Daily Market Analysis From Forexmart

EUR/USD and GBP/USD trading plan for beginners on January 17, 2023

Details of the economic calendar on January 16
The economic calendar was traditionally empty on Monday. No important reports were published in the EU, the United Kingdom, and the Unites States.

Martin Luther King Day was celebrated in the United States. For this reason, banks, funds, and stock exchanges were closed.

Analysis of trading charts from January 16
EURUSD reached the 1.0800 level during the pullback stage, where there was an amplitude move within 70 pips. In fact, the market remains in an upward mood, otherwise there would be a full-blown correction.

GBPUSD reduced the volume of long positions during the price convergence with the 1.2300 resistance level. As a result, there was a pullback of about 100 pips, which eventually turned into a stagnation.

Economic calendar for January 17
Since the opening of the European session, data on the UK labor market have been published, which came out without any fundamental changes. Unemployment in the country remained at 3.6%. Employment increased by 27,000, while jobless claims rose by 19,700.

Expectations coincided with the forecast; there is no reaction in the market.

EUR/USD trading plan for January 17
Presumably, the 1.0800/1.0870 amplitude will focus the market on itself only for a while. As a result, the stagnation will end with an impulse emanating from the stagnation, which will indicate one of the possible scenarios.

The first scenario considers the prolongation of the current upward cycle in the market in case of a stable holding of the price above the value of 1.0880 in a four-hour period.

The second scenario considers the transition from a pullback stage to a full correction if the price holds below 1.0770 in a four-hour period.

GBP/USD trading plan for January 17
Stagnation possibly serves as a process of accumulation of trading forces, which can become a lever for new price jumps. The 1.2150 level serves as a variable support, while the resistance is at 1.2300.

In this situation, cardinal changes will occur only after the price stays outside one or another control level for at least a four-hour period.

 

Hot forecast for GBP/USD on 19/01/2023

UK inflation fell from 10.7% to 10.5% in December, and the pound gradually increased. Inflation eased for the second month, and it hints at the possibility of a more subdued increase in the Bank of England's interest rate. And these very expectations in regard to the Federal Reserve's actions just recently were the reason why the dollar is getting weaker. Moreover, during the previous meeting, two members of the Board argued for rate cuts. So, everything indicates that not only will the US central bank complete its cycle of interest rate hikes soon, but that the BoE could follow suit. And this means there is no reason for the pound to rise substantially. Investors haven't probably realized this fact yet.

Inflation (UK):

But the main reason why the dollar weakened during the European session was the latest US reports, forecasts for it were also negative. In December, U.S. retail sales softened 1.1% and industrial production fell 0.7%. So some pessimism about the dollar was justified. Especially when it became known that previous data had been revised downward. Retail sales climbed 6.0% and industrial production to 2.2%. And if you look at the final industrial report, things got even worse as the growth rate slowed to 1.6%. But the dollar started to rise after the data was released. It's all about retail sales, which remained unchanged with the revision. And this report is significant because it best reflects the state of consumer activity, which is the engine of economic growth. And the data turned out to be significantly better than expected, which of course will inspire confidence that the United States can avoid a recession.

Retail Sales (United States):

First of all, due to the inflationary dynamics in the UK itself, the pound's growth potential is extremely limited. Investors will have to gradually start changing their positions, not in favor of the British currency. But now it has nowhere to go today either. The total number of unemployment claims in the US may grow by 8,000. Of course, the growth itself isn't very significant, but the forecasts are still negative, so there is no reason for the dollar to rise, at least for today. Hence, the market is likely to consolidate around the current values.

Unemployment claims (United States):

GBPUSD crossed the resistance level of 1.2300. As a consequence, the upward momentum gave the pound the opportunity to come close to the December high. The subsequent swing was expressed in a pullback, indicating a decline in the volume of long positions.

On the four-hour chart, the RSI technical indicator was in the overbought area, above the 70 line. This occurred when GBP crossed 1.2300 and approached the December high. Subsequently, there was a price pullback, which is expressed on the RSI indicator by its return below 70.

On the four-hour and D1 chart, the Alligator's MAs are headed upward, which corresponds to the general bullish sentiment.

Outlook

The pullback stage brought the quote back to 1.2300, which, taking into account the current strengthening, is considered as the least possible price change. For the pullback to pass the stage of correction, the quote should return below 1.2250 on the four-hour chart. In this case, GBP could reach 1.2150.

