17.02.201805:48 Forex Analysis & Reviews: The US Dollar Strikes Back

The European currency fell strongly against the US dollar against the background of profit taking after a sharp upward trend, which could be observed throughout the week.

The absence of important fundamental data on the eurozone economy, apart from a number of statements by rating agencies, also forced investors to resort to closing long positions in a number of risky assets ahead of the weekend.

On Friday, the S&P noted the fact that the euro area economy continues to demonstrate strong large-scale growth, which indicates the preservation of the credit rating at a sufficiently high level. The agency also believes that further growth in the economy will contribute to increased consumption and investment. Importance was also given to exports.

All this suggests that the growth of the European currency that has been observed recently has reasonably good reasons and is not based on the conclusions of traders on the need for the European Central Bank to raise interest rates and curtail the bond redemption program.

Data on the US economy supported the demand for the US dollar, which was observed since the beginning of the European session.

According to the report of the US Department of Commerce, the number of construction of new homes in January this year increased by 9.7% compared to the previous month and amounted to 1.326 million homes per year. The number of building permits increased by 7.4% compared to the previous month and amounted to 1.396 million homes per year. Economists had expected an increase in the number of bookmarks by 4.2%.

The report of the National Bureau of Statistics of Great Britain pointed to a weak growth in retail sales in the UK in January this year. This suggests that weak consumer spending will have a negative impact on the prospects for economic growth earlier this year and will continue to put pressure on the economy, which is not in the best condition due to Brexit.

According to the data, retail sales in January 2018 grew by only 0.1% compared to the previous month. In December, there was a drop of 1.4%. Economists had expected growth of 0.6% in January. The bureau noted that further slowdown in the retail sales sector is expected.

The British pound reacted to these data by a large decline against the US dollar.

As for the technical picture of the GBPUSD pair, the current downward correction may be limited to a very large level of support around 1.4000, which was formed in the middle of this week. A breakthrough will lead to significant selling with an update of the area of 1.3950.