Mixed PMI data from various Euro area countries led to a surge in volatility for European currency pairs on Thursday morning.
Preliminary estimates for France surprised with their strength. The manufacturing PMI jumped from 43.1 to 46.8 (43.5 expected). The services index rose from 45.4 to 48.0 (45.7 expected). These figures came well above expectations, boosting risk appetite and supporting buying in both the single currency and equities.
However, the EURUSD's rise to 1.0887 was rudely halted by the release of the exact figures for Germany, where the manufacturing index fell to 42.3 from 45.5 (expected 46.1). The services index rose to 48.2 from 47.7 (48.0 was expected).

For the euro area, the manufacturing index fell from 46.6 to 46.1, against expectations for a rise to 47.0. The services sector reached the critical milestone of 50.0. Readings below this level indicate a month-on-month contraction, and the overall composite PMI for the euro area remained in contractionary territory for the seventh consecutive month. However, it has risen to 48.9, the highest level since June last year.

The #EURUSD rose for the seventh consecutive session. The bulls tested the 200-day average earlier in the week, and the pair traded above this important trend indicator on Thursday morning. For much of last month, the pair was bought on dips below this line, and clearly, they did not want to stay away from it for long in February. The ability to attract buyers from these levels could set up a sustained uptrend.

However, the course of trading suggests that it will be a very bumpy and uneven road. On Thursday, in addition to the disappointment of the weak German data, the 50-day moving average acted as resistance. This dynamic suggests that we may see an intense tug-of-war in the coming days before the bulls can mount an offensive.

Fundamental pressures on the dollar against the euro include expectations that the Fed will start cutting rates much sooner than the ECB.

📣Trade responsibly with fxpro.com

Dollar turns the tables
Something important happened in the currency markets on Thursday. The initial and relatively sharp fall of 0.7% in the dollar index was reversed, and now, as trading begins in New York, we are seeing a strengthening to the day's opening level.

In terms of news, the disappointing Eurozone PMI data helped to halt the dollar's slide. Just as notably, buying US currency has increased significantly with the start of active trading in the US.

The release of the weekly jobless claims can be seen as a supporting factor. This is another robust data with initial claims falling to 201 thousand (minimum for five weeks). Continued claims came in at 1.862 million against a forecast of 1.885 million. This data fits perfectly into the picture of a strong US economy, which will allow or even force the Fed not to rush to cut interest rates.

But we are also looking at another factor - Nvidia. The company once again blew away expectations for last quarter's revenue and future guidance. It is quite possible that the company's report, together with the solid macroeconomic data, is attracting capital from abroad to the US markets, supporting interest in the dollar.

A more fundamental approach is also valid: a strong labour market and confident corporate forecasts are a strong plus for higher interest rates in the long run.

#WaveAnalysis

#USDCAD reversed from resistance level 1.3530

Likely to fall to support level 1.3400

USDCAD currency pair recently reversed down from the pivotal resistance level 1.3530 (which has been repeatedly reversing the pair from the middle of January).

The downward reversal from the resistance level 1.3530 will most likely form the daily Evening Star today – strong sell signal for this currency pair.

USDCAD currency pair can be expected to fall further to the next support level 1.3400, which stopped the previous minor correction ii.

📣Trade responsibly with fxpro.com

#WaveAnalysis

#AUDJPY broke long-term resistance level 98.40

Likely to rise to resistance level 100.00

AUDJPY currency pair recently broke the major long-term resistance level 98.40 (previous yearly high from 2022 and 2023).

The breakout of the resistance level 98.40 should accelerate both of the active impulse waves 3 and (3).

Given the multiyear uptrend and the continuation of the strong yen sales, AUDJPY currency pair can be expected to rise toward the next round resistance level 100.00.

📣Trade responsibly with fxpro.com

Oil is down 1.3% since the start of the day on Friday and remains on a tight leash around its 200-day moving average. The previous afternoon, oil managed to resist pressure from a strengthening dollar. It failed to make any gains on Friday due to caution in global markets, from currencies and equities to commodities and cryptocurrencies.

Fundamental factors weighing on oil include a weaker-than-expected European economy and a new wave of house price falls in China. The latter reflects the weakness of the real economy, which is negative for commodities despite the measures taken to support the financial market.

Gas prices in Europe and the US are close to multi-year cyclical lows, easily explained by higher inventories for this time of year. They are above the 5-year range.

