Despite the variation in the results of the important American economic releases led by the American jobs figures, the US dollar remained the strongest against the rest of the other major currencies. The EUR/USD has fallen to the lowest support level of 1.0771 for the currency pair in more than three years months and closed last week's trade around those losses.
The forecast for the euro against the US dollar in the coming days:
The European Central Bank is unlikely to support the euro when it meets on Sept. 14, according to one analyst who weighed the forex landscape following the release of stubborn eurozone inflation data. Brad Bechtel, forex analyst at Jefferies LLC, says that the combination of stubborn core inflation and rising headline inflation leaves the European Central Bank unable to provide any supportive guidance for the euro when it meets in mid-month.
He added by saying after the announcement of the inflation figures for the Eurozone "Directionally, there is only one way for the EUR/USD pair from here."
For its part, Eurostat reported that inflation in the Eurozone rose by 0.6% on a monthly basis in August, which is a sharp increase compared to the month of July -0.1% and exceeded expectations with a growth of 0.4%. The analyst added by saying "Inflation in the Eurozone continues to show signs of recovery, or at least stabilization at a high level."
Last week saw the inflation rate in Germany rise by a tenth higher than expected after state data there indicated a rise by a tenth, and Spain also came in a tenth higher than the markets expected. France also saw that inflation came in higher than expected at 1.0% on a monthly basis against the expected 0.8% and 0.1% previously. Overall, August inflation data now point to the European Central Bank's September 14 policy decision, which current market pricing shows investors are willing to keep interest rates on hold at a 60-40 split, although a number of analysts say a rate hike is likely. again. The analyst added by saying: "The hawkish narrative that the European Central Bank was looking forward to at the next meeting is likely to recede a bit because this type of print will put pressure on it to raise interest rates at the next meeting instead."
At the same time, the decision and guidance on future decisions will be an important moment for the euro next month. Therefore, in any of the two scenarios, the euro's performance is supposed to be lower than expected. The analyst added by saying: "If they take a tough stance, it won't be enough to fight inflation, and if they end up raising interest rates, it will be at the expense of growth."
Overall, the euro fell in the minutes following the release of euro zone inflation data which showed core consumer price index inflation - a closely watched measure at the European Central Bank - fell to 5.3% year-on-year in August, down from 5.5% in July.
For his part, Jamie Dutta, market analyst at Vantage, says that the drop in core inflation in the Eurozone has seen the markets move more strongly towards the European Central Bank stopping at its meeting in September. Traders have been hesitant to fully price in the latest increase with the implied probability remaining at around 50% over the past few weeks. And those bets fell to about a one in three chance after the data, with the euro hitting new lows.
Expectations of the euro against the dollar today:
- According to the performance on the daily chart below, the general direction of the euro pair against the US dollar EUR/USD increased in strength.
- This was enough to push the technical indicators towards strong selling saturation levels.
- It is possible to consider buying the currency pair from the support levels 1.0755 and 1.0670 respectively.
- There will be no real change in the general direction to go up without moving the currency pair towards the psychological resistance level of 1.1000 again.
I expect a quiet trading session today for the euro against the dollar with a downward trend as it is, in the light of the American holiday and the absence of important and influential releases.
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