EURUSD: oversold side is over?
The Minutes from September`s FOMC meeting were released during the previous week. They provided information to the market that generally FOMC members are not in full agreement over the question whether the reference rates should be increased for one more time this year. However, what they all agree about is that reference rates should stay at elevated levels for some time in the future. The further course of FOMC action will depend on the course of inflation data, and whether it will provide confidence to FOMC members that inflation is on a course toward targeted 2%. The US inflation figures for September were posted during the previous week showing its further easing. Inflation rate in September was 3.7% on a yearly basis, a bit higher from 3.6% expected by the market. Core inflation remained at higher levels, at 4.1% y/y, but in line with market expectations. The Producer Price Index in September was up by 0.5% on a monthly basis, a bit higher from 0.3% estimated by the market. Michigan Consumer Sentiment Preliminary for October reached level of 63 missing market estimate of 67.2.
As for data for the EU, the inflation rate in Germany in September reached 4.5% on a yearly basis, which was in line with the market estimate.
The currency pair started the previous week around 1.05 level, after reaching a clear oversold side during the week before. The highest level reached during the week was 1.063 which was a sort of a reversal point, when the currency pair reverted back to the level from the beginning of the week, at 1.0510. RSI is still trying to move away from the oversold side, but with quite modest moves, still struggling around the 40 level. Moving average of 50 days continues to move away from its MA200 counterpart, confirming the cross occurred a few weeks ago.
Markets are currently pricing that the Fed is done with the further increase of interest rates. This might impact the ease of USD in the coming period. The currency pair is still moving close to the oversold side, not showing strength that it might clearly start its reversal toward the overbought side. The support line at 1.055 will be tested during the beginning of the week ahead. In case that it is clearly broken, then the currency pair will continue its path toward the next resistance at 1.067. At this moment, there is a small probability that the currency pair might move toward 1.045 for one more time.
Important news to watch during the week ahead are:
Euro: ZEW Economic Sentiment Index for October for Euro Area and Germany, Inflation Rate for Euro Area final for September,
USD: Retail Sales for September, Building Permits preliminary for September, Fed Chair Powell speech
As for data for the EU, the inflation rate in Germany in September reached 4.5% on a yearly basis, which was in line with the market estimate.
The currency pair started the previous week around 1.05 level, after reaching a clear oversold side during the week before. The highest level reached during the week was 1.063 which was a sort of a reversal point, when the currency pair reverted back to the level from the beginning of the week, at 1.0510. RSI is still trying to move away from the oversold side, but with quite modest moves, still struggling around the 40 level. Moving average of 50 days continues to move away from its MA200 counterpart, confirming the cross occurred a few weeks ago.
Markets are currently pricing that the Fed is done with the further increase of interest rates. This might impact the ease of USD in the coming period. The currency pair is still moving close to the oversold side, not showing strength that it might clearly start its reversal toward the overbought side. The support line at 1.055 will be tested during the beginning of the week ahead. In case that it is clearly broken, then the currency pair will continue its path toward the next resistance at 1.067. At this moment, there is a small probability that the currency pair might move toward 1.045 for one more time.
Important news to watch during the week ahead are:
Euro: ZEW Economic Sentiment Index for October for Euro Area and Germany, Inflation Rate for Euro Area final for September,
USD: Retail Sales for September, Building Permits preliminary for September, Fed Chair Powell speech
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