The economic calendar for the upcoming week is not packed with significant events; however, several scheduled reports are likely to have a substantial impact on the dollar and, consequently, on the EUR/USD pair. Among them are the January Nonfarm Payrolls, the U.S. CPI report, and retail sales data. All other macroeconomic reports will play a secondary (supportive) role.
Data on U.S. retail sales volume for December will be published on Tuesday, February 10. Last month, the indicator supported the American currency, as it came out in the "green zone." Overall retail sales increased by 0.6% (the highest since August), against a forecast of 0.3%. Excluding auto sales, the figure rose by 0.5% (also the highest since August last year), and excluding auto and fuel sales, it increased by 0.4% (against a forecast of 0.2%).
In December, the main components of the report are expected to remain in positive territory; however, their values will be lower than those in November. Overall retail sales are expected to increase by 0.4%, and excluding auto sales, by 0.4% as well.
This report is traditionally seen as a barometer of the American consumer's condition (and therefore of the entire U.S. economy, where consumption accounts for about 70% of GDP). For dollar bulls, the figure mustn't fall into negative territory. A slowdown in growth (to 0.4%) in December will not be interpreted against the greenback, especially in light of significant sell-offs in November and the early start to the holiday season. However, if, contrary to forecasts, the indicator comes in below zero, the dollar will experience significant pressure.
The January NonFarm Payrolls were scheduled to be published last Friday, but due to a brief partial shutdown, the release has been postponed to February 11, which falls on the coming Wednesday. Official data on the U.S. labor market is critical in itself; however, given the current circumstances, its importance has increased significantly. All accompanying "second-tier" reports (JOLTS, ADP, Unemployment Claims) released last week were in the red, reflecting negative trends.
In December, the total number of job openings fell to 6.54 million—the lowest figure for this indicator in over 5 years—while most analysts had expected it to be 7.2 million. ADP data also disappointed, showing that only 22,000 new jobs were created in the private sector in December (the forecast was at 45,000).
Additionally, the Unemployment Claims report indicated that initial claims for unemployment benefits rose by 231,000 in a week, the highest figure since early December last year. Given this "preview," the January NFP data could play a decisive role for the dollar.
Preliminary forecasts suggest that the unemployment rate will remain at December's level of 4.4%. The number of jobs in the non-farm sector is expected to increase by only 70,000, following a 50,000 increase in the previous month. The earnings figure (average hourly earnings) is expected to show a downward trend, falling to the November level of 3.6%. The proportion of the labor force is anticipated to slightly decrease to 62.3% (down from 62.4%).
As we can see, the forecast appears quite weak, so if the key components of the release come in the red zone, the dollar will face significant pressure, especially in light of the disappointing JOLTS, ADP, and Unemployment Claims data. Conversely, if the number of jobs exceeded 100,000 and the unemployment rate decreases (contrary to stagnation forecasts), the dollar will likely regain demand.
It should be noted that the Fed emphasized labor market issues at the January meeting, highlighting inflation risks. The central bank has effectively tied the future of the interest rate to employment data trends. Therefore, the January NFP report will be of critical importance for the American currency and, consequently, for EUR/USD traders.
The final act of the upcoming week will be the report on U.S. CPI growth for January. Essentially, inflation is the primary (and perhaps only) trump card for the "moderate hawks" advocating for a wait-and-see position from the Fed. If the main inflation indicators begin to slow or at least remain stagnant, dovish expectations regarding the Fed's actions will rise significantly. In this context, CPI plays a key role (along with the core PCE index).
The overall consumer price index over the past two months (December and November) was 2.7%. According to preliminary forecasts, it is expected to decrease to 2.5% in January, its lowest level since May of last year. The core CPI, excluding food and energy prices, is expected to remain at previous months' levels, i.e., at 2.6%.
Even if the report comes in as forecasted (not to mention in the red zone), the dollar may come under pressure. A slowdown in overall inflation while core CPI stagnates is likely to be interpreted as a dovish signal. However, the degree of "dovishness" will depend on the condition of the American labor market.
Ahead is a crucial week for the dollar and dollar pairs, especially if key reports "resonate." Should the U.S. labor market show signs of further cooling and inflation slow or stagnate, buyers of EUR/USD may try to return to the 19-figure area, surpassing the 1.1900 resistance level (the upper boundary of the Kumo cloud on the H4 timeframe). However, if CPI accelerates contrary to forecasts, and if NFP comes in the green zone, sellers will likely consolidate below the support level of 1.1770 (the middle Bollinger Bands line on D1 and the Kijun-sen line on W1), opening up a pathway down to the 17-figure base.
*A análise de mercado aqui postada destina-se a aumentar o seu conhecimento, mas não dar instruções para fazer uma negociação.
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