13.03.202610:21 Forex Analysis & Reviews: US economic data encourages dollar bulls

According to the reports, initial jobless claims in the United States fell slightly last week, signaling that layoffs remain under control. The US Department of Labor said on Thursday that initial claims decreased by 1,000 to 213,000 for the week ending March 7. The median economist forecast had been 215,000.

All of this indicates that new claims remain fairly low despite a growing number of companies announcing cuts this year. Over the past couple of weeks, Oracle Corp., Morgan Stanley and Block Inc. have all announced staff reductions. Continuing claims also fell last week to 1.85 million.

In a separate report released yesterday, the US goods and services trade deficit narrowed in January as exports rose, reflecting the country's relatively stable trade policy last year. According to Commerce Department data published on Thursday, the trade deficit fell by more than 25% month-on-month to $54.5 billion. The average economist survey had expected a $66 billion deficit. Exports in January rose 5.5% month-on-month, helped by shipments of gold and other precious metals, as well as computers and aircraft. Overall imports fell 0.7%, reflecting weaker pharmaceutical shipments.

Another positive for the dollar came from housing starts, which rose for a third consecutive month to the highest level in nearly a year, driven by multi-family projects. Government data published on Thursday showed permits increased 7.2% in January to an annual pace of 1.49 million housing starts. Housing starts beat every economist forecast, led by nearly 30% growth in multi-family construction, while single-family starts declined.

As noted above, these kinds of data prompted active dollar buying and selling of a number of risk assets in FX and equity markets.

Technical outlook for EUR/USD

Buyers now need to reclaim 1.1500. Only that will allow a test of 1.1530. From there, the pair currency could reach 1.1565, but doing so without support from major players will be difficult. The ultimate upside target is 1.1700. On the downside, I expect significant buyer interest only around 1.1470. If there is no buying there, it would be prudent to wait for a new low at 1.1430 or to open long positions from 1.1405.

Technical outlook for GBP/USD

Pound buyers need to take the nearest resistance at 1.3325. Only that would allow targeting 1.3367, above which a further breakout will be difficult. The ultimate upside target is around 1.3405. On the downside, bears will try to seize control at 1.3285. If they succeed, a break of that range would deal a heavy blow to the bulls and could push GBP/USD down to 1.3255 with the potential to extend to 1.3215.