FX.co ★ EUR/USD analysis and outlook for February 3, 2022

Is euro's collapse premature?

Hello, dear colleagues!

Today, the European Central Bank will probably make the important decision concerning the next steps in its monetary policy. The current ECB president Christine Lagarde's press conference will likely be her keynote speech since she has been the head of the European Central Bank. Notably, the policy set by the US Federal Reserve has always been followed by the European Central Bank. However, this tendency was common before the COVID-19 pandemic. It broke the supply chain and the economies of many developed countries and their central banks faced serious problems with rising inflation. Currently, each company and institution deals with its issues or is independent to be precise. In particular, this example was vividly demonstrated by the Bank of England. It raised the interest rate earlier than the Fed, which is traditionally a trendsetter in the monetary policy of the world's leading central banks.

Yesterday's ADP employment data was weak. With the forecast of 250 000, the figure was - 301 000 compared to the previous reading of 807 000! The eurozone published inflation reports, i.e. the consumer price indices. I think this macroeconomic data was very ambiguous. Overall, it can be concluded that consumer prices in the EU are rising or the ECB will have to tighten its monetary policy by raising interest rates in the near future. If the ECB members follow this principle, the situation will be more favourable to the EU economy. Currently, the ECB takes a dovish stance on monetary policy. Today's decision on interest rates will undoubtedly remain unchanged. As for the rhetoric of ECB president Christine Lagarde's speech, it is likely to be tightened. In this case, the euro will get more support and will continue to rise against the US dollar. So, has the euro's collapse proved to be premature? I believe today's and tomorrow's trading, as well as the final closing of the week will provide an answer.

Daily

As estimated in yesterday's EUR/USD review, the pair reached the important and strong technical level of 1.1300 and tried to overcome it upwards. Notably, the blue Kijun line and the 50 simple moving average were to provide the resistance on this timeframe. Evidently, such expectations and assumptions proved effective. Yesterday, the pair was rising to another strong technical level of 1.1330. However, it failed to hold near it and rolled back to 1.1304, where it closed Wednesday's session. Euro bulls managed to close the trading session on February 2 within the boundaries of the Ichimoku indicator cloud, as well as slightly above the blue Kijun line.

However, permabulls failed to close yesterday's day above the 50 MA. If the movement of the major currency pair of the forex market is forecasted, it will be affected by the rhetoric of the ECB president Christine Lagarde. If the comments of the ECB head will support the single currency, the EUR/USD pair will continue to rise to the area of 1.1370-1.1385 or even higher. Otherwise, the pair will fall again from the daily Ichimoku indicator cloud and fall to yesterday's low at 1.1265 as the nearest bearish target. From a technical point of view, I believe the chances of the EUR/USD price direction can be assessed as 50/50. Based on the above data, today I will not make specific trading recommendations.

Good luck!