FX.co ★ Fundamental analysis of EUR/USD and GBP/USD. Demand for USD remains strong despite it being overbought

The euro continues moving down amid negative interest rate concerns in the eurozone as well as lower risk appetite due to absence of desired results from the rollout of the vaccine against COVID-19. A recent study shows that the global economic recovery could seriously slow down or even stall due to the slow vaccine rollout in poorer countries compared to their wealthier neighbors.

According to official statistics, around 4.54 million people are inoculated worldwide every week. However, the distribution is uneven. Thus, the United States and the United Kingdom account for about 40% of all doses that have been used to vaccinate the global population. Therefore, the situation with the vaccine rollout in emerging markets is much worse compared to developed countries. In fact, the vaccination has not even started or has been going slowly in the majority of the countries of Central Asia and Central America.

The problem is that emerging markets risk lagging further behind developed economies where the pace of the vaccination campaign is quicker. The more the gap widens, the higher the likelihood of new viral mutations and slower global economic growth. Based on a recent survey of the International Chamber of Commerce, the uneven distribution of vaccines could cost the global economy some $9.2 trillion.

In this light, demand for safe-haven assets, the greenback in particular, will remain steady. Despite its overbought status, the prospects of a sharp increase in the euro are still poor. This week, traders have ignored positive data from the euro area, selling the euro after the release of pessimistic reports. Similar events took place after the US delivered its fundamental statistics. Today, an important labor market data is set for release. If the reading turns out to be better that expected, EUR/USD is likely to plunge to the range of 1.1900.

As for the intraday technical analysis on EUR/USD, the price's failed attempt to break below 1.1952 and a return to this range will give a buy signal in order to recover to resistance at the base of the 1.2000. The price will be able to break through this range only in case of a poor US labour market report. In such a case, the instrument may well reach the highs of 1.2040 and 1.2090. If the pressure on the euro remains and the price breaks through the support level of 1.1950, the pair will possibly reach new local lows in the area of 1.1920 and 1.1880.

Notably, the market ignored yesterday's poor labor market data. Thus, nonfarm labor productivity in the US fell by an annualized 4.8% in the last quarter of 2020, following an upwardly revised 5.1% increase in the third quarter. Economists had expected the reading to drop by 2.8%.

As for the weekly labor market statistics, the situation is getting better amid a decrease in the number of jobless claims. Thus, initial jobless claims plummeted to 779,000 in the week ended on January 30. This was 33,000 less than the revised level of the previous week - 812,000. Economists had expected jobless claims to shrink to 830,000. The Labor Department said the less volatile four-week moving average also edged down to 848,250.

Meanwhile, US factory orders did not go unnoticed by traders, which led to another decline in the EUR/USD pair. The Commerce Department report said factory orders jumped by 1.1% in December after surging up by 1.3%. Economists had expected factory orders to climb by 0.7%. The bigger than expected increase in factory orders came as orders for non-durable goods spiked by 1.7%, while orders for durable goods rose by an upwardly revised 0.5%.

GBP

Today, Governor of the Bank of England Andrew Bailey will deliver his speech. Traders expect him to drop any hints on the possibility of negative interest rates, If so, it may lead to a sharp decline in the pound in the short term.

Yesterday, the British pound skyrocketed after the publication of the minutes of the BoE's Board meeting. Let me remind you that many traders expected that the regulator would raise the issue of negative interest rates. However, it did not happen. Consequently, those traders who expected to trade on the news about interest rates had to abruptly close their short positions.

Today, this can be exactly the opposite situation. But for this, Bailey will have to talk about negative interest rates. Most likely, this will lead to a sharp decline in GBP/USD to the support level of 1.3640. Another target is seen at the low of 1.3600. Bulls will try to gain control of this level since the lower border of the new ascending channel may pass in this range, which can return the pound to its annual highs. A breakout of the resistance at 1.3690 will lead to the cancellation of a number of bears' stop orders, contributing to a stronger upward movement on GBP/USD to the 1.3725 level. The price may even reach 1.3760.