However, staying above 1.2300 may eventually restart long positions in the pound, and it could update the local high of the upward cycle.

Comprehensive indicator analysis suggests a price pullback for the short-term and intraday trading. While the bullish sentiment is still valid for the medium term.

 

EUR/USD: Dollar back in disgrace, while euro gains momentum

The euro-dollar pair tested the 9th figure at the start of the new trading week for the first time since April last year. Such price dynamics is due not only to the weakening of the U.S. currency (the U.S. dollar index opened trading with a downward gap), but also to the strengthening of the euro (as evidenced by the main cross-pairs involving euro). Such a fundamental background allows EUR/USD bulls to move towards the upper line of the Bollinger Bands indicator on the D1 timeframe, which currently corresponds to the 1.0950 mark. Overcoming this resistance level will open the way for traders to the 10th figure.

Dollar in disgrace

The U.S. dollar is declining amid an almost empty economic calendar on Monday, following Friday's trading inertia. The U.S. dollar index fell from 102.30 to 101.70 on the last day of last trading week. The weekend didn't change traders' minds: today, the index resumed its downward marathon, heading to the base of the 101st figure. Major currency pairs changed their configuration accordingly, with the exception of USD/JPY, which rose after the publication of the minutes of the Bank of Japan's December meeting (according to some members of the Governing Council, the central bank should "clearly explain that expanding the yield range is not the first step in exiting the ultra-loose policy").

But in general, the greenback is under significant pressure. Recent releases indicate that the Fed is guaranteed to reduce the pace of rate hikes to 25 points, and will do so at its February meeting. On Friday, Fed Governor Christopher Waller (who has long been one of the main hawks in favor of an aggressive rate hike) advocated a 25-point scenario. Earlier, a similar position was voiced by other representatives of the Fed, in particular, Patrick Harker, Lorie Logan, and Esther George.

Such statements were made amid a slowdown in U.S. inflation indicators: note that not only the consumer price index, but also the producer price index came out in the red zone. If this week, core PCE index comes out at least at the predicted level (not to mention the "red color"), the puzzle will be finalized. However, the market already de facto has no doubt that the Fed will reduce the pace of rate hike to 25 points. According to the CME FedWatch Tool, the probability of this scenario at the February meeting is estimated at 99%. I think additional comments are unnecessary here.

Euro outlook

Unlike the dollar, the euro enjoys support from the ECB. Representatives of the central bank are vying to voice hawkish messages, assuring traders that the regulator will not change its hawkish course. Last week, there were rumors in the market that the European Central Bank may reduce the rate hike to 25 points in March. The relevant information was published by Bloomberg, citing its sources in the central bank.

The published insider, to put it mildly, surprised market participants (it was then that the EUR/USD pair updated the local high, dropping to 1.0795) since many ECB members voiced opposite signals in public. Christine Lagarde came to the aid of the euro here: speaking at the Davos economic Forum, she said that the European Central Bank is still far from its target, and the regulator has to take "several significant steps." The hawkish minutes of the ECB's December meeting only complemented her words, keeping the EUR/USD pair within the 8th figure.

Today the "hawkish marathon" got its development. Firstly, ECB Governing Council member and Bank of Finland Governor Olli Rehn said that he sees all grounds for a significant interest rate hike "both in winter and this coming spring." Second, a Reuters poll of leading economists was released today. According to most experts, the European Central Bank will raise rates by 50 points, not only at the February meeting, but also at the March meeting. The polled economists also predicted that the rate will reach 3.25% by the middle of the year (the highest value since end 2008).

Conclusions

The fundamental background formed last week contributes to further growth in the price of EUR/USD. And to date, the situation has not changed: the comments of the head of the central bank of Finland, as well as the published Reuters survey, only added to the fundamental picture, allowing buyers of the pair to test the borders of the 9th figure.

Today's main news flow is expected during the U.S. trading session. Eurozone consumer confidence index will be released (positive dynamics is expected), and ECB representatives Christine Lagarde and Fabio Panetta will give a speech (they can also support the euro). In general, the pair remains bullish. The price echelon has shifted one step up, to the range of 1.0850–1.0950. Probably, in the medium term, EUR/USD buyers will try not only to gain a foothold within the 9th figure, but also to precipitate the 1.0950 resistance level, which corresponds to the upper line of the Bollinger Bands indicator on the daily chart.

