Kicking Off 2023 With a Bang: U.S. Jobs, EU Inflation
Euro Touches 7-Month High. Overextended Rally Prone to Pullbacks.
Markets are still feeling the effects of the parties that marked the closing of 2022 and the grand opening of 2023 but volatility is right around the corner. The first trading week of the New Year has some very interesting events in store, which will likely stir up movement, with potentially big moves on the horizon.
The Euro is trading at a 7-month high against the US Dollar, at levels last seen in June 2022. Despite this climb, the single currency lost 7% vs. the greenback in 2022, reaching a 20-year low at $0.96 in September of last year. The rally seems overextended and the RSI is showing signs of decline but it all comes down to this week’s data and how the market participants will interpret it.
Key Events for the Week Ahead
The first couple of days of the week don’t have anything notable in store but the action picks up Wednesday with the release of the ISM Manufacturing PMI scheduled at 3:00 pm GMT. Later in the day, at 7:00 pm GMT, the FOMC will release the Minutes of their latest Meeting, containing in-depth insights into the reasons that determined their latest interest rate vote.
Friday at 10:00 am GMT we take a look at European inflation with the release of the CPI Flash Estimate and Core version of the same indicator. According to expectations, the reading will be almost identical to last month’s but inflation is a burning issue, thus the release will probably trigger a market reaction.
The biggest event of the week will be the release of the U.S. Non-Farm Payrolls, scheduled for Friday at 1:30 pm GMT. The expected number is 200K, lower than last month’s 263K, and given that the NFP is the most important indicator for the labor market, it will probably generate substantial movement.
Technical Outlook – EUR/USD
The pair is currently trading above the previous resistance at 1.0635 but the rally has weakened although bullish momentum picked up over the last couple of days of 2022. The Relative Strength Index is declining after bouncing several times on its overbought level, which is a sign that a pullback is coming soon.
The upper Bollinger Band is now acting as resistance and we can see a double top forming. This is another indication that the pair is getting ready for a move down. We may see a touch of 1.0775 first, which will make a drop even more probable. If the bears can take the price below the middle Bollinger Band, the pair will likely travel to the lower band.
