indicators are the lowest for the last six months. The index of current economic conditions reflected a decline to 86.2 points in February from 86.7 in January. Thus, the US dollar will continue to weaken tomorrow, after the weekend.

 

EUR/USD. February 16, 2021 – Euro continues to dominate against dollar

The EUR/USD pair continues its ascent on Tuesday. The current quote for the asset is 1.2163. The euro is strengthening, even despite yesterday's weak economic statistics from the eurozone: industrial production in the eurozone in December fell by 1.6% m/m, while the forecast expected a decline of 0.4% m / m. A month earlier, the indicator rose by 2.6% m/m. On an annual basis, the indicator declined 0.8% against the forecast of a decline of 0.3%.

Experts predict that in January and February similar indicators will be relatively similar, but in March the picture should change radically.

Today we should pay attention to the preliminary statistics on GDP in the Eurozone for the IV quarter. The indicator fell by 0.6%, which turned out to be better than the forecasted reduction by 0.7%. On an annualized basis, the region's GDP fell by 5%, which is also better than the forecast of -5.1%.

Also of interest are the data on economic sentiment in Germany from the ZEW: the index rose to 71.2 points, which is better than the forecast of a decline to 59.6. Considering the general weakness of the US dollar on the market and positive statistics from Europe, we can safely expect further growth of the European currency.

 

GBP/USD. February 17, 2021 – Sterling started to decline from highs

On Wednesday, the GBP/USD pair declines moderately from 1.3950. The current quote for the asset is 1.3890.

The driver of the pound's decline was the strengthening of the US dollar in the market, which received support from a sharp rise in the yield of US debt bonds. However, the British currency does not intend to give up primacy so easily: the sterling receives strong support from the high rates of vaccination in the UK. Experts note that the rate of vaccination of the country's population is much higher than the world average.

Today you should pay attention to the publication of inflation data in Britain. The consumer price index in monthly terms decreased by 0.2%, which turned out to be better than the forecast of decline by 0.4%. Annual inflation in January accelerated to 0.7% from 0.6% in December. Also of interest are data on the price index of British producers: the indicator rose by 0.7%, while analysts predicted growth of 0.5%.

In the US, statistics on producer prices will be published in the same way, as well as on the volume of retail sales. In the evening hours, it is worth paying attention to the data on the volume of industrial production and the publication of the FOMC minutes.

 

February 18 | Fundamental analysis of oil market

Brent quotes continue to renew multi-month highs: on Thursday, the asset quotes reached $65.40 per barrel. The last time at such marks the price of oil was in January 2020. The current Brent quote is $64.70.

The abnormal cold in Texas, which led to the suspension of the operation of several oil platforms, continues to contribute to the rise in prices. As a result, oil production in the United States fell by 2.6 million barrels per day. Combined with optimism about the rapid spread of vaccines in the world and a decrease in the number of coronavirus cases, this will lead to the fact that the bullish rally in oil prices will continue in the near future.

An additional local factor in the growth of Brent quotes was a report from the American Petroleum Institute (API), according to which US oil reserves fell by 5.8 million barrels over the week. Today you should pay attention to similar statistics from the Energy Information Administration (EIA) of the US Department of Energy. Analysts predict a decline in US oil reserves by 2 million barrels.

However, there are also risks. Experts note that the current rise in prices may lead to a revision of the terms of the OPEC+ deal at a meeting on March 3-4. It is also expected that Saudi Arabia may announce the cancellation of the unilateral production cut of 1 million barrels per day during February and March. In this scenario, the oil market may face a deep correction.

 

EUR/USD. February 19, 2021 – Euro returns to growth

The EUR/USD pair is again approaching highs: the current quotation of the asset is 1.2140. The pressure on the dollar was exerted by yesterday's data on the number of claims for unemployment benefits in the United States: the indicator rose to 861 thousand against expectations of a decrease to 775 thousand. Such statistics indicate that the labor market in the United States remains unstable.

