The euro-dollar pair at the start of the new trading week continues to move according to the inertia of Friday trading. EUR/USD buyers are trying to realize their ambitions, getting close to the limits of the parity level. Sellers, in turn, are forced to retreat—the October nonfarm payrolls were not in favor of the US currency.
Nevertheless, despite the strength of the upward movement, the current price increase should be considered a correction—at least until traders consolidate above the 1.0050 resistance level (the upper line of the Bollinger Bands indicator on the D1 timeframe). From a fundamental point of view, the positions of EUR/USD buyers are also quite shaky: in the near future, the information background may change in favor of the greenback.
Note that the dollar fell in price on Friday due to the nonfarm payrolls data. To be more precise, the contradictory report on the growth of the labor market in the United States reduced the hawkish mood of traders regarding the possible outcome of the December Fed meeting. Actually, this circumstance was the reason for the "upward rally" of EUR/USD. However, in my opinion, market participants made hasty conclusions, which, moreover, do not correlate with the general position of the Federal Reserve.
After all, firstly, Jerome Powell, following the results of the November meeting, "plainly" announced a possible slowdown in the pace of tightening monetary policy in the coming months. The report published on Friday only shifted the time frame for discussing this issue from February to December. Secondly, having announced a slowdown in the rate increase, the regulator simultaneously announced that the peak of the current cycle would be at a higher level, that is, it would exceed the five percent mark. Also, Fed Chair Powell stressed that it is premature to even think about the suspension of the rate hike. And, thirdly, the issue of slowing down the pace of monetary policy tightening is debatable in itself: at the December meeting, the regulator's members will discuss the feasibility of this step.
That is why the positions of EUR/USD buyers now look so shaky. If the members of the regulator this week voice a more hawkish attitude, and the release of data on inflation growth in the United States comes out in the "green zone," the dollar will remind itself again, returning the lost points.
It is worth noting that several representatives of the Federal Reserve will speak at once during the current week. Today, during the American session, Susan Collins and Loretta Mester, Tuesday—Thomas Barkin, Wednesday—John Williams, Thursday—Christopher Waller, Patrick Harker, Laurie Logan (recently headed the Federal Reserve Bank of Dallas) and Easter George.
The key release of the week is the report on inflation growth in the US in October, which will be published on Thursday, November 10th. According to most experts, last month, the consumer price index in the United States rose by 8.0% YoY, and the core—by 6.5% YoY. Even if all components come out at the predicted level, the dollar can significantly strengthen its positions, as inflation growth will demonstrate an extremely weak pace of slowdown. If the inflation report turns out to be in the "green zone," we may become witnesses of another dollar rally.
The latest news from China does not contribute to the development of the upward movement. In particular, rumors that China may abandon its "zero tolerance" policy for COVID have not been confirmed. The National Health Commission today issued an official statement that the authorities must adhere to a policy of strict control of the spread of the coronavirus. It also became known that on November 6, 5,496 new cases of COVID-19 were registered in China. This is the strongest growth rate since May 2, when strict quarantine measures were introduced. Recall that earlier rumors spread on Chinese social networks that Beijing was exploring the possibility of curtailing the zero tolerance policy for Covid. Such talk increased interest in risky assets and led to a short-term increase in Chinese stock markets.
Also, today it became known that China's trade surplus increased to $85.15 billion (from $84.74 billion), while market expectations were at $95 billion.
Thus, despite the fighting mood of the EUR/USD bulls, the overall prospects for further corrective growth look vague. The pair is growing on rather shaky grounds, the risk of another reversal to the south is very high. Therefore, longs look risky, especially since buyers have not even been able to break the 1.0000 mark (not to mention consolidation above 1.0050). All attention is on the comments of the Fed members and the inflation report, which will be published on Thursday.