Dollar Holds Steady after Producer Price Data Release

Market activity remains quite low at the beginning of the week, as American trading floors are closed to celebrate Presidents' Day. At the same time, investors continue to evaluate the data on manufacturing inflation published last Friday. Thus, the producer price index increased by 0.3% on a monthly basis and by 0.9% on an annual basis, which turned out to be higher than the predicted 0.1% and 0.6% and the December values of −0.1% and 1.0 %, respectively. In addition, trading participants paid attention to the publication of the consumer confidence index from the University of Michigan, a leading indicator that predicts consumer spending: in February it increased from 79.0 points to 79.6 points, slightly lower than the estimated 80.0 points.

EUR/USD

Today, the European currency is holding near the 1.0780 mark against the backdrop of weak investor activity, while market participants evaluate Friday's publications from Europe and the United States. Immediate resistance can be seen at 1.0790, a break higher could trigger a rise towards 1.0815. On the downside, immediate support is seen at 1.0732, a break below could take the pair towards 1.0695.

According to French statistics, the consumer price index, calculated according to EU standards, showed a decrease of 0.2% month on month, and an increase of 3.4% in annual terms. However, prices excluding tobacco products fell 0.3% month-on-month after rising 0.1%.

Technical analysis of EUR/USD shows that a new ascending channel has formed at the highs of two days of last week. Now the price is in the middle of the channel and may continue to rise.

GBP/USD

The pound is adding value in the GBP/USD pair, testing the 1.2620 mark for an upward breakout. Immediate resistance on the GBP/USD chart can be seen at 1.2683, a break higher could trigger a rise towards 1.2772. On the downside, immediate support is seen at 1.2627, a break below could take the pair towards 1.2560.

Trading participants continue to analyse macroeconomic data presented on Friday from the UK and the US. British statistics on the dynamics of retail sales in January recorded an increase of 0.7% year on year, which turned out to be significantly better than a decline of 2.4% last month and preliminary estimates suggesting a fall of 1.4%. In monthly terms, sales dynamics accelerated by 3.4% after a decline of 3.3% in December, although analysts expected only to reach 1.5%. Excluding fuel, sales for the same period adjusted by 3.2% in monthly terms and by 0.7% in annual terms, also ahead of the estimated 1.7% and -1.6%, respectively. Monday's British statistics provide virtually no noticeable support to the pound. Meanwhile, the housing price index from research company Rightmove Group Ltd., which records changes in the average cost of homes for sale, added 0.9% in February, which was slightly lower than last month's dynamics of 1.3%.

Based on the highs of two days of last week, a new ascending channel has formed. Now the price is near the upper limit and may continue to rise.

USD/JPY

The US dollar is showing downward dynamics in the USD/JPY pair during the Asian session, holding close to the psychological level of 150.00. Strong resistance can be seen at 150.88, a break higher could trigger a rise towards 151.20. On the other hand, the nearest support on the USD/JPY chart is visible at 149.53. A break below could take the pair towards 148.80.

Today, Japanese investors monitored data on the dynamics of orders for engineering products. At the end of December, the index managed to recover by 2.7% after a sharp decline of 4.9% earlier, although analysts predicted a correction of only 2.5%. In annual terms, the figure fell by 0.7% after a sharp November dynamics of -5.0%, despite the fact that experts expected a more rapid decline of -1.4%. Meanwhile, traders are trying to predict the Bank of Japan's further steps and, in particular, the timing of the abandonment of the negative interest rate policy. Earlier, the head of the department, Kazuo Ueda, said that officials were closely monitoring the annual wage negotiations between trade unions and company management, which will end in mid-March, as well as other indicators to confirm the presence of positive dynamics, which, in turn, will act as a driver for changing the ultra-dove course.

Based on the highs of two days of last week, a new downward channel has formed. Now the price is moving down along the upper border of the channel.