The euro (EUR) remained largely unchanged against the US dollar (USD) on Tuesday, trading at 1.1905. It has stabilized near a one-week high following two consecutive days of gains. As the market anticipates significant US economic indicators, the dollar remains weak amid a generally optimistic sentiment.
On Monday, economic adviser Kevin Hassett from the White House expressed concerns that President Donald Trump’s immigration policies, alongside productivity improvements, could lead to slower job growth in the upcoming months. This follows the disappointing job numbers from last week, which only added to the pressure on the dollar. With the non-farm payrolls (NFP) report set for release on Wednesday, Hassett’s remarks have yet to buoy the currency.
In Europe, Christine Lagarde, President of the European Central Bank (ECB), expressed confidence that inflation in the region would stabilize at around 2% in the medium term. This aligns with last week’s monetary policy statement that indicated steadiness in interest rates in the coming months.
Tuesday’s European economic calendar appears light, with attention focused on the US retail sales report and the four-week average of ADP employment figures. These metrics could influence market sentiment leading into Wednesday’s NFP report.
Daily Digest Market Trends: Employment Concerns Weigh on USD
- The US dollar remains susceptible as worries around job creation resurface. Hassett’s prediction of a dip in employment demand has dampened expectations for an upbeat NFP announcement on Wednesday, raising the likelihood of an interest rate cut by the Federal Reserve soon.
- Futures markets indicate a 17% chance of a rate cut in March and 34% in April. Investors are anticipating that the central bank may reinitiate its easing cycle after Chairman Jerome Powell’s impending departure in May. Data from CME’s FedWatch tool suggests a nearly 75% chance of a rate cut by June and over 70% for at least one more cut by year’s end.
- There appear to be differing opinions within the Federal Reserve itself. Governor Stephen Millan, appointed by Trump, downplayed the inflationary effects of tariffs and called for further rate cuts, while Atlanta Fed President Rafael Bostic raised concerns about the dollar’s stability, citing the variable employment data as a reason for caution.
- On Tuesday, investors expect US retail sales to rise by 0.4% in December, slowing from November’s 0.6% increase. Excluding automobile sales, a further slowdown to 0.3% from 0.5% is also anticipated.
Technical analysis: EUR/USD consolidates gains above 1.1900
The euro has effectively reversed its decline from late January highs and has returned to a broader uptrend against the US dollar. The EUR/USD pair is holding steady above 1.1900, yet there is minimal downside movement observed currently.
Looking at the technical indicators, the positive momentum does seem to be waning. The moving average convergence divergence (MACD) histogram remains positive, but the flatness of the MACD line around the signal line suggests some market hesitation. The Relative Strength Index (RSI) is hovering near 60, indicating a moderately bullish trend.
The pair peaked at 1.1925 on Monday, blocking movement towards the January 30 high near 1.1970. On the downside, the session high around 1.1895 is currently seen as bearish, while more attention is being paid to the range between the 50% Fibonacci retracement level at 1.1834 and Monday’s low near 1.1820.