 

EUR/USD. Analysis for January 25. Statistics from the European Union again prevented the euro from falling.

The wave marking on the euro/dollar instrument's 4-hour chart is still quite compelling and getting more intricate, and the entire upward segment of the trend is still quite convoluted. Although its length is better suited for the pulse portion, it has taken on a powerful corrective and extended form. The waves a-b-c-d-e have been combined into a complicated corrective structure, with wave e having a form that is far more complex than the other waves. Since the peak of wave e is substantially higher than the peak of wave C, if the wave markings are accurate, construction on this structure may be nearly finished. I'm still planning for a decline in the instrument because we are predicted to build at least three waves down in this scenario. The demand for the euro currency increased in the first three weeks of 2023, and during this time the instrument only managed to move marginally lower from previously established levels. A new attempt to surpass 1.0721, which according to Fibonacci amounts to 200.0%, was successful, allowing the wave e to take on an even longer form. Unfortunately, there is another delay in starting to build the trend correction part.

The euro is making every effort to maintain its part of the trend.

On Tuesday, the euro/dollar instrument rose by 15 basis points, and the instrument's amplitude was extremely small throughout the day. I think that all of yesterday's movements were just "market noise." Movements of 20–30 points in a variety of directions cannot be interpreted by me as a market response to news or deliberate market activity. It is still true that there is a stagnant increase in demand for US cash. If you pay close attention to the news context, there can be no justification for the market to raise its demand for the dollar. For instance, business activity indices in the US continued to be below the critical value of 50.0. On the other hand, when compared to the data from a month ago, all three indices have increased. In other words, the market could have raised the demand for the dollar but chose not to. If you ignore the fact that two of them stayed below 50.0, the European business activity indices also turned out to be rather strong. But because the statistics were so vague, the market could give them its interpretation. In recent months, it has taken an interest in purchasing euro currency. Another day has passed when, if not an increase, then certainly a decline in demand for the euro.

We can assume that the market paid no attention to this news if we think back to the instrument's overall amplitude. The market seems to be anticipating meetings for the coming week. Before the meetings, perhaps the euro will even be able to increase a little bit further. However, if the increase persists after them, it will be even more challenging to discuss rational movements. Corrective waves, which we frequently saw at the start of the rising trend section, are now completely absent.analytics63d0bd375a595.jpg

Conclusions in general
I conclude that the upward trend section's building is about finished based on the analysis. As a result, given that the MACD is signaling "down," it is now possible to contemplate sales with goals close to the predicted mark of 1.0350, or 261.8% per Fibonacci. The potential for complicating and extending the upward portion of the trend remains quite strong, as does the likelihood of this happening. The market will be ready to finish the wave e when a bid to break through the 1.0950 level fails.

The wave marking of the descending trend segment notably becomes more intricate and lengthens at the higher wave scale. The a-b-c-d-e structure is most likely represented by the five upward waves we observed. After the construction of this portion is complete, work on a downward trend segment can start.

 

Hot forecast for GBP/USD on 27/01/2023

US economic growth is expected to have slowed from 1.9% to 1.6%, but the first estimate of GDP for the fourth quarter showed a slowdown to 1.0%. This is perfectly in line with speculation that the US economy is at risk of sliding into recession. And with it the global economy. In theory, this would lead to the inevitable depreciation of the dollar. However, this has not happened. If you look at the pound, it has actually remained in place. The dollar edged up when the report was published, but then it quickly returned to the positions at which it was just before the US GDP report was released. The reason for such a strange reaction to obviously weak data lies in the preliminary estimates themselves. Yes, in annual terms, the growth rate slowed down significantly. However, if we look at the quarterly data, the economy grew by 2.9% in the fourth quarter, while the growth forecast was 2.7%. And if you also look at the durable goods orders, which suddenly rose as much as 5.6%, well above the 2.2% forecast, then you would see that the market's reaction is quite understandable. Yes, the economy has slowed down a lot, but there are signs that a recession can be avoided. The durable goods report hints at the possibility of an economic recovery as early as the first quarter.

