During this week, the EUR/USD pair has been hovering near the pivot level of 1.0700. From time to time, it climbs above this level but later, it rolls back to the previous values. Analysts believe that in the near future, the euro could break out of this range. The US dollar is likely to assert strength.
By the end of this week, the EUR/USD pair has been able to break through the level of 1.0700. Earlier, the pair started a significant correction. At some point, the EUR/USD pair rose to 1.0777 but it was a short-term jump. During the week, the EUR/USD pair has been moving in the range of 1.0700-1.0750, trying really hard not to decline lower. The support level was located at 1.0470. As a reminder, the EUR/USD pair rolled back to such a low in early January 2023.
Against this background, the US currency resumed an upward movement amid expectations of fresh US macroeconomic reports later today. On February 10, the EUR/USD pair was trading at 1.0726, trying to consolidate at its current levels.
FX strategists at Commerzbank note that it is hard to predict whether EUR/USD will consolidate above 1.0700 or not. Both scenarios are possible. However, analysts doubt that it will resume an upward movement. The greenback is likely to continue the midterm bearish movement.
Today, the US will reveal a batch of macroeconomic reports. According to preliminary estimates, the University of Michigan Consumer Sentiment Index will total 65 points. In January, the indicator was 64.9. Analysts expect a drop in the US budget deficit to $63 billion after the December reading of $85 billion.
Yesterday, speculators digested economic data from Germany. According to the Federal Statistical Office (Destatis), in January, annual inflation in Germany accelerated to 8.7% from the previous level of 8.6%. Analysts had expected an increase to 8.9%. The Harmonised Indices of Consumer Prices in Germany fell to 9.2% in annual terms versus the December figure of 9.6%. This indicator undershot expectations. Economists had anticipated the reading to stand at 10%. Fresh macro stats adversely affected the trajectory of the euro. However, the euro managed to recover after short-lived downward corrections.
It exerted pressure on the US currency, pushing EUR/USD higher. Many analysts expect further appreciation of the greenback amid the Fed's hawkish rhetoric. Earlier, the regulator announced a possible increase in the key rate by 50 basis points. Before that, traders ignored the Fed's hints about monetary tightening. However, after the release of strong NFP data, the situation changed drastically. Investors are factoring in an increase in the key rate to the range of 5%-5.25%. It means two more 25 basis point rate hikes.
The US dollar has recently lost steam because of expectations of a softer stance from the Fed. However, it did not happen. Fed policymakers suppose that it is too early to talk about monetary easing as the labor market in the United States is overheated. The service sector and the real estate market are unable to recover due to inflation. Therefore, the regulator is ready to raise the key rate further. In this light, the US dollar will receive support from both rate hikes and increased demand for safe-haven assets.
Analysts at ING bank suppose that the greenback has failed to benefit from the Fed's hawkish comments. However, the situation may change at any moment. If the market stabilizes, it will create favorable conditions for USD growth. Many investors are looking for opportunities to open short positions on the US currency. However, analysts do not advise traders to go short now.