Still 1.10 or 1.15: the euro-dollar pair is still at a crossroads. And despite the fact that the price is not far from the 15th figure, the downward scenario looks as realistic as the upward one. EUR/USD bulls made a 350-point march in just a few days, rising from the base of the 11th price level to the multi-month high of 1.1484. If the situation develops again in favor of the US currency, then the bears will overcome a similar distance just as quickly. Therefore, the relative "remoteness" of the 10th figure should not confuse market participants: this is the main goal of the downward trend, which will be achieved in a short time – if the Federal Reserve aggressively tightens monetary policy. This information driver is able to reverse the situation in pairs, while all other fundamental factors play a supporting role.
The tops can't, the bottoms don't want to – this is about how you can characterize the current situation for a pair. On the wave of optimism associated with the imaginary hawkishness of the European Central Bank, bulls could not conquer the 15th figure, thereby confirming the strength of the upward trend. Bears, in turn, could not take full advantage of the strong Nonfarm, which strengthened the dollar's position throughout the market. In the case of the EUR/USD pair, the bears only approached the base of the 14th figure, but could not go below the target of 1.1400 - again, to turn the situation in their favor. As a result, the parties agreed on neutral territory, within the 14th price level, in anticipation of the next information driver.
The stalemate is further aggravated by the fact that the economic calendar for the EUR/USD pair is almost empty this week. If we do not take into account tomorrow's inflation release, then the calendar looks almost like a white canvas – secondary macroeconomic reports are unable to push the pair out of the 14th figure. It is noteworthy that the pair ignores many fundamental factors that theoretically can affect the price dynamics. For example, the euro ignored the news of a geopolitical nature. The mediation mission of French President Macron, which is designed to resolve the strained relations between Russia and the West, has brought the first positive results. The French leader said yesterday that he had managed to "stop the escalation and open up new opportunities." Unfortunately, the top officials of the Russian Federation, Ukraine, and France did not go into details, but their rhetoric as a whole is (so far) optimistic. But the single currency ignored this fact. Similarly, traders ignored the news from the "coronavirus front". Despite the fact that the incidence rate in Europe is still high, EU countries are gradually relaxing restrictions. Quarantine anti-weed measures have been almost completely canceled (or are planning to be canceled) in Denmark, Sweden, Finland, Switzerland and Italy (although the Italians are still ready to cancel the emergency regime).
The euro remained indifferent to the aforementioned information guides. However, the greenback also ignores "its" fundamental factors. For example, today the head of the Federal Reserve Bank of Atlanta, Rafael Bostic, said that, in his opinion, it is necessary to raise the interest rate four times this year. At the same time, he did not rule out an aggressive pace of tightening monetary policy. According to him, at the moment he is confident in a 25-point rate hike at the March meeting. But at the same time, he "leaves open all other options." Let me remind you that rumors are actively being circulated in the market that the central bank will decide to raise the interest rate by 50 basis points at once in March, especially if US inflation in January and February again shows a record result. Bostic's above remark suggests that some Fed members also do not rule out a hawkish scenario.
However, the dollar bulls ignored the comments of the head of the Atlanta Fed. The EUR/USD pair fluctuates in a rather narrow price range, within the 1.1415-1.1450 echelon. The fact that the dollar ignored the Fed's hawkish comments suggests that the greenback needs stronger fundamental arguments.
Let me remind you that, summing up the January meeting, Fed Chairman Jerome Powell, on the one hand, allowed the rate increase "at every meeting this year"; but, on the other hand, he tied the pace of monetary tightening to key macroeconomic reports - primarily in the field of the labor market and inflation. The latest Nonfarm allowed the dollar bulls to strengthen their positions, but did not allow the dollar rally to be organized. But an inflationary release may provoke a more violent reaction from traders, especially if the indicators turn out to be in the green zone.
In other words, Thursday's key release will dot the i's: either the US currency will receive strong support (if the components of the report exceed the expectations of experts), or EUR/USD bulls will not only test the resistance level of 1.1500, but, most likely, will consolidate in the area of 15 th figure. Given this degree of uncertainty, at the moment it is best to take a wait-and-see position - tomorrow's inflation report can easily redraw the fundamental picture for the pair.