GDP change (United States):

Despite the obvious interest in long positions, GBPUSD failed to update the local high of the upward cycle. As a result, 1.2440 has become a kind of resistance level against which stagnation/rebound occurs.

On the four-hour chart, the RSI technical indicator is moving in the upper area of 50/70, which points to the bullish sentiment. There is a similar technical signal on the daily chart.

On the four-hour chart, the Alligator's MAs have numerous intersections, which corresponds to the flat movement. The MAs are headed upwards.

Outlook

Based on the fact that the price has been fluctuating this week, the pair has been trading within the sideways channel of 1.2300/1.2440. At the peak of the upward cycle, this movement points to an accumulation process. As a result, an outgoing momentum should emerge that may indicate the price's succeeding direction.

In terms of the complex indicator analysis, we see that in the short-term and intraday periods, the indicator is providing a mixed signal because of stagnation. In the mid-term period, the indicators are moving in the direction of the upward cycle from the previous fall.

 

AUD/USD. A black streak for the Australian dollar

A "black streak" came for the AUD/USD bulls after a streak of gains. The pair was rising almost the entire week and hit 0.7147, a seven-month high. But traders couldn't keep it at the level of the 71st figure: the price went down for the second day and tested the 69th price level. Although, it is worth taking note of the fact that the pair is losing ground not only because of the greenback's strength ahead of the Federal Reserve meeting.

Australia: Labor market and inflation
In exactly one week's time, the Reserve Bank of Australia will hold its meeting on February 7. Therefore, traders are not only discussing the outcome of the Fed meeting, but are also preparing for the announcement of the RBA's verdict.

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AUD/USD. A black streak for the Australian dollar
Take note that last week, the pair received strong support from Australian inflation. Data on consumer price index growth in Australia turned out to be in the green zone, surprising market participants. For example, the monthly CPI indicator rose to 8.4% in the twelve months to December (with a forecasted increase to 7.6%). As for Q4 as a whole, all indicators were also in the green zone, exceeding analysts' expectations. In particular, Australia's annual rate of inflation has risen to a record high of 7.8% (with the forecast of 7.5%). The indicator continued the uptrend that it demonstrated throughout last year. The CPI rose 1.9% in the December 2022 quarter, while most experts had forecast a decline to 1.6% (after 1.8% in the third quarter). Core inflation in Australia (weighted average CPI) in quarterly terms also exceeded forecasts, coming in at 1.7%.

The inflation report "revived" the aussie after the previous labor market report. This report, on the contrary, turned out to be very controversial. The growth rate of the number of employed people fell to -14,600, while the growth rate was forecasted to +27,000. After the report, there were rumors in the market that the RBA might take a break in hiking rates in the beginning of spring. Unexpectedly strong inflation refuted these rumors, and the pair managed to conquer the resistance level of 0.7000.

The decline was due to investors' concerns over the actions of the Australian central bank. In my opinion, these fears are exaggerated.

The next steps of the RBA
Let me remind you that after the previous (December) meeting, RBA Governor Philip Lowe said that the central bank does not follow the pre-planned course: according to him, "the size and timing of future rate hikes will continue to be determined by incoming data and the Board's assessment of the outlook for inflation and the labor market". And while the labor market has generally "let down" the bulls, rising Australian inflation clearly speaks in favor of further rate hikes.

In this context, another phrase from Lowe is also noteworthy - that "the Board's priority is to return inflation to target over time".

One would assume that the central bank would slow the pace of rate hikes. But in this case, the RBA played ahead of the curve, lowering the rate to 25 points ahead of many of the leading central banks in the world. That's why this issue was off the table months ago.

As for rumors that the RBA may pause in monetary tightening, first of all, representatives of the central bank have repeatedly denied such intentions, and secondly, inflation indicators have offset the "dovish" talk, even amid weak "Australian Nonfarm".

Conclusions
The Australian dollar, in my opinion, unreasonably yields to pressure from the US currency. Certainly, ahead of the announcement of the results of the Federal Reserve's February meeting, it is detrimental and even dangerous to open any trading positions on the pair. But if the Fed does not ally with the greenback, the upward route for the pair's bulls will be open, even despite some doubts regarding the RBA's further actions. The bullish target will be 0.7150 again.

