Trading on payrolls day proved tricky as the U.S. jobs report showed a mixed picture. The latest jobs data showed weak wage growth while the headline print was very positive. 227k jobs were added in January, which was the strongest amount in 4 months, but the focus was on wage growth and it was precisely that slowdown in wages which has discouraged dollar bulls from buying USD. Traders who have kept out of the volatile market on Friday have not missed out on anything.
To summarize: Despite good economic U.S. growth, the outlook for the currency market remains uncertain, at least for a while. What the market needs is political reliability and stability and only the hope around 'Trumponomics' is no longer sufficient. In the light of Donald Trump's unpredictable policy the forecast for the U.S. dollar remains neutral.
This week we have a very light economic calendar without significant drivers. The lack of market-moving data may therefore lead to a continuation of the recent sideways trend in the coming days.
EUR/USD
The euro was not able to make any great leaps and still remained confined to a trading range between 1.08 and 1.07. While we currently see a higher likelihood for upcoming bullish momentum, driving the euro towards 1.0850 and 1.09 we will also focus on short-term pullbacks. In short-term time frames we will pay attention to a break above 1.0785 on the upside or vice versa, below 1.0760 on the downside. Once the 1.07-level is breached to the downside, we will shift our focus to the crucial support area around 1.0630.
Today, ECB President Mario Draghi will speak at the European Parliament at 14:00 UTC. His testimony could have an impact on the euro provided that Draghi will comment on monetary policy. While a defense of the ECB's actions is to be expected, he may point to accelerating inflation and the weak euro.
GBP/USD
The cable trended downwards and the focus is gradually shifting back towards the 1.24-support. We generally expect further losses in this pair and once the 1.24-mark gives way we may see the pound tumbling towards 1.2260. If, however, the pound is able to stabilize above 1.25, it could head for a renewed test of 1.26 and possibly even 1.2670.
Here are our daily signal alerts:
EUR/USD
Long at 1.0810 SL 25 TP 35-40
Short at 1.0760 SL 25 TP 20, 40
GBP/USD
Long at 1.2580 SL 25 TP 20, 40
Short at 1.2435 SL 25 TP 20, 60
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