EURUSD: at overbought side
During the previous week one of the “oops” moments occurred with USD. Although the charts were pointing that the currency is on a path of strengthening, still, the opposite occurred. Whether such moments have support in real data or not, it cannot be judged, since the market is always right. Overall, it was a buzzy week for both currencies.
German inflation data show that price increases are persistent in the largest EU economy. Yearly inflation rate reached 6.4% in June, higher from 6.1% in May. At the same time German ZEW Economic Sentiment index has further dropped in June to the level of -14.7, from previous -8.5. Industrial production in the Euro Area significantly dropped in May as posted figures show minus 2.2% y/y. It was significantly below market estimate of -1.2%.
Inflation figures posted for the US economy were optimistic for investors. Core inflation rate in June was down to 4.8% y/y from 5.3% posted for the previous month. Inflation rate reached 3% y/y for the same period, better from the market estimate. The figure was down by 1 percentage point from the previous month. That the inflation is slowing down was also confirmed through the released Producer Price Index, which reached 0.1% in June, better from the market estimate of 0.2%. As of the week-end Michigan Consumer Sentiment for July has been published, reaching a level of 72.6, and absolutely beating market expectations of 65.5. This is quite positive for the US economy, since there is increased optimism among consumers, however, there is also a threat that increased spending might push the inflation again to the upside.
Overall, above noted economic developments are clearly pointing to already known facts – the Euro Area is in recession and the US economy is obviously in a soft-landing phase, as Fed Chair Powell initially promised. However, the tricky part here is that the ECB will most probably have to further increase its interest rates, while the Fed is slowly reaching its peak interest rates.
EURUSD started the previous week around 1.09 level and was strongly pushed to the upside during the course of the week. The highest weekly level reached was at 1.242, which occurred on Friday. RSI finished the week at level of 74, which is highly overbought market side, so it could be expected a short term reversal in the coming period. Moving average of 50 days is still modestly diverging from its MA200 counterpart, but the difference between lines is slowly decreasing.
Indicators are pointing to a high probability of a short-term reversal in the coming period. In this sense, the support line at 1.10 might be the next target of the EURUSD. A further move to the upside, does not seem likely at this moment, except in case of some strong fundamentals, which will push the currency pair to higher grounds.
Important news to watch during the week ahead are:
Euro: Inflation rate for June – final
USD: Retail Sales for June, Building Permits for June
German inflation data show that price increases are persistent in the largest EU economy. Yearly inflation rate reached 6.4% in June, higher from 6.1% in May. At the same time German ZEW Economic Sentiment index has further dropped in June to the level of -14.7, from previous -8.5. Industrial production in the Euro Area significantly dropped in May as posted figures show minus 2.2% y/y. It was significantly below market estimate of -1.2%.
Inflation figures posted for the US economy were optimistic for investors. Core inflation rate in June was down to 4.8% y/y from 5.3% posted for the previous month. Inflation rate reached 3% y/y for the same period, better from the market estimate. The figure was down by 1 percentage point from the previous month. That the inflation is slowing down was also confirmed through the released Producer Price Index, which reached 0.1% in June, better from the market estimate of 0.2%. As of the week-end Michigan Consumer Sentiment for July has been published, reaching a level of 72.6, and absolutely beating market expectations of 65.5. This is quite positive for the US economy, since there is increased optimism among consumers, however, there is also a threat that increased spending might push the inflation again to the upside.
Overall, above noted economic developments are clearly pointing to already known facts – the Euro Area is in recession and the US economy is obviously in a soft-landing phase, as Fed Chair Powell initially promised. However, the tricky part here is that the ECB will most probably have to further increase its interest rates, while the Fed is slowly reaching its peak interest rates.
EURUSD started the previous week around 1.09 level and was strongly pushed to the upside during the course of the week. The highest weekly level reached was at 1.242, which occurred on Friday. RSI finished the week at level of 74, which is highly overbought market side, so it could be expected a short term reversal in the coming period. Moving average of 50 days is still modestly diverging from its MA200 counterpart, but the difference between lines is slowly decreasing.
Indicators are pointing to a high probability of a short-term reversal in the coming period. In this sense, the support line at 1.10 might be the next target of the EURUSD. A further move to the upside, does not seem likely at this moment, except in case of some strong fundamentals, which will push the currency pair to higher grounds.
Important news to watch during the week ahead are:
Euro: Inflation rate for June – final
USD: Retail Sales for June, Building Permits for June
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