Fiscal Fireworks: NFP & Rates Rock U.S. Outlook

Charting the Course: EUR/USD Amidst Market Shifts

U.S. inflation data offered mixed signals last week, as the Core PCE Price Index showed an increase for December (previous 0.1%; actual 0.2%) but decreased from a yearly perspective (previous 3.2%; actual 2.9%).

The greenback had a mixed week, with the US Dollar Index (DXY) opening at 103.23 and closing the period at 103.47. Against the Euro, the Dollar opened the week at 1.0889 and closed at 1.0853. Overall not a lot of movement and all directional moves were quickly reversed, which resulted in choppy price action.

This is all about to change this week, because some of the most important economic indicators will be released, including the Federal Open Market Committee (FOMC) interest rate and the always-important U.S. jobs data to end the week.

Economic Calendar Highlights

The first notable release of the week will be the U.S. Consumer Confidence survey, which is scheduled for release on Tuesday at 3:00 pm GMT. Consumer confidence is directly related to consumer spending (retail sales), hence its importance.

The action picks up Wednesday at 12:00 pm GMT with inflation data (CPI) for the German economy, while later in the day, at 7:00 pm GMT, the FOMC will announce the interest rate. There is no change expected but the FOMC Statement may contain clues about the direction of future cuts; if this is the case, look for some interesting movement on US Dollar pairs. Half an hour later, at 7:30 pm GMT, Fed Chair Powell will hold the usual press conference.

Thursday we focus on the Eurozone economy with the release of the Core CPI Flash Estimate scheduled at 10:00 am GMT and on the U.K. economy with the BoE interest rate announcement at 12:00 pm GMT.

The final event of the week will be the release of the U.S. Non-Farm Payrolls, alongside the Average Hourly Earnings and Unemployment Rate, all scheduled for Friday at 1:30 pm GMT. The jobs data will probably create the most volatility, depending of course on how much the actual numbers differ from the forecast.

Technical Outlook – EUR/USD

Last week’s choppy price action doesn’t really offer a lot of clues going forward. We’ve had a lot of candles where the opening price almost matched the closing price and days that completely nullified the movement of the previous ones.

Therefore we should focus on what can be easily seen on the charts: the pair is currently trading below the 50-day Moving Average after trying several times to move back above it. The bullish trend line is clearly broken and the Relative Strength Index is moving south without being oversold.

These are all bearish signs but considering the amount of potential market-movers that will be coming out this week, we can expect to see a quick and strong move to either side, depending on the numbers. Pay extra attention to the Fed rate announcement and the NFP release because these are known to be “bombs” of volatility.