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There was a stagnation in the market yesterday, which was not fully acceptable from the perspective of a wide flow of statistical data. However, investors and traders were not ready for action.
Taking into account the economic calendar, Europe's inflation rate was released, where strong growth was expected after a long stay at the levels of deflation. But as a result, inflation in the EU did not just increase, it skyrocketed.
EU inflation was expected to rise from 0.3% to 0.5%, but its level surged to 0.9%.
On such statistics, the price of the euro should accelerate, but the quote remained in the same place where it was before the data was published. This is all due to investors' shocking reaction from everything that is happening, since the course of the monetary policy of the European Central Bank may change with such a rapid increase in inflation. In other words, market participants were not ready for such rapid changes.
This statistical flow has not ended, as the ADP report on US employment was published during the US session, where the previous data was revised for the better – from 123 to 78 thousand. But January's current data was rushed above 174 thousand, instead of the expected +49 thousand.
This is positive data, especially in anticipation of the report of the US Department of Labor. Unfortunately, the market ignored everything again. It was assumed that market participants were in the accumulation stage of trade forces.
What happened on the trading chart?
The EUR/USD pair did not show proper activity in the market yesterday. Rather, the quote slowed down within the important support level of 1.2000, forming an amplitude of about 35 points.
The GBP/USD pair has long and persistently fluctuated within the pivot area of 1.3650/1.3670, which hinted accumulation and a possible breakdown.
Trading recommendations on EUR/USD and GBP/USD for February 4, 2021
Today, Europe's volume of retail sales will be released, with a growth forecast of 1.6% in December. The results are quite good, but it is still unclear whether the market will react to them.
10:00 Universal time - EU retail sales
After that, a scheduled meeting of the Bank of England will take place, whose results will be known at 12:00 Universal time. We can assume that the regulator will take a "dovish" position without doing anything, which is both a good and a bad signal. However, we will continue to consider the correction as a prospect, given the pound's high rate.
During the US session, weekly data on US applications for unemployment benefits will be published, where their volume is expected to decline.
USA 13:30 Universal time - Applications for unemployment benefits
If we analyze the current trading chart of EUR/USD, it can be seen that the quote is still moving within the support level of 1.2000, showing low activity. To prolong the corrective move from the high of the medium-term trend, market participants should remain under the level of 1.1990 in a four-hour time frame. In this case, a path in the direction of 1.1810 may open.
An alternative scenario considers the existing stagnation as a possible signal for a rebound from the level of 1.2000, where holding the price above 1.2050 may indicate a local movement towards 1.2150.
As for the current trading chart of the GBP/USD, we see that the market already confirmed the signal of a possible breakdown of the support area of 1.3650/1.3670. Thus, the volume of short positions increased, which may weaken the pound in the direction of 1.3535-1.3465.
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