Technically speaking, the pair is between the middle and the upper lines of the Bollinger Bands indicator on the D1 chart, as well as above all lines of the Ichimoku indicator, which demonstrates a bullish "Parade of Lines" signal. In other words, technically, the pair retains the potential for further growth, to the major resistance level of 0.7150 (the upper line of the Bollinger Bands indicator on D1). A breakdown of this level will open the way to the area of the 72nd figure.

 

Aggressive Fed rate hike is ending

Euro rose above 1.1000 after the Fed signaled a change in their stance on monetary policy. Their statements during yesterday's meeting were more dovish compared to December, with interest rates increasing by only 25 basis points to a range of 4.5%-4.75%.

At first, markets did not react much to the news as everyone was waiting for the speech of Jerome Powell. But when the Fed Chairman confirmed that they will no longer be aggressive in terms of interest rates, risk appetite surged. The decision was kind of in line with what everyone was expecting, that is, a more optimistic view of inflation and the economy. Of course, Powell was not objectively dovish, but neither was he overly hawkish, which was enough for the market.

Speaking to reporters on Wednesday, Powell said they are forecasting "a couple more" rate hikes, but are ready to adjust their plans if price pressures eased faster than expected. When asked about easing conditions in financial markets that could complicate the central bank's path to return to its 2.0% inflation target, he did not sound particularly concerned.

The 25 basis point hike that was made yesterday was another step towards policy normalization after a half-point rate hike in December and four giant hikes of 75 basis points before that. Most likely, the soft inflation data in recent months has been persuasive enough for the Fed to consider suspending their rate hike campaign. Although the committee continues to cite high prices, the hint of two more 25 basis point hikes confirms market expectations of a final rate hike of 5.25%.

During the press conference, Powell admitted that the US economy is now in an era of disinflation with cooling price pressures. He stressed that more data is needed before they can declare victory, but did not specify how much they need to ensure that inflation is on the right track.

In terms of the forex market, demand for euro surged, but buyers need to protect 1.1000 in order to maintain the chance of rising above 1.1050. Possible price levels in such a situation are 1.1090 and 1.1125. In the event of a decline, EUR/USD could move below 1.1000 and head towards 1.0960 and 1.0920.

For GBP/USD, the sideways trend persists, so buyers need to return above 1.2420 to regain their advantage. Only the breakdown of this resistance level will strengthen the hope of a rise towards 1.2470, after which it will be possible for the pair to reach 1.2540. If pressure returns and sellers take control of 1.2350, the pair will fall to 1.2290 and 1.2230.

 

EUR/USD. The Fed hit the dollar, the ECB hit the euro

The European Central Bank increased the interest rate by 50 points at this year's first meeting, while announcing a 50-point hike at the next meeting in March. Despite such hawkish results of the February meeting, the euro came under pressure. The single currency retreated from a multi-month price peak (1.1034) and returned to the area of the 9th figure. Anomalous, at the first glance, market reaction is due to several factors.

Spring is near
If you assess the February meetings of the Federal Reserve, Bank of England and ECB, you can take note of one general characteristic. On the one hand, central banks declared the continuation of a hawkish course, but on the other hand, they made it clear that aggressive monetary policies are coming to an end. That's why the dollar was under attack at the end of the Fed meeting, the pound was under pressure by the end of the BoE meeting, and the euro was losing ground by the results of the ECB meeting. At the same time, traders actually ignored the fact that the central banks announced further steps to monetary tightening.

For example, ECB President Christine Lagarde without any vague wording, which is considered "straightforward", announced that the ECB intends to raise interest rates by another 50 basis points during the next meeting in March. According to her, the disinflationary process hadn't begun, despite the slowdown in the overall consumer price index (core inflation continues to show an uptrend).

It would seem that such straightforward hawkish verbal signals should have served as a springboard for the euro. But instead of growth to the resistance level of 1.1090 (the upper line of the Bollinger Bands indicator on the weekly chart), the price turned 180 degrees and was marked in the area of the 8th figure, followed by the retreat to the area of the 9th price level.

