EURUSD rebound does not have a solid foundation

The EURUSD currency pair experienced a sharp decline at the beginning of the week, but later began to actively recover losses. Quotes almost returned to the level of 1.04, but the upward movement began to slow down and in the near future may again be replaced by a decline. Bulls were able to prevent the update of the 2-year low, but in the current situation, the euro exchange rate has no grounds for stable strengthening against the dollar.

According to a Bloomberg survey, leading investment companies consider the EURUSD upward momentum exactly as a corrective rebound and nothing more. Analysts at Nomura International Plc, Brown Brothers Harriman and HSBC continue to advise holding a long position on the US currency, whether Donald Trump follows through on his threats to impose tariffs on EU imports or not. Stable US economic growth remains a key factor in the dollar's strength, far outperforming European countries.

The statistics on open vacancies published yesterday could shake traders' confidence in the stability of the US currency, but Reuters experts do not attach great importance to it. The number of job openings in the US fell by more than 550 000 to 7.6 million for December. However, this fact did not have a negative impact both on the scale of layoffs (1.77 million, down 29 000 month-on-month) and on the employment rate (+89 000). The labor market is cooling, but there are still no signs of a crisis.

Fed Vice Chairman Philip Jefferson, in a speech, confirmed the regulator's caution in considering whether to continue the cycle of interest rate cuts. Market participants expect the next monetary policy easing in the US only in June, while the ECB is set for further rate cuts in March. Increased rate differential will put pressure on EURUSD.

The Stochastic indicator signal points to the still available potential for EURUSD upward rebound. Opening short positions may become interesting in the range of 1.04–1.045.

Consider the following trading strategy:

Sell EURUSD in the range of 1.04–1.045. Take profit — 1.027. Stop-loss — 1.05.