EURUSD: rate cuts in May?
There are two major events for USD which occurred during the previous week. The first event was related to a better than expected US GDP annualized growth rate of 5.2% for the third quarter, beating the market estimate of 5.0%. Such a strong figure heated investors’ confidence that the Fed is just around the corner to cut interest rates. It also showed the strength of the US economy, where significantly increased interest rates could not hurt the economic output. The second event was related to Fed Chair Powell's speech at Spelman College in Atlanta on Friday, where he noted once again that the Fed is currently not considering any rate cuts, but they could be further increased in case that the inflation remains persistent. Market reacted to his speech in a quite positive manner, pushing the equity prices to higher grounds, while USD further gained in value. As this was quite an unusual market reaction, still, it seems that Powell is not at all able to convince the market that there will be no rate cuts anytime soon. Released data for PCE Price Index show a modest drop to 3% in October, but in line with market forecast, while core PCE was standing at 3.5% in October. As for other released data for the US, the CB Consumer Confidence in November was at level of 3.9%, modestly lower from market expectations of 4%. ISM Manufacturing PMI in November was 46.7 a bit lower from 47.6 expected by the market.
Posted figures for Germany`s GfK Consumer Confidence show a modest drop to the level of -27.8 from revised -28.3 in December. Germany's inflation rate preliminary for November was standing at 3.2%, lower from market expectation of 3.5%, and certainly lower from previous 3.8%. The unemployment rate in Germany was 5.9% in November, a modestly higher from 5.8% expected by the market. The Euro Area inflation rate flash for November was a bit of a surprise for the market as it reached a level of 2.4%, although the market was expecting to see a figure around 2.7%. The inflation in the EU dropped by 0.5% in November as per first estimates, which might indicate that the ECB might also cut rates sooner than it was initially expected.
The USD was highly supported by the market expectations that the Fed might cut interest rates by May next year. In this sense the currency pair was moving between levels of 1.10 down to 1.08 as of the end of the week. Resistance line at 1.10 has been tested at the beginning of the week, while the support line at 1.08 has been reached as of the week. The eurusd finished the week at level of 1.0881. The RSI started to revert from the overbought market side, ending the week at level of 57. Although the 50 line has still not been crossed, still, there is an indication that the market is slowly starting to eye the oversold side. Moving average of 50 days continues with its modest convergence toward its MA200 counterpart, but there is still a distance between two lines in order for a cross to occur.
The currency pair started a short reversal. Although last week`s move was supported by the US strong economic output in Q3 as well as market expectation on rate cuts, the further strengthening of the USD will depend on additional economic indicators which will be released in the week ahead. The non-farm payrolls and unemployment rate development might have some impact on the value of USD. In this sense, there is some probability that the currency pair will revert a bit above the 1.09 level, before it reverts once again to 1.08 to clearly test this support line for one more time.
Important news to watch during the week ahead is:
Euro: Euro Area GDP Growth Rate third estimate for Q3, Germany Inflation Rate final for November,
USD: ISM Service PMI for November, Non-Farm Payrolls for November, Unemployment Rate for November, Michigan Consumer Sentiment preliminary for December
Posted figures for Germany`s GfK Consumer Confidence show a modest drop to the level of -27.8 from revised -28.3 in December. Germany's inflation rate preliminary for November was standing at 3.2%, lower from market expectation of 3.5%, and certainly lower from previous 3.8%. The unemployment rate in Germany was 5.9% in November, a modestly higher from 5.8% expected by the market. The Euro Area inflation rate flash for November was a bit of a surprise for the market as it reached a level of 2.4%, although the market was expecting to see a figure around 2.7%. The inflation in the EU dropped by 0.5% in November as per first estimates, which might indicate that the ECB might also cut rates sooner than it was initially expected.
The USD was highly supported by the market expectations that the Fed might cut interest rates by May next year. In this sense the currency pair was moving between levels of 1.10 down to 1.08 as of the end of the week. Resistance line at 1.10 has been tested at the beginning of the week, while the support line at 1.08 has been reached as of the week. The eurusd finished the week at level of 1.0881. The RSI started to revert from the overbought market side, ending the week at level of 57. Although the 50 line has still not been crossed, still, there is an indication that the market is slowly starting to eye the oversold side. Moving average of 50 days continues with its modest convergence toward its MA200 counterpart, but there is still a distance between two lines in order for a cross to occur.
The currency pair started a short reversal. Although last week`s move was supported by the US strong economic output in Q3 as well as market expectation on rate cuts, the further strengthening of the USD will depend on additional economic indicators which will be released in the week ahead. The non-farm payrolls and unemployment rate development might have some impact on the value of USD. In this sense, there is some probability that the currency pair will revert a bit above the 1.09 level, before it reverts once again to 1.08 to clearly test this support line for one more time.
Important news to watch during the week ahead is:
Euro: Euro Area GDP Growth Rate third estimate for Q3, Germany Inflation Rate final for November,
USD: ISM Service PMI for November, Non-Farm Payrolls for November, Unemployment Rate for November, Michigan Consumer Sentiment preliminary for December
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