EURUSD: recession lost in a translation
The markets used prior week to conclude that there is no recession in the US. The first glimpse of optimism came at the start of the week, when ISM Services PMI for July was published, reaching the level of 51.4, above market estimate of 51, and higher from the previous post of 49.6. At the same time the ISM Services Business Activity was 54.5 while ISM Services Employment was standing at 51.1. This provided an insight to the market that the services sector stands relatively good in the US, in which sense, there is still a lower probability that the economy is on the path to recession. Initial Jobless Claims for the first week of August reached 233K, down from 240K forecasted by the market, which represents another indication to the market that July job figures were not reflecting the actual state of the US jobs market.
The German economy continues to struggle, but on a positive side were posted Factory orders for June which increased by 3.9%, significantly above the forecasted 0.8%. Although this is currently not one of the significant indicators that the market is currently watching, still, it represents a strong shift toward the potential for the recovery of the German economy. Still, posted data shows that Germany is still struggling with its Balance of trade which reached 20.4B in June, down from forecasted 23.3B, where exports were decreased by even -3.4%, while the market was expecting to see the figure of -1.5%. The posted inflation rate final for July showed no changes from the market expectations of 2.3% on a yearly basis and 0.3% for the month. During the week there has not been any significant macro data for the Euro Zone posted.
After a turbulent end of the week, the markets started the previous week in an optimistic manner, trying to consolidate some of the losses from the week before. After the data clearly showed that the US economy is still not entering a recession period, the currency pair continued to move strongly to the upside, reaching the highest weekly level at 1.10 on one occasion. The rest of the week, the currency pair was slowing down, ending the week at the level of 1.0917. The RSI reached the level of 62, however, the clear overbought market side has not been reached. The indicator is ending the week at the level of 58, however, there is no indication that the market is currently eyeing the oversold market side. Moving averages of 50 and 200 days still move as two parallel lines, without an indication of a potential cross in the coming period.
Taking into account current market nervousness about Fed's next moves, the week ahead might also be the volatile one. If we take into account that the US inflation data, Producers Price Index and Retail Sales for July will be posted, including weekly jobless claims, there might be a potential for some surprises, which would certainly be perceived from the market with a higher swings in the value of the currency pair, and other financial assets. As per current charts, there is some probability that the 1.10 could be tested for one more time. On the opposite side, there is also potential for lower grounds, where levels above 1.850 could be tested.
Important news to watch during the week ahead are:
Euro: ZEW Economic Sentiment Index for August for the Euro Zone and Germany, GDP Growth Rate for Q2, second estimate for the Euro Zone, Industrial Production for the Euro Zone,
USD: PPI for July, Inflation Rate for July, Retail Sales for July, Initial jobless Claims for the second week of August, Building Permits preliminary for July, Michigan Consumer Sentiment preliminary for August.
The German economy continues to struggle, but on a positive side were posted Factory orders for June which increased by 3.9%, significantly above the forecasted 0.8%. Although this is currently not one of the significant indicators that the market is currently watching, still, it represents a strong shift toward the potential for the recovery of the German economy. Still, posted data shows that Germany is still struggling with its Balance of trade which reached 20.4B in June, down from forecasted 23.3B, where exports were decreased by even -3.4%, while the market was expecting to see the figure of -1.5%. The posted inflation rate final for July showed no changes from the market expectations of 2.3% on a yearly basis and 0.3% for the month. During the week there has not been any significant macro data for the Euro Zone posted.
After a turbulent end of the week, the markets started the previous week in an optimistic manner, trying to consolidate some of the losses from the week before. After the data clearly showed that the US economy is still not entering a recession period, the currency pair continued to move strongly to the upside, reaching the highest weekly level at 1.10 on one occasion. The rest of the week, the currency pair was slowing down, ending the week at the level of 1.0917. The RSI reached the level of 62, however, the clear overbought market side has not been reached. The indicator is ending the week at the level of 58, however, there is no indication that the market is currently eyeing the oversold market side. Moving averages of 50 and 200 days still move as two parallel lines, without an indication of a potential cross in the coming period.
Taking into account current market nervousness about Fed's next moves, the week ahead might also be the volatile one. If we take into account that the US inflation data, Producers Price Index and Retail Sales for July will be posted, including weekly jobless claims, there might be a potential for some surprises, which would certainly be perceived from the market with a higher swings in the value of the currency pair, and other financial assets. As per current charts, there is some probability that the 1.10 could be tested for one more time. On the opposite side, there is also potential for lower grounds, where levels above 1.850 could be tested.
Important news to watch during the week ahead are:
Euro: ZEW Economic Sentiment Index for August for the Euro Zone and Germany, GDP Growth Rate for Q2, second estimate for the Euro Zone, Industrial Production for the Euro Zone,
USD: PPI for July, Inflation Rate for July, Retail Sales for July, Initial jobless Claims for the second week of August, Building Permits preliminary for July, Michigan Consumer Sentiment preliminary for August.
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