Powell Confident About the Economy; Jobs Rally Ahead of CPI
Downside Risks Persist as EUR/USD Fails to Break 1.0600 Zone
The market is still digesting last week’s Non-Farm Payrolls report, which showed that the U.S. economy added 227K new jobs, in line with the 218K expected figure. This comes a month after an NFP report which showed only 12K new jobs but was skewed by hurricanes and was revised this month to 36K.
Earlier in the week, Federal Reserve Chair Jerome Powell participated in an event hosted by the New York Times and confidently said: “The US economy is in very good shape, and there’s no reason for that not to continue”. This was followed by “we can afford to be a little more cautious” while referring to future rate cuts. The Fed is going to announce the interest rate on December 18 and currently, there’s an 84.3% probability of a cut of 25 bps, according to CME’s FedWatch tool.
Economic Calendar Highlights
Inflation will be the week’s central focus for the dollar: the Consumer Price Index (CPI) will be released Wednesday at 1:30 pm GMT, showing the change in the price paid by consumers for a basket of goods and services.
The Core version will be released at the same time – this version excludes food and energy from the calculation. The headline reading is expected to show a 0.3% change (previous 0.2%) and the Core version is expected to remain unchanged, at 0.3%.
Thursday all eyes will be on the European Central Bank for the rate announcement and the usual press conference that follows. The rate is expected to drop to 3.15% from the current 3.40% and this is mostly priced into the market so we may not see extreme volatility. The rate announcement is scheduled at 1:15 pm GMT and the press conference at 1:45 pm GMT. Volatility will be dependent on what ECB President Christine Lagarde has to say and any potential forward guidance regarding monetary policy.
Technical Outlook – EUR/USD
Last week the pair showed a false break of 1.0600, which could be a sign that the downtrend is about to resume. Friday’s candle pierced the resistance at 1.0600 but by the end of the trading session, the price retreated below the mentioned level, which resulted long upper wick and a small candle body.
This rejection sequence could make 1.0500 the immediate target, followed by 1.0400 and 1.0350 in the medium term. A bullish break of 1.0600 will probably take the pair closer to the 50-day Moving Average but keep in mind that both the US Dollar and the Euro will be affected by major releases this week.
