Since October last year, market participants have been looking for signs of a FED pivot which came eventually, and they got their wish. FED chairman Jerome Powell softened the rhetoric in November and we saw more signs of that during his press conference, following the FOMC meeting last week.

Powell mentioned rate cuts, but he has left the monetary policy at the mercy of the economic. The most important one which is US inflation has been trending down, making it risk positive. The FED had to acknowledge that but it was the hot US jobs report on Friday which is stealing the spotlight focus as we get into the new week.

That has put a strong bid in the USD as risk sentiment remains negative on the idea that the FED will kep raising interest rates. EUR/USD reversed lower from above 1.10 and is heading for 1.07. Sellers broke the 50% midpoint of the 2023 trading range which comesd at 1.07558. Falling below that level has opened the door for further downside potential as the bias shifts more to the sellers.

EUR/USD H4 Chart – Sellers Pushing Below the 20 SMA

This looks like a long term bearish reversal 

The price has slipped lower and sellers are now facing the 200 SMA (purple) which has acted as support before, during the retreat in the firs week of January. lthough, the price is slipping below that moving average now, which leaves 1.07 as the next level to watch out for. We have turned showrt on this pair but will wait for a rebound higher before openeing a sell EUR/USD signal.

The ECB is keeping the pace of rate hikes, with one or two more 50 bps hikes priced in for the next two meetings, but they have softened the language, so traders are looking for a possible pivot in the ECB rhetoric. This means that the Euro is where the USD was several months back and will keep retreating, especially if inflation keeps slowing. Retail sales posted a major decline in the Eurozone for December.

Retail Sales Data Released by Eurostat – 6 February 2023

• December retail sales MoM -2.7% vs -2.5% expected
• November sales MoM were +0.8%; revised to +1.2%
• Retail sales YoY -2.8% vs -2.7% expected
• Prior sales YoY were -2.8%; revised to -2.5%

That’s a notable drop in euro area retail sales towards the end of last year with the volume of retail trade decreasing by 2.9% for food, drinks and tobacco and by 2.6% for non-food products, while it grew by 2.3% for automotive fuels. As a whole for 2022, retail trade in the region grew by 0.7% – in which the figure could have been better if not for higher inflation surely.

EUR/USD Live Chart