Inflation Data & Powell Testimony Set to Drive Volatility
EUR/USD Closes Price Gap. Dollar Back in Control After Rejection at Resistance
Friday’s trading session was choppy but the US Dollar was lifted against most of its peers by the U.S. Non-Farm Payrolls report and the perceived threat of a trade war. President Trump announced that he is planning reciprocal tariffs on some countries, but did not offer any specifics.
The NFP report showed that 143K new jobs were created, which is lower than the 169K predicted by the analysts. The previous month’s number was revised to 307K from 256K. The Average Hourly Earnings increased by 0.5% and the Unemployment Rate dropped to 4.0% from 4.1%. Overall these numbers make it possible for the Fed to pause the rate cuts for one or two more meetings.
According to the CME FedWatch tool, the June FOMC meeting will be the one with a good chance of a cut (42.1%). The probability of a cut in May is around 24% and only 8% for the March meeting.
Economic Calendar Highlights
Tuesday at 3:00 pm GMT, Fed Chair Powell will testify before the Senate Banking Committee on the topic of the Semi-Annual Monetary Policy Report. Wednesday at 3:00 pm GMT, he will testify on the same topic but before the House Financial Services Committee. These testimonies can spark bursts of volatility, so caution is advised.
The U.S. inflation numbers will come out Wednesday at 1:30 pm GMT and this will most likely be the main event of the week. The monthly Core CPI is expected to increase by 0.3%, higher than last month’s 0.2% and the yearly CPI is expected to remain unchanged at 2.9%, which is still above the Fed’s target.
The Core PPI is scheduled for release on Thursday at 1:30 pm GMT and the final release of the week will be the U.S. Retail Sales numbers, which will come out Friday at 1:30 pm GMT. Sales made at retail levels represent the majority of consumer spending, which in turn represents the biggest chunk of the overall economic activity of the country.
Technical Outlook – EUR/USD
Last week opened with a huge price gap triggered by the new tariffs imposed by President Trump on Mexico, Canada, and China. Although this gap was closed very quickly (on the same day), the pair failed to break through the 50-day Moving Average and the dollar bulls took back control.
The price is now once again below the S/R at 1.0350 and the pair is headed towards the long-term bearish trend line drawn from the 1.1200 top. As long as the pair stays below 1.0350, the next target is 1.0220 and the bias is bearish.
