EURUSD: reversal has started
Is the US economy cooling down or is it still not time for such a move? Latest data are a bit mixed, which might be a challenge for investors when it comes to positioning of a deal, before the forthcoming FOMC meeting on July 26-27. Released figures for Retail Sales for June shows an increase by 0.2% m/m less than market expectations of 0.5%. At the same time industrial production decreased by -0.5% in June on a monthly basis, although the market was expecting at least 0% monthly change. Building permits in the US modestly decreased in June to 1.44M lower from market forecast of 1.49M.
Core inflation rate in the Euro Area was up by 5.5% in June, higher from 5.4% expected by the market and 5.3% posted for the previous month. At the same time yearly inflation stands at level of 5.5% in June and has dropped further from 6.1% posted for the previous month. Core inflation continues to be persistent in the EU, which will support further rate increases by the ECB. This was also clearly noted by the ECB President Lagarde.
Both ECB and FED interest rate decisions are scheduled for the week ahead, in which sense, some market volatility could be expected.
During the week eurusd reached its highest level at 1,1275, and started a short term reversal for the rest of the week. The pair ended the week at 1,1124. As of the end of the week before, RSI clearly entered into the overbought side by reaching level of 74, which was indication of a forthcoming short reversal. RSI reached a level of 61 during the week. Moving average of 50 days is still modestly diverging from MA200 counterpart, and is not providing an indication on a potential cross in the coming period.
Selling orders were dominant during the previous week. When it comes to fundamentals, both currencies have their own pros and cons. It is well known that the ECB will increase further interest rates in order to fight inflation, however, markets are betting that the Fed will also do the same at July`s meeting. Considering that both ECB and FOMC meetings are scheduled for the week ahead, it should be expected increased volatility when it comes to eurusd. The pair just started its reversal, which might lead to a 1.10 support line. At least charts are pointing toward this level for the last two weeks. There is currently a very small probability that the pair might revert to the upside, but if this occurs, then 1.12 might be targeted for one more time.
Important news to watch during the week ahead are:
Euro: Ifo Business Climate for Germany for July, German GfK Consumer Confidence for August, ECB Interest Rate Decision (expectations 4.25%), German Inflation Rate – preliminary for July,
USD: CB Consumer Confidence for July, FED Interest Rate Decision (expectation is 5.5%), Durable Goods Orders for June, GDP Growth Rate for Q2, PCE Price Index for June, Michigan Consumer Sentiment – final for July
Core inflation rate in the Euro Area was up by 5.5% in June, higher from 5.4% expected by the market and 5.3% posted for the previous month. At the same time yearly inflation stands at level of 5.5% in June and has dropped further from 6.1% posted for the previous month. Core inflation continues to be persistent in the EU, which will support further rate increases by the ECB. This was also clearly noted by the ECB President Lagarde.
Both ECB and FED interest rate decisions are scheduled for the week ahead, in which sense, some market volatility could be expected.
During the week eurusd reached its highest level at 1,1275, and started a short term reversal for the rest of the week. The pair ended the week at 1,1124. As of the end of the week before, RSI clearly entered into the overbought side by reaching level of 74, which was indication of a forthcoming short reversal. RSI reached a level of 61 during the week. Moving average of 50 days is still modestly diverging from MA200 counterpart, and is not providing an indication on a potential cross in the coming period.
Selling orders were dominant during the previous week. When it comes to fundamentals, both currencies have their own pros and cons. It is well known that the ECB will increase further interest rates in order to fight inflation, however, markets are betting that the Fed will also do the same at July`s meeting. Considering that both ECB and FOMC meetings are scheduled for the week ahead, it should be expected increased volatility when it comes to eurusd. The pair just started its reversal, which might lead to a 1.10 support line. At least charts are pointing toward this level for the last two weeks. There is currently a very small probability that the pair might revert to the upside, but if this occurs, then 1.12 might be targeted for one more time.
Important news to watch during the week ahead are:
Euro: Ifo Business Climate for Germany for July, German GfK Consumer Confidence for August, ECB Interest Rate Decision (expectations 4.25%), German Inflation Rate – preliminary for July,
USD: CB Consumer Confidence for July, FED Interest Rate Decision (expectation is 5.5%), Durable Goods Orders for June, GDP Growth Rate for Q2, PCE Price Index for June, Michigan Consumer Sentiment – final for July
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