Euro sellers almost completely won back the morning growth of the pair on Friday, after the release of a good report on the US labor market, which indicated its further growth.
In the first half of the day, a report on inflation in the eurozone came out, which did not greatly surprise investors, which limited the upward potential in euros.
According to the data, annual inflation in the eurozone in January 2019 declined again, which is a bad signal for the European Central Bank, as it indicates a slowdown in the region's economy.
As indicated in the statistics agency of the EU, the preliminary CPI in January rose by 1.4% over the same period last year, after rising 1.6% in December. The main fall in inflation was directly related to lower energy prices, as core inflation, which did not take into account volatile categories, rose to 1.1% in January versus 1.0% in January 2018.
The data, which came out in the second half of the day, significantly helped the US dollar, as the number of non-farm jobs continued to grow in January, and wages increased.
According to a report by the US Department of Labor, the number of non-agricultural jobs in January increased immediately by 304,000, which was much higher than economists' forecasts. The unemployment rate rose to 4.0%, which is directly related to the partial suspension of US government work. Economists had expected the number of new jobs to be 170,000, while unemployment would be at a level of 3.9%.
As noted above, hourly earnings in the private sector increased immediately by 3.2% compared with the same period of the previous year.
Production activity in the US increased in January. It happened against the background of increased production and new orders. According to IHS Markit, the PMI Purchasing Managers Index for the manufacturing sector in January 2019 rose to 54.9 points, while in December the index was 53.8 points. Let me remind you that the index value above 50 indicates an increase in activity. Economists had expected the index to be 54.8 in January.
The upward potential of the US dollar was limited by a weak report on the sentiment of American households, which sharply deteriorated in January due to the partial suspension of government work. According to the University of Michigan, the consumer sentiment index in January 2019 fell to 91.2 points against 98.3 points at the end of last year.
At the end of the day, a representative of the Federal Reserve, Robert Kaplan, said that the US economy should grow faster so that the authorities could cope with the high debt problem, but there are still a number of reasons that are likely to lead to slower growth in the 2019 year Kaplan fully supports the idea of a pause in the rate hike cycle, which Fed Chairman Jerome Powell announced at the last meeting.
According to the representative of the Fed, the suspension of interest rate increases will last until June this year, as the slowdown in global economic growth and tighter financial conditions increase the risks to the prospects for the US economy.
As for the technical picture of the EUR / USD currency pair, so far everything indicates a further decline in the euro in the short term. A new downward price channel has already been built after Friday's unsuccessful growth of the euro and an attempt to consolidate above the range of 1.1490. The breakthrough of support of 1.1430 may lead to a new wave of sales and reduce risky assets in the region of the lower boundary of the downward channel, as well as to the support level of 1.1405 and 1.1378. In the case of an upward correction, the upper limit in the area of 1.1475 will be a good level for the return of new major sellers of the European currency to the market.
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