Friday’s U.S. nonfarm payrolls report showed with 210k jobs in November the smallest gain this year while the unemployment rate fell by more than forecast to 4.2 percent. Despite that mixed picture in November, the Federal Reserve could be on track to possibly tighten policy faster than planned as inflation proves more persistent than previously thought.
The focus this week shifts to the U.S. consumer price report on Friday which is likely to show the highest inflation since 1982. In addition, the emerging omicron covid-19 variant is also presenting upside risks for inflation. With this in mind, the Fed could be poised to announce a faster taper which is why the U.S. dollar could remain in demand.
EUR/USD – Euro weakness is likely to resume
With the Fed’s hawkish pivot and the ECB’s further dovish course there is little hope for euro bulls turning the tables. For the sentiment to change from bearish to bullish it would need a 180-degree U-turn by the European Central bank which is not impossible but it would hurt the ECB’s credibility. Until at least February we might not get a course reversal from the ECB.
Technically, if the euro falls below 1.1270 and further 1.1240, we expect the pair to extend losses toward 1.12 and maybe even toward a lower target at 1.11. For bullish momentum to accelerate we need to see a break above 1.1360 and further above 1.14.
GBP/USD: As long as the cable is unable to stabilize above 1.33, we expect the pair to drop toward 1.31 and further 1.30.
Disclaimer: All trading ideas and expressions of opinion made in the articles are the personal opinion and assumption of MaiMarFX traders. They are not meant to be a solicitation or recommendation to buy or sell a specific financial instrument.
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