The EUR/USD currency pair has experienced a dynamic February, closing the month with significant gains despite a backdrop of mixed economic indicators. As February draws to a close, the EUR/USD pair has climbed roughly 200 pips from its monthly opening at 1.0226. This ascent is framed by the latest economic data, including the February IFO Business Climate survey, which remained steady at 85.2, falling short of the anticipated 85.8. Meanwhile, in the United States, softer-than-expected figures such as a -0.2% Q4 GDP and a modest 0.2% month-on-month increase in January Retail Sales have contributed to market volatility.
In Europe, the IFO survey's findings suggest that business sentiment remains cautious. The unchanged reading of 85.2 highlights ongoing concerns within the economic landscape, despite expectations for slight improvement. This sentiment is mirrored in the Relative Strength Index (RSI) indicator for the EUR/USD pair, which continues its downward trajectory, settling around 42.
The United States, on the other hand, has seen mixed data releases. While Q4 GDP fell into negative territory with a -0.2% contraction, Durable Goods Orders provided a glimmer of optimism with a robust 3.1% surge in January. This jump was seen after December's figures were revised upward from -2.2% to -1.8%, suggesting some resilience in certain sectors of the U.S. economy.
Looking ahead, market participants are gearing up for key economic releases expected this week. On Wednesday, the U.S. will publish the ADP Employment Change report and the ISM Services PMI, both critical indicators of economic health. Simultaneously, the European Union will release the January Producer Price Index (PPI), providing insights into inflationary pressures within the bloc.
The EUR/USD pair has also been influenced by technical indicators. The pair retreated sharply from a bearish 20 Simple Moving Average (SMA), which is trending downward below mildly bearish 100 and 200 SMAs. This pattern suggests ongoing bearish pressure on the pair, a sentiment reinforced by Thursday's plummet to an early Friday low of 1.0379, marking its lowest point in over two weeks.
On a weekly chart, sellers appear to maintain control over the EUR/USD pair in the long term. Daily charts indicate that upside movements are constrained by sellers near a flat 20 SMA at 1.0415 and further resistance at the 100 SMA around 1.0530. The Momentum indicator has reached its midline but is losing steam just below it, hinting at lingering buyer hesitation.
The U.S. Dollar finds itself caught between a cautious global mood that provides support and lukewarm domestic data that raises concerns about economic growth in the world's largest economy. This environment has created a complex dynamic for the EUR/USD pair as it navigates through varying economic signals.
Throughout this period, the EUR/USD has consistently posted lower lows and lower highs, a typical indication of prevailing bearish strength. Such patterns typically suggest that sellers continue to dominate market sentiment, potentially limiting any substantial upward momentum for the currency pair.