Both EURUSD and cable dropped out of their recent ranges as the post labor market report US dollar rally continued yesterday. The greenback posted further gains after the ISM Services Index showed that new orders had increased during January, prompting analysts to reprice Fed policy, implying a stronger dollar as the chance of a March interest rate cut from the Fed fell away.
EURUSD fell through various support levels including the 100-day MA at 1.0785 to trade at an old support level at 1.0725 where the pair found some buying interest. There have been several reasons why EURUSD dropped out of its range; the above print NFP, a hawkish Powell, positive carry, as well as the economic and interest rate outlook all suggest that the pair maybe has further to fall. Euro area PMIs published yesterday did little to support the single currency, unveiling a picture of softer downward trends for production and orders. Eurozone Retail Sales data is on the docket this morning, and we look forward to a couple of Fed speakers later this afternoon as investors continue to search for clues on the timing of the first cut from the FOMC.
Before last week’s US employment report GBPUSD seemed comfortable treading water within a 1.26 to 1.28 range. The break on the downside pushed the pair to within a whisker of the psychological 1.25 area yesterday triggering a brief rally to 1.2550. EURGBP continues to consolidate within the 0.85 to 0.8550 area, although a test of the stubborn 0.85 area seems likely with the pair likely to gradually grind lower.
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