EURUSD: the PCE is coming

Figures for US Building Permits in January were posted at the level 0,1% higher for the month in January, while the Housing Starts dropped by -9,8% in January. Existing Home sales in January dropped by -4,9% on the monthly basis, much higher from forecasted -1,7%. Michigan Consumer Sentiment Final for February was at the level of 64,7 modestly lower from market forecast of 67,8. At the same time, inflation expectations were increased. The majority of US consumers are expecting inflation at the level of 4,3% while five years inflation expectations were increased to the level of 3,5%, from 3,2% posted previously.

The ZEW Economic Sentiment Index for February in the Euro Zone reached the level of 24,2 and generally was in line with the market consensus. The same indicator for Germany was standing at the level of 26,0 and was higher from 20 expected by the market. The Producers Price Index in January in Germany was standing at 0,5% on a yearly basis, and -0,1% for the month. The Consumer Confidence in the Euro Zone in February was at the level of -13,6 a bit better from market estimate of -14,4. The HCOB Manufacturing PMI Flash for February in Germany was at the level of 46,1, and a bit higher from market estimate of 45,5. The same indicator for the Euro Zone was at 47,3 also a bit higher from estimated 47.

Without official release of data which would point to inflation in the US, the eurusd currency pair was traded in a relatively short range during the previous week. The week started by testing the 1,05 resistance line. Without the strength to break it, the currency pair reverted a bit toward the downside, till the lowest weekly level of 1,04, where the support line lies. At the weekend it reverted again back toward the 1,05, but again without success to break this level. The currency pair ended the week at 1,045. The RSI is still moving above the level of 50, implying that the market is still more oriented toward the overbought market side. The moving average of 50 days is modestly slowing down its divergence from MA200, however, there is still a high distance between lines, in which sense, the potential cross is still not in store.

The Fed's favourite inflation gauge, the PCE indicator is scheduled for a release during the week ahead. Considering current market high sensitivity on inflation data, a higher volatility might be expected. At this moment, charts are showing that eurusd is traded to some extent sideways, between levels of 1,05 and 1,04. If the market manages to break the support line at 1,04 during the week ahead, then it could be expected to move toward the 1,03. In case that 1,04 manages to hold, then the currency pair will revert back toward higher grounds, and probably will surpass the 1,05 resistance line.

Important news to watch during the week ahead are:

EUR: Ifo Business Climate for February in Germany, Inflation rate for January in the EuroZone, GDP Growth Rate final for Q4 in Germany, GfK Consumer Confidence for March in Germany, Retail Sales in Germany in January, Unemployment rate in Germany in February,

USD: Durable Goods Orders for January, GDP Growth Rate second estimate for Q4, PCE Price Index preliminary for February, Personal Income and Personal Spending