EUR/USD: outlook for September 4-8
The single currency had an extremely volatile week. EUR/USD made a spike to 1.2070, then fell to 1.1820 and then made another spike to the levels close to 1.2000 before returning below 1.1900.
The euro made bullish swings on good data from the euro area and the US dollar’s weakness. European inflation gathered pace in August. CPI increased by 1.5% exceeding analysts’ forecasts. At the same time, the acceleration was mainly because of higher oils prices as core CPI, which excludes energy and food prices, maintained the same pace.
Disappointing US labor data on Friday pushed the euro higher, but the euro bulls were stopped by a report from Bloomberg, citing unnamed euro zone officials, that the ECB may not be ready to finalize their decision on next year’s QE program until December.
Traders are looking forward to the European Central Bank’s meeting on Thursday, September 7. Only a few analysts expect the ECB to announce a timeline for its withdrawal in bond purchase plans. At his speech in Jackson Hole in August, the ECB President Mario Draghi said that “a significant degree of monetary accommodation” was still warranted. Instead, the market’s focus will be on the regulator’s comments on the euro’s strength. Minutes of the regulator’s most recent meeting showed some officials were concerned about this. Yet, some of the ