EURUSD: Powell`s alignment with market
The most important event during the previous week was the FOMC meeting, where its members left the rates unchanged. After the meeting statement, Powell`s rhetoric was more in alignment with the market anticipations, then it was during previous meetings. Although the possibility of further rate increases has not been fully excluded, still, the majority of FOMC members are perceiving interest rates during the course of the next year at a level of 4.6%. Through CME Group's FedWAtch tool, the market is currently pricing a 25 basis points rate cut in March next year. As for economic output, Powell noted that it has slowed down in Q4 and that GDP growth should reach 2,5% for this year. Posted figures on inflation in November show further modest drop to 3.1% on a yearly basis, from 3.2% posted in October. Core inflation remained at 4.0% level, same as the month before. Producer`s Price Index was standing at 0% for November, below market estimate of 0.1%. Retail sales continued to pick up in November, reaching 0.3% for the month, and above market estimate of -0.1%.
ECB members also met during the previous week to discuss further rate movements. They have also left rates unchanged, but are still not ready to make comments regarding potential rate cuts in the course of the year ahead. Instead, they stick with rhetoric that rates will stay increased as long as necessary, considering fragility of the EU economy coming from its dependence on oil and gas, which could make a negative impact on currently decreasing inflation. As for other economic indicators posted during the previous week, the ZEW Economic Sentiment Index for the EU reached 23.0 in December, significantly above market estimate of 11.2. The same indicator for Germany was standing at 12.8, also higher from the forecasted 8.8. HCOB Manufacturing PMI Flash for Germany for December was standing at 43.1 in line with market forecast of 43.2.
The eurusd pair was traded with higher volatility during the previous week. Although the pair reached 1.072 as the lowest weekly level, it soon reverted toward the upside, ending the week at its highest weekly level of 1.10. Still, the last traded price of the pair was 1.0893. The RSI moved toward the level of 63 on Thursday, but ended the week at the level of 55. It is still not clear whether the market is ready for a move toward the oversold side. Moving average of 50 days continues to converge toward the MA200 indicating the potential for the cross in the future period.
The currency pair tested for one more time the 1.10 resistance line, but was not able to cross it for the second time within a few weeks. A short reversal started after this level, and ended at 1.08 support line. The pair will start the week ahead by testing 1.08 support line, with lower probability that it might clearly revert for one more time toward the 1.10 resistance. In case that the 1.08 support line is breached, then the pair might slowly head toward the next support at 1.067.
Important news to watch during the week ahead is:
Euro: Ifo Business Climate for December for Germany, Euro Area Inflation Rate for November, GfK Consumer Confidence in January for Germany.
USD: Building Permits preliminary for November, CB Consumer Confidence in December, GDP growth rate final for Q3, Durable Goods Orders for November, PCE Price Index for November, Michigan Consumer Sentiment final for December.
ECB members also met during the previous week to discuss further rate movements. They have also left rates unchanged, but are still not ready to make comments regarding potential rate cuts in the course of the year ahead. Instead, they stick with rhetoric that rates will stay increased as long as necessary, considering fragility of the EU economy coming from its dependence on oil and gas, which could make a negative impact on currently decreasing inflation. As for other economic indicators posted during the previous week, the ZEW Economic Sentiment Index for the EU reached 23.0 in December, significantly above market estimate of 11.2. The same indicator for Germany was standing at 12.8, also higher from the forecasted 8.8. HCOB Manufacturing PMI Flash for Germany for December was standing at 43.1 in line with market forecast of 43.2.
The eurusd pair was traded with higher volatility during the previous week. Although the pair reached 1.072 as the lowest weekly level, it soon reverted toward the upside, ending the week at its highest weekly level of 1.10. Still, the last traded price of the pair was 1.0893. The RSI moved toward the level of 63 on Thursday, but ended the week at the level of 55. It is still not clear whether the market is ready for a move toward the oversold side. Moving average of 50 days continues to converge toward the MA200 indicating the potential for the cross in the future period.
The currency pair tested for one more time the 1.10 resistance line, but was not able to cross it for the second time within a few weeks. A short reversal started after this level, and ended at 1.08 support line. The pair will start the week ahead by testing 1.08 support line, with lower probability that it might clearly revert for one more time toward the 1.10 resistance. In case that the 1.08 support line is breached, then the pair might slowly head toward the next support at 1.067.
Important news to watch during the week ahead is:
Euro: Ifo Business Climate for December for Germany, Euro Area Inflation Rate for November, GfK Consumer Confidence in January for Germany.
USD: Building Permits preliminary for November, CB Consumer Confidence in December, GDP growth rate final for Q3, Durable Goods Orders for November, PCE Price Index for November, Michigan Consumer Sentiment final for December.
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