In the first half of Friday’s trading, the EURUSD pair continued its decline within the downwards channel with a drop from 1.1294 to 1.1234 to revisit the low from the 13th of November of last year. However, the pair underwent a sharp reversal ahead of the US session, and went on to climb to 1.1308, breaking through the upper boundary of the downwards channel that has been dictating this pair’s trajectory since the end of January. The pair then closed the week at 1.1292.
This growth was not so much the result of positives from Europe as it was negatives from the US. The USA’s import price index for January declined by 0.5% MoM against expectations of 0.1%. A reduction in import prices is a sign that inflation is slowing down, which is one factor that will go towards delaying any tightening of monetary policy. This is negative for the dollar. Moreover, capacity utilization in the US in January came out at 78.2% against an expected 78.7%, while industrial production suffered a sudden decline of 0.6% MoM where markets had expected a rise of 0.1%.
The breakout of the downwards channel has provided some impetus for growth, which was reaffirmed on Monday morning. The EURUSD reached 1.1324 before pulling back to 1.1307. The next target for the bulls is the 1.1341 resistance. There aren’t any significant news releases coming from Europe today and US markets are closed due to Presidents’ Day, so activity on the Forex market will be subdued.