At the same time, oil inventories are rising. Last week, commercial oil inventories rose by another 3.5 million, bringing the 4-week increase to 22.3 million. The current stock level of 443 million barrels is 7.5% below the level of a year ago. Stocks in the Strategic Petroleum Reserve increased by 0.75 million over the week, bringing the total to 12.75 million from a 40-year low in July 2023.

Production remains at a record 13.3m bpd. Still, a recent WSJ article noted that further production increases will be difficult as companies focus their financial efforts on buybacks and dividends rather than investing in hydrocarbon exploration.

Oil has been trading near its 200-day moving average for over a week now. The bulls failed to consolidate above this line in late January and last November. In addition, the approach of $79 per barrel for WTI triggered a sharp sell-off.

On the other hand, on the daily timeframe, it is easy to see buying on the dips since the beginning of last week. The intraday fall in oil was likely due to the cautious nature of the markets on Friday.

This means that after a rise above $80, we can state capitulation of the bears and the start of the bull market. If the decline in oil continues for 2-3 days in a row, Crude oil can extend its fall to $72. If this level does not hold, we will see the breakdown of the key 200-week average, which will mark the start of a sell-off on a par with what happened in 2020 or 2014.

The Dollar Index is giving up positions painfully slowly. It is under pressure for the ninth session in a row, but at the same time, the market is unable to accelerate or break this downtrend. Individual currency pairs are now testing critical local levels. The ability to finally break through them could set the trend for the coming weeks.

The Dollar Index has fallen from a high of 104.85 on February 14th to 103.7. This level was strong resistance from late November to early February. It could now act as support. This is also a historically important level for the Dollar Index as it was the peak in March 2020, which took 26 months to overcome.

It is logical to expect increased volatility in this area as this is where global trend selection takes place. A decisive move lower will open a quick path to last year's lows around 100.0. Approaching these levels will make the main scenario a further multi-month decline in the US currency, with a final target in the 90.0-92.5 range.

The ability to develop an offensive from these levels would demonstrate the strength of the dollar bulls after the pause. In this case, the DXY could quickly return to last year's October-November highs. This, in turn, should be followed by a recovery of the dollar to multi-year highs towards 114.5-115.0.

Keeping the dollar in balance this week rests on the shoulders of the 10 FOMC members who are scheduled to speak this week. On the macro data front, the market will be watching Thursday's Personal Income and Expenditure and PCE price indices.

On the technical front, the EURUSD, AUDUSD, and USDCHF are all trading around their 200-day moving averages, the GBPUSD is trading around its 50-day MA, and the USDJPY is approaching 151 level, where the pair made a brutal multi-week bearish reversal in October 2022 and November 2023.

Japanese consumer inflation slowed from 2.6% y/y to 2.2% y/y in January. The data was slightly higher than the expected 2.1%, providing temporary support for the Yen, which rose 0.4% after the release, pushing USDJPY back to 150.10.

Prices excluding food slowed to 2.0% year-on-year, the lowest since March 2022 and back to the BoJ's target. However, an even less volatile measure excluding food and energy slowed to 3.5% from 3.7% in January. These are still the highest levels since the early 1980s, so they warrant the regulator's attention.

The inflation data also helped push Japanese 2-year government bond yields to their highest levels since 2011.

The latest inflation figures have raised expectations of imminent changes in monetary policy. Observers are predicting that the zero-interest-rate policy will be abandoned as early as April this year. The strengthening of these expectations supports the yen by narrowing the yield spread between yen-denominated debt and other reserve currencies.

At the same time, Japan has repeatedly surprised with its passivity in recent years, so it is worth remaining sceptical about its ability to make real changes. This is doubly true when the Fed, the ECB and the Bank of England pick their moment to start cutting interest rates. Fears that the yield spread will narrow too quickly could lead the Bank of Japan to opt for inaction once again.

📣Trade responsibly with fxpro.com

US durable goods orders decreased 6.1% in January after falling 0.3%. The cost of total orders in January was the lowest since September 2022, although it has been quite volatile in recent months due to transport. This was worse than the forecasted 4.9% fall.

Excluding transport, the decline in new orders was a modest 0.3%, to the lowest since July 2023. The average forecast was for growth of 0.2%, but this figure is flat with just 2.2% over 2 years.

This stagnation stands in stark contrast to a tight labour market and record highs in the stock market. But it would be simplistic to see this as an early sign of recession. For example, the headline and core indices had been contracting since the last quarter of 2018, but it was only the sharp acceleration of the decline in the first lockdown that triggered a recession.

The release halted dollar weakness, adding 0.1% to the greenback and briefly taking 0.2% off the Nasdaq100, as the new report did not add to expectations of a US economic expansion.