The major event during the previous week was the ECB meeting where reference interest rates were increased by 25 bps, which is also its 10th consecutive increase. On a positive side is that this might be the last rate increase, as per President Lagarde, however, it could be expected for rates to hold these levels for a longer period of time. At the same time oil prices continued to trade above $90/barrel, with some analysts commenting that the price could soon reach level of $100. Increased prices of oil might jeopardize both EU and US efforts to curb inflation to the targeted 2% and further slowdown economic growth. However, even without an impact of current oil price levels, the ECB revised its previous projection of growth within the Euro Area to the down side, in which sense, a growth in 2023 is projected to be 0.7% from previous 0.9% and from 1.5% down to 1.0% in 2024. Market did not perceive such developments well and the price of euro dropped against USD during the week, reaching a minimum level of 1.063 as of the end of the week. From other economic data posted for the EU, ZEW Economic Sentiment Index within the Euro Area in September was standing at -8.9, higher from market estimate of -6.2, while the same indicator for Germany was better from market estimate of -15, reaching -11.4.
Inflation in the US in August reached 4.3% in line with market estimate, while it reached 3.7% compared to the year before, which was higher from previous 3.2% and market expectation of 3.6%. Producer Price Index in August increased by 0.7%, much higher from estimated 0.4% for the same month. At the same time Retail Sales in August were increased by 0.6% on a monthly basis, which was highly above estimated 0.2%. Michigan Consumer Sentiment preliminary for September reached 67.7 lower from anticipated 69.1. Latest figures on inflation and PPI are going to be an important topic at the forthcoming FOMC meeting, since the inflation is modestly picking up in the US, as per latest figures. Still, the majority of market participants are expecting that the FED will skip this meeting for further rate increases.
Regardless of USD strengthening against Euro during the previous week, the RSI did not manage to reach the clear oversold side of the market. The lowest level reached by the indicator was 32, however, there is still time in the week ahead for this level to be clearly reached. Moving average of 50 days is modestly converging toward its MA200 counterpart, but there is still no clear indication that a potential cross is coming.
As per technical analysis, there is no indication that the price of euro could continue to weaken further. The currency pair reached a support line at 1.067 as of the end of the previous week, which is going to be tested in the week ahead. A short reversal toward the upside is possible, where resistance line at 1.08 could be tested. At this moment, there is no indication that this resistance line could be breached. FOMC meeting and rate decision is scheduled for the week ahead, in which sense some higher market volatility might occur.
Important news to watch during the week ahead are:
Euro: Inflation Rate for August for Euro Area, HCOB Manufacturing PMI for September for Germany
USD: Building Permits for August, FOMC Meeting and Rate Decision, Fed Press Conference
Inflation in the US in August reached 4.3% in line with market estimate, while it reached 3.7% compared to the year before, which was higher from previous 3.2% and market expectation of 3.6%. Producer Price Index in August increased by 0.7%, much higher from estimated 0.4% for the same month. At the same time Retail Sales in August were increased by 0.6% on a monthly basis, which was highly above estimated 0.2%. Michigan Consumer Sentiment preliminary for September reached 67.7 lower from anticipated 69.1. Latest figures on inflation and PPI are going to be an important topic at the forthcoming FOMC meeting, since the inflation is modestly picking up in the US, as per latest figures. Still, the majority of market participants are expecting that the FED will skip this meeting for further rate increases.
Regardless of USD strengthening against Euro during the previous week, the RSI did not manage to reach the clear oversold side of the market. The lowest level reached by the indicator was 32, however, there is still time in the week ahead for this level to be clearly reached. Moving average of 50 days is modestly converging toward its MA200 counterpart, but there is still no clear indication that a potential cross is coming.
As per technical analysis, there is no indication that the price of euro could continue to weaken further. The currency pair reached a support line at 1.067 as of the end of the previous week, which is going to be tested in the week ahead. A short reversal toward the upside is possible, where resistance line at 1.08 could be tested. At this moment, there is no indication that this resistance line could be breached. FOMC meeting and rate decision is scheduled for the week ahead, in which sense some higher market volatility might occur.
Important news to watch during the week ahead are:
Euro: Inflation Rate for August for Euro Area, HCOB Manufacturing PMI for September for Germany
USD: Building Permits for August, FOMC Meeting and Rate Decision, Fed Press Conference
