EURUSD: watch for inflation data
Rating agency Fitch downgraded the US long-term government debt by one notch, to AA+. This was sort of a surprise for both financial markets and the US Government. Reaction was negative, but it seems that it has been swiftly digested. The market was more concerned over the jobs data in the US which were posted during the week. Non-farm Payrolls reached 187K in July, missing market estimates at 200K. Unemployment rate strengthened further to the level of 3.5% from 3.6% posted previously. These data are still showing that employment in the US continues to be strong, which is positive for the US economy. ISM Manufacturing PMI for July at 46.4 was modestly lower from market expectations at level of 46.8. At the same time ISM Services PMI reached 52.7 in July, modestly lower from market forecast at 53.
Retail sales in Germany were down by -1.6% in June compared to the same period a year ago. Although it is still in negative territory, figures were better from market estimates of a drop of -2.7%, and significantly better from -3.6% posted for the previous month. Despite the weakening economy, the unemployment rate in Germany dropped to the level of 5.6% in July, from 5.7% posted for the previous month. Core inflation figures posted for the Euro area of 5.5% y/y in July were slightly higher from market estimate of 5.4%. Inflation continues to be elevated in the EU area, which implies further actions from ECB, in terms of increasing interest rates in the coming period. At the same time, GDP grew by 0.3% in Q2 and 0.6% y/y, which was higher from figures estimated by the market.
Although eurusd started the week around level of 1.104, it reached the lowest week level at 1.091. However, the currency pair reverted on Friday`s trading, ending the week around 1.10 level. The RSI continued its road toward the oversold side, however, the indicator is ending the week around the level of 50. Based on current charts, it seems like this move is only a short break of the previous path. Moving average of 200 days is moving closer to its MA50 counterpart, but both lines are keeping their up-trend track. There is still no indication that the potential cross might occur any time soon.
Based on current charts, there is some potential that the currency pair might make a move toward the levels below 1.11, with decreased probability that this line could be breached. Such a move to the upside should be looked at as a testing of the 1.10 short resistance line. On the opposite side, there is some space for 1.08 support to be tested again with equal probability as 1.10 level. Inflation Rate for July for the US is scheduled for the week ahead, which could imply some higher market volatility.
Important news to watch during the week ahead are:
Euro: Inflation Rate for Germany in July,
USD: Inflation Rate for July, PPI for July, Michigan Consumer Sentiment preliminary for August
Retail sales in Germany were down by -1.6% in June compared to the same period a year ago. Although it is still in negative territory, figures were better from market estimates of a drop of -2.7%, and significantly better from -3.6% posted for the previous month. Despite the weakening economy, the unemployment rate in Germany dropped to the level of 5.6% in July, from 5.7% posted for the previous month. Core inflation figures posted for the Euro area of 5.5% y/y in July were slightly higher from market estimate of 5.4%. Inflation continues to be elevated in the EU area, which implies further actions from ECB, in terms of increasing interest rates in the coming period. At the same time, GDP grew by 0.3% in Q2 and 0.6% y/y, which was higher from figures estimated by the market.
Although eurusd started the week around level of 1.104, it reached the lowest week level at 1.091. However, the currency pair reverted on Friday`s trading, ending the week around 1.10 level. The RSI continued its road toward the oversold side, however, the indicator is ending the week around the level of 50. Based on current charts, it seems like this move is only a short break of the previous path. Moving average of 200 days is moving closer to its MA50 counterpart, but both lines are keeping their up-trend track. There is still no indication that the potential cross might occur any time soon.
Based on current charts, there is some potential that the currency pair might make a move toward the levels below 1.11, with decreased probability that this line could be breached. Such a move to the upside should be looked at as a testing of the 1.10 short resistance line. On the opposite side, there is some space for 1.08 support to be tested again with equal probability as 1.10 level. Inflation Rate for July for the US is scheduled for the week ahead, which could imply some higher market volatility.
Important news to watch during the week ahead are:
Euro: Inflation Rate for Germany in July,
USD: Inflation Rate for July, PPI for July, Michigan Consumer Sentiment preliminary for August
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