Why did this happen?
First of all, Lagarde, while announcing monetary tightening in March, questioned the further growth of interest rates. According to her, after the March decision "the ECB will evaluate the subsequent path of monetary policy." At the same time, market expectations (in particular, currency strategists at Danske Bank and a number of other large conglomerates) are more hawkish. The assumed scenario includes a 50-point hike in March and a 25-point increase at the next meeting (by 50 points according to some other analysts). Therefore, Lagarde's "wrap-up" sentiment was negatively received by EUR/USD bulls. The single currency was under pressure as traders took the ECB's message as a sign that the central bank nears the end of its rate hike cycle. In my opinion, the market adequately assessed the situation and correctly perceived the signals of the ECB.

Secondly, the ECB head emphasized her stance on problematic aspects - in particular, she said that economic activity in the European region has slowed down noticeably. At the same time, "high inflation and tighter financing conditions, these headwinds dampen spending and production,". Such comments put pressure on the euro.

Nevertheless, despite the euro's negative response, the EUR/USD pair did not collapse into the area of 7-6 figures, but only retreated from the multi-month price high to the base of the 9th price level. The underlying reason for such stress tolerance is that Lagarde tried to maintain a balance in her rhetoric. On the one hand, she announced a "guaranteed" 50-point hike in March, on the other hand, she questioned further steps towards tightening. On the one hand, Lagarde complained about the slowdown in economic activity; but then she also admitted that the European economy has been more resilient than expected. Moreover, according to forecasts, the economy will show signs of recovery in the coming quarters. At the same time, the ECB head pointed to the optimism of entrepreneurs (obviously referring to the PMI and ifo indices), stable gas supplies to Europe and reduced interruptions.

Conclusions
Figuratively speaking, the scales are back in equilibrium again: The Fed put pressure on the dollar, and the ECB put almost as much pressure on the greenback. The bulls couldn't conquer the 10th figure, the bears couldn't pull the price down to the 7th figure (and even failed to get a foothold at the 8th price level). Now everything will depend on the values of the key macroeconomic indicators, first of all, in regards to inflation. If core inflation in the European region persistently climbs up, the ECB may raise the rate not only in March but also at the next meeting. The US faces a similar situation: the Fed chief has declared a hawkish course, "tying" the scope of monetary tightening to the dynamics of key inflation indicators. Each inflation report and each inflation component (both in the US and Europe) will be viewed through the prism of further central bank actions.

Following the Fed and ECB meetings, the pair remained in the 1.0850-1.0970 range within which it has been trading for several weeks. In my opinion, in the mid-term perspective, the pair will fluctuate in the given price range, alternately pushing back from its limits, reacting to the current information flow.

 

EUR/USD: euro seeks growth opportunities as US dollar remains under pressure from statistic data

The US currency began this week on the back foot. USD retreated significantly after an earlier upsurge triggered by US labor market data. The euro took advantage of the situation and once again rebounded, trying to consolidate its past gains.

On Monday, February 6, the US dollar extended its Friday rally, which began after the release of strong labor market data. However, USD could not overtake EUR. On Friday, February 3, the US dollar index (USDX) jumped and tested the three-week high at 102.7.

As the greenback surged, US stock futures declined considerably. The release of strong US labor market data prompted investors to avoid risky assets, and sent USD higher, as it indicated that the Fed's policy expectations should be reconsidered. Market participants are expecting the regulator to continue its hawkish policy and put the peak interest rate at 5%-5.25%. According to preliminary estimates, this could be achieved with two additional hikes. Analysts say that the non-farm payrolls for January show that the US labor market is overheated. This would give the Fed more room for further rate hikes, experts say.

In the meantime, the European currency rallied after dropping on Friday by 1%. At the beginning of the new week EUR rose against USD and hit 1.0796. EUR/USD traded at 1.0790 early on Monday, February 6, trying to hold on to its gains. FX strategists at TD Securities believe the pair will move near 1.0800, but may retreat to the low of 1.0600 in the near future.

According to the US Bureau of Labor Statistics, unemployment in the United States dropped unexpectedly by 0.1% in January, reaching an all-time low of 3.4%. Experts expected the rate to rise to 3.6%. The latest data shows that employment rose by 894,000 in January, while the number of unemployed declined by 28,000. At the same time, the number of non-farm payrolls rose by 517,000, far exceeding forecasts. The non-farm payroll report for December 2022 was also revised upward.

According to estimates, the number of new jobs in the US economy was almost three times higher than expected. The unexpected growth gave the American economy a new impulse, experts noted. In January, the world's largest economy added 517,000 jobs. This is almost twice as much compared to 223,000 new jobs registered in December 2022.

