EURUSD: in the oversold territory
The major event for the EU economy was a further decrease of reference interest rates by ECB members. At their meeting, the ECB decided to cut interest rates by another 25 bps, with possibility of another rate cut till the end of this year, due to drop in inflation, and also, decreasing business activity within the EU. The wholesale prices dropped by -0,3% in Germany in September, leading to an annual drop of -1,6%. The industrial production in the Euro Zone was higher by 1,8% in August for the month, bringing the total increase to 0,1% on a yearly basis. The ZEW Economic Sentiment Index in Germany was standing at 13,1 for October, while the ZEW Economic Conditions were down to -86,9. The Inflation rate in the Euro Zone final for September was 2,7% and in line with a forecast.
The US Retail Sales were up by 0,4% in September for the month. Retail sales excluding autos were higher by 0,5% for the same month. Retail sales increased by 1,7% in September y/y, which was a bit higher from 1,6% forecasted by the market. At the same time, the industrial production in the US was down by -0,6% in September on a yearly basis. Building Permits preliminary for September reached 1.428B, which was down by 2,9% for the month.
Decrease of interest rates by the ECB members, and weakening of inflation in the US, pushed the eurusd currency pair to the lower grounds during the previous week. The currency pair started the previous week around the level of 1,930 and moved to the lowest weekly level at 1,0812. This move represents the continuation of the last three winning weeks for the USD, which moved from levels around 1,12 resistance, down to 1,08 support. Still, Friday's trading session was closed at the level of 1,0871. The RSI clearly entered into the oversold territory, and reverted a bit to the level of 33 as of the end of the week. The moving average of 50 days is further slowing down its divergence from MA200, however, a clear convergence has not yet started. It might take some time in the future, until the cross of two lines occurs.
A clear oversold market side is the first signal that the market exhausted its potential for the downside and that short term reversal might be expected in the coming period. Considering that there is no currently significant macro data scheduled for the week ahead, which could strongly move the market to one side, some stronger moves should not be expected. Current charts are implying the probability for eurusd to revert a bit toward the 1,09 levels, most probably toward the 1,095. There is no current indication for the higher grounds. On the opposite side, there might be just a modest move toward the 1,08 support line, however, charts are pointing to a lower probability of such an occurrence during the week ahead.
Important news to watch during the week ahead are:
EUR: PPI in September for Germany, ECB President Lagarde speech, HCOB Manufacturing PMI Flash for October in Germany and the Euro Zone, Ifo Business Climate for October in Germany,
USD: Home Sales in September, Durable Goods Orders in September, Michigan Consumer Sentiment final in October.
The US Retail Sales were up by 0,4% in September for the month. Retail sales excluding autos were higher by 0,5% for the same month. Retail sales increased by 1,7% in September y/y, which was a bit higher from 1,6% forecasted by the market. At the same time, the industrial production in the US was down by -0,6% in September on a yearly basis. Building Permits preliminary for September reached 1.428B, which was down by 2,9% for the month.
Decrease of interest rates by the ECB members, and weakening of inflation in the US, pushed the eurusd currency pair to the lower grounds during the previous week. The currency pair started the previous week around the level of 1,930 and moved to the lowest weekly level at 1,0812. This move represents the continuation of the last three winning weeks for the USD, which moved from levels around 1,12 resistance, down to 1,08 support. Still, Friday's trading session was closed at the level of 1,0871. The RSI clearly entered into the oversold territory, and reverted a bit to the level of 33 as of the end of the week. The moving average of 50 days is further slowing down its divergence from MA200, however, a clear convergence has not yet started. It might take some time in the future, until the cross of two lines occurs.
A clear oversold market side is the first signal that the market exhausted its potential for the downside and that short term reversal might be expected in the coming period. Considering that there is no currently significant macro data scheduled for the week ahead, which could strongly move the market to one side, some stronger moves should not be expected. Current charts are implying the probability for eurusd to revert a bit toward the 1,09 levels, most probably toward the 1,095. There is no current indication for the higher grounds. On the opposite side, there might be just a modest move toward the 1,08 support line, however, charts are pointing to a lower probability of such an occurrence during the week ahead.
Important news to watch during the week ahead are:
EUR: PPI in September for Germany, ECB President Lagarde speech, HCOB Manufacturing PMI Flash for October in Germany and the Euro Zone, Ifo Business Climate for October in Germany,
USD: Home Sales in September, Durable Goods Orders in September, Michigan Consumer Sentiment final in October.
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