The euro / dollar continues to show negative dynamics. After another unsuccessful assault on the 15th figure, the price is slowly but surely moving towards the first support level of 1.1390 (the upper limit of the Kumo cloud on the daily chart). Traders "digested" negative data on the US dollar and did not dramatize the situation, focusing on external fundamental factors. Uncertainty with Brexit, as well as the vague prospects of the US-China trade negotiations provide support to the US currency, which, as a rule, "skims off" with the growth of anti-risk sentiment in the market.
Nonfarm could not fundamentally change the attitude of the market to the greenback. After some hesitations, the pendulum of preferences swung to the dollar, despite the increase in unemployment and weak wage growth. Dollar bulls decided that in a half-way situation, "a glass is half full rather than empty." Indeed, in addition to the weak side, Nonfarm were strong. In particular, the number of people employed in the non-agricultural sector increased by 304 thousand (the strongest result since February 2018), and the number of people employed in the private sector jumped to 296 thousand, also setting an annual record. In addition, the ISM manufacturing index was published on Friday, which showed a relatively good result. After an unexpected recession in December (anti-record at 54.3 points), in January the indicator regained its position and reached 56.6 points. It cannot be said that the situation has changed radically, but, firstly, the indicator remained above the key mark of 50, and secondly, the negative dynamics did not continue.
In other words, Friday's releases were rather controversial, which could be interpreted both in favor of the dollar and against it. Against the background of the Chinese holidays and the slowdown of the eurozone economy, traders of EUR / USD for the most part recorded profits and moderated their appetite for relatively long positions. And although the US currency also enjoys relatively weak demand (the dollar index is still in the region of 95 points), the euro does not have sufficient arguments to dominate the pair EUR / USD.
The problems of the single currency can be divided into two parts, current and long-term. First of all, we are talking about slowing down the key economic indicators of the eurozone. GDP growth in Europe slowed down to 1.2%, inflation growth to 1.4%. The dynamics of indicators in the most developed EU countries is also disturbing. In Germany, the consumer price index fell to -0.8% m / m (for the first time since January 2018, it sank into a negative area), and in annual terms to 1.4%, continuing the negative trend for the third month in a row. Retail sales in Germany also set an anti-record. On a monthly basis, the indicator collapsed immediately to -4.3%, with a decline forecast to -0.5%. In addition, the Italian economy has entered a stage of technical recession, and the growth of the French economy has slowed to 0.3%.
These are the results of the fourth quarter of last year, but even this year, experts do not expect any breakthrough. On the contrary, most analysts predict a further decline. The current trend is postponing its imprint on the future prospects of the single currency, in light of the possible actions of the ECB. After a portion of the "pigeon" comments by Mario Draghi and other representatives of the Central Bank, the market seems to have resigned to the fact that this issue will not be considered until the first quarter of 2020, that is, no longer with Mario Draghi, whose powers end in October of this year. In this regard, the market again began to discuss the question of who will be the successor to the current head of the ECB.
Previously, the undisputed favorite was considered the chairman of the Bundesbank, Jens Weidmann, who is known for his "hawkish" attitude. But later it turned out that German Chancellor Angela Merkel is lobbying for the post of European Commission representative of Germany (Manfred Weber) and is ready to "exchange" the post of head of the ECB. In addition, the EU representatives will not allow the representatives of Germany to occupy two such important posts at once, almost all experts are sure of this. As a result, the market has reoriented its stakes, and now the former leader of the Bank of Finland, Erkki Liikanen, considered by many to be a centrist, is considered the main favorite of the "election race". However, this issue will be seriously discussed only after the elections to the European Parliament. If Weber's candidacy is rejected, then Weidmann's chances will increase again, as will the chances of a sharper monetary policy tightening.
Thus, the prevailing fundamental picture does not allow the EUR / USD pair to continue the northern movement amid a slight recovery in the US dollar. As a result, the pair slides to the 13th figure, to the first support level of 1.1390. If the bears push this level, then a more substantial price pullback will follow, to the base of the 13th figure.
