The long-awaited upward correction of the European currency began yesterday and may continue today. This will happen in the event of weak US inflation data, which once again will convince investors of the correct decision of the Federal Reserve System to slow down the increase in interest rates this year.
During yesterday's speech, Fed Chairman Jerome Powell said that the incoming data suggest that the US economy is in good shape, but the fiscal policy is superior in its capabilities to monetary policy. This is a confirmation that in the first half of this year, the Fed will not change its policy.
A speech by US President Donald Trump yesterday dealt with trade negotiations with China, as well as an agreement on financing border security.
Trump said that the US and the Chinese side want to conclude a new trade agreement, and tariff increases for Chinese imports on March 1 may not occur if the parties are close to a trade agreement.
Regarding the problem with the wall on the border of Mexico, the US president expressed dissatisfaction with the new agreement on the financing of border security, which was recently reached in Congress. At the same time, Trump said that he does not expect a repetition of the suspension of the government's work, and expects that a wall on the border with Mexico will be built.
As for yesterday's fundamental statistics, it did not greatly help the American dollar, since it was generally negative in nature.
According to the report, due to the recent partial suspension of government operations, the expectations of small business owners have declined. It is worth noting that the deterioration of sentiment in the field of small business has been observed for several months in a row.
According to the National Federation of Independent Business NFIB, the optimism index in January 2019 fell to 101.2 points against 104.4 points in December. Economists had expected the index to be 102 points in January. Despite this, the federation noted that small business is still very active, but many small business owners have less confidence in their future.
The number of vacancies in the US increased in December. According to a report by the US Department of Labor, the number of vacancies as of the last working day of December was 7.34 million, while at the end of November, the number of vacancies was 7.17 million. Such data indicate a lack of supply in the labor market. Let me remind you that in December 2018, unemployment in the United States was 3.9%, while in January it rose to 4%.
After the Eurogroup meeting, the current President of the Bundesbank, Jens Weidmann, once again criticized the work of the European Central Bank. He said that the purchase of bonds by the European Central Bank could jeopardize independence since the central banks of countries should not take on too much of a burden. On the one hand, the criticism of the work of the European regulator does not sound the first time, but now, on the background of the fact that Weidmann is one of the potential candidates for the post of ECB chairman, it is perceived by the market quite differently. His victory may lead to significant changes in the approach and attitude of the ECB to monetary policy in the future.
As for the technical picture of the EURUSD pair, the upward correctional potential may continue today. This requires a breakthrough resistance of 1.1350, which will strengthen the demand for the euro and lead to new highs of 1.1390 and 1.1440. In the case of a downward correction of the euro, support will be provided by a large area of 1.1300, where you can return to the opening of long positions in risky assets.
Today's exit of fundamental data on inflation in the United States and a number of other indicators can only aggravate the position of the US dollar amid slowing economic growth.