In addition, average hourly earnings in the US rose by 0.3% last month. Last December average hourly earnings increased by 0.4%. As a result, year-on-year wage growth declined to 4.4% from 4.8% in the previous month. According to current data, public sector employment in the U.S. increased substantially, with 74,000 new jobs added.

Business activity in the US service sector also picked up in January. After a brief dip in December 2022, the index was back above the key level of 50 points, which separates growth from decline. As a result, the ISM Services PMI went up noticeably and advanced to 55.2 points from 49.6 points in November 2022. Recall that in November last year this indicator was 49.6 points.

The current macroeconomic data supported the US dollar, which gained 1% against the euro at the end of last week. However, on Monday, February 6, USD reversed course. As a result, the European currency got the upper hand, recouping its earlier drop.

Analysts believe that upcoming retail sales data in the eurozone may change this situation. Earlier, the euro decreased after the ECB made its decision on interest rates, only to increase after the statements made by the Federal Reserve. Last week, Fed chairman Jerome Powell suggested that there were only two rate hikes left for the regulator. In addition, the head of the Federal Reserve made it clear that the regulator may likely change its monetary policy interest rate, as the rate could reach its peak in 2023 (5%-5.25%).

Amid this situation, analysts noted that the market has become "tired" of endless USD sell-offs. This trend has been continuing throughout the last four months. This might lead to a corrective pullback of EUR/USD by 3%-4%, experts argue. In case of such a scenario, market participants will be able to take their current profits and balance their investment portfolios.

 

EUR/USD and GBP/USD trading plan for beginners on February 8, 2023

Details of the economic calendar on February 7
The macroeconomic calendar was empty. No important reports were released in the EU, the United Kingdom, and the Unites States.

In this regard, investors and traders focused on the incoming information and news flow. Federal Reserve Chairman Jerome Powell spoke before the Economic Club of Washington, where he once again pointed out the hawkish position of the regulator. However, the markets ignored Powell's words, perhaps due to the fact that all his statements were already known from the recent Fed meeting.

The main theses from Powell's speech:

- inflationary pressure is decreasing

- there is still a lot of work to be done

- interest rates need to be raised further

- national employment report was much stronger than expected

- monetary policy is still not sufficiently restrictive

- if the data continues to come out stronger than expected, the Fed will raise the rate even more

- 2% inflation target will not change

- inflation to fall significantly in 2023

- the labor market is strong because the economy is strong

- no decline in service sector inflation yet

- no decline in real estate inflation so far, expected in 2H 2023

- in order to fully reduce inflation, easing in the labor market is necessary

- if strong labor market reports or reports of higher inflation continue, the Fed may need to raise rates more than the markets are laying

- The Fed will respond to incoming statistics

Analysis of trading charts from February 7
The EURUSD currency pair reached 1.0670 during the downward cycle, where there was a reduction in the volume of short positions. As a result, the market rebounded slightly above 1.0750, but this movement did not lead to anything cardinal. So far, all this reminds of the stagnation that arose at the stage of the downward cycle.

The GBPUSD currency pair, despite the manifestation of local activity, continued to move within the area of the 1.2000 psychological level. This price stagnation may well indicate a realignment of trading forces, which will eventually play into the hands of speculators.

Economic calendar for February 8
Today, the macroeconomic calendar is again empty. No important reports are expected in the EU, the United Kingdom, and the Unites States.

In this regard, investors and traders will continue to focus on the incoming information and news flow.

EUR/USD trading plan for February 8
Based on the euro's oversold status due to the strong price action the days before, the current stagnation-pullback is a justified move in the market. At the same time, the update of the correction low points to the continuing downward mood among traders in the market.

In this situation, the technical signal about the completion of the corrective move may be the price holding above the level of 1.0800 in a four-hour period.

As for the downward scenario, a prolonged corrective move may occur when the price holds below 1.0660.

GBP/USD trading plan for February 8
In this situation, special attention is paid to two values, these are 1.2100, where holding above it for at least a four-hour period may indicate the completion of a corrective move, and 1.1950, if the price holds below this value in the daily period, it may prolong the current downward cycle.

Until the above technical signals are confirmed, the market will continue to have variable turbulence along the 1.2000 psychological level.