FX.co ★ Weak nonfarm stopped dollar's rise, but CFTC suggests investors are determined. Overview of USD, EUR, and GBP

Expectations after the publication of positive ISM and ADP reports did not materialize, the US labor market report for January was downright weak. And if the number of new jobs created coincided with the forecast (49,000 versus 50,000), although the players were counting on the excess, then the large-scale revision of the two previous months was a complete surprise. November's 336,000 revised to 264,000, and December's 140,000 to 227,000, a total decrease of 159,000.

At the same time, the unemployment rate fell from 6.7% to 6.3%, which is somewhat surprising, but it can also have a rational explanation since the Bureau of Labor points out numerous errors in research due to the pandemic.

One might get the impression that the employment gap is related to covid, but this impression is misleading. Of course, the pandemic has made its negative contribution, but if we compare the rate of creation of new jobs with the growth rate of dropouts from the labor force, or with the general level of the US population, we can see that the peak in employment was reached in December 1999, and by 2020 employment was at levels lower than before the 2008 crisis.

Former US President Donald Trump tried to implement a plan to restore the US industry but failed. Given the persistence with which he was kicked out of the White House, it is logical to assume that the Democrats have another plan that will restore employment and close the giant budget hole, but what this plan is, is still completely unclear.

The CFTC report released on Friday confirms market expectations for such a plan. In any case, the consolidated short for the dollar fell by more than 10% over the reporting week, this is the first decline in 7 weeks, for gold, the long position also declined, which indicates the growing confidence of investors in the imminent arrival of a strong dollar.

Commodity currencies have remained virtually unchanged, which can be regarded as equilibrium, the market is balancing between the desire for profit and fear, and the direction for the week is not set. Monday is trading mainly in the green zone, which suggests little pressure on defensive assets, the dollar will either be stable or resume growth with the opening of the American session.

EUR/USD

There will be no more or less significant statistics for the euro this week, attention will be focused on vaccinations and politics. Italy is creating a new government headed by the former head of the ECB Mario Draghi, and the European Commission intends to initiate the temporary abolition of all mutual duties between the US and the EU that were introduced during the Trump administration. A positive reaction from Biden could push the euro slightly higher.

The euro net long position was trimmed by $4.5 billion in the reporting week, which is the equivalent of 28,3000 contracts, the largest weekly reduction in euro net long positions since mid-2018 when the euro depreciated rapidly from its peak at the beginning of the year. The calculated price remains below the long-term average and is directed downward, which gives grounds for a bearish trend.

The zone of resistance at 1.2050/55 is convenient for selling with a short stop, the first target is the renewal of the minimum of 1.1950, next to 1.1800/30, the main technically significant level is still at 1.1695.

GBP/USD

The net long position on the pound increased slightly, which partially offset the fall in the euro, but in general, the direction, apparently, is still downwards.

The pound could not overcome the resistance zone 1.3745/60, the impulse ended slightly below the previous high, which from a technical point of view can be considered a sign of a reversal. We expect a decline to 1.3564 and further below, the next target is 1.3480/3500, the main one remains unchanged at 1.3200.