The data on the real estate market in January was also mixed. The number of building permits issued rose to 1.88 million from 1.70 million, while the number of new home starts fell to 1.58 million from the December level of 1.68 million. American businesses are still uncertain about future demand, despite low interest rates.

Today the macroeconomic calendar is quite diverse. The eurozone presented a preliminary index of business activity in the manufacturing sector for February: the indicator rose to 57.7 (better than the forecast of 54.3 points). A similar index in the service sector fell short of forecasts, falling to 44.7 points against growth expectations to 45.9.

In the evening hours, data on business activity will be presented by the United States. You should also pay attention to the important indicator of sales in the secondary housing market in January, which can demonstrate a local decline in the indicator. The Fed's monetary policy report will be released late in the evening.

 

EUR/USD. February 22, 2021 – Euro grows weakly from the level of 1.2100

Last Friday, trading closed at 1.2100, and today the pair opens the day with growth to 1.2130. The European currency is supported by strong macro statistics from the Eurozone.

In particular, the February business activity indices of the Eurozone manufacturing sector were published last Friday. The indicator rose to 57.7 points against the forecasted decline to 54.3 points. The composite PMI of the euro zone was 48.1 points, while analysts had expected an increase to 48 points. At the same time, the indicator remains below the level of 50 points for the fourth month in a row, which indicates a decline in economic activity in the region.

On Monday, support for the European currency was provided by the data on the business climate index from IFO in Germany: the indicator rose from 90.3 to 92.4 points. Analysts had expected the index to reach 90.5 points. The index of business expectations in the largest European economy also came out better than forecast, showing an increase from 91.5 to 94.2 points.

The trading day promises to be calm, as the macroeconomic calendar is almost completely empty today. In the evening hours, you should pay attention to the speech of the ECB Heads Christine Lagarde.

 

GBP/USD. February 24, 2021 – Sterling renews three-year high

The pound sterling continues to confidently renew highs, rising above the 1.42 level. The current quote for the GBP/USD pair is 1.4172. The last time such values were observed at the beginning of January 2018.

The currency was supported by the speech of British Prime Minister Boris Johnson, who noted that he was satisfied with the rate of vaccination and the general epidemiological situation. The prime minister also announced a reduction in quarantine restrictions from March 8. Note that the rate of vaccination in the country today remains the fastest in the world.

Additional support for the British currency was provided by yesterday's data on the labor market in the UK. According to the United Kingdom Office for National Statistics, the unemployment rate rose from 5% to 5.1% in December, better than expected to rise to 5.2%. The number of applications for unemployment benefits fell by 20 thousand against the projected growth of 35 thousand. The average level of wages, taking into account bonuses, increased by 4.7%, experts had expected an increase of 4.1%.

Today you should pay attention to the inflation report from the Bank of England: as a rule, on its basis, the regulator decides on the further course of monetary policy.

 

EUR/USD. February 25, 2021 – Euro hits local highs

On Thursday, the euro continues to rise, reaching 1.2233. The currency is still supported by macroeconomic statistics from Europe. According to the published data, the German economy grew by 0.3% in the IV quarter of 2020. The economic recovery was driven by the growth of investments (by 1%) and exports (by 4.5%), which offset the decline in consumer spending (by 3.3%) and government spending.

At the same time, a strong pressure on the US dollar was exerted by the speech of the head of the US Federal Reserve before Congress on Tuesday and Wednesday. Jerome Powell noted that the regulator intends to continue a soft policy without raising interest rates for a long period of time. Until inflation reaches the 2% target and employment returns to pre-crisis levels, rates will remain at historic lows.

Another important factor influencing the dynamics of the EUR/USD pair is the issue of agreeing on new fiscal stimulus measures in the United States. The Democrats are slated to pass a $1.9 trillion Senate bailout tomorrow, after which the bill will be sent to President Joe Biden for signature. If the stimulus package is adopted in full, huge cash infusions can accelerate inflation, which will have a very detrimental effect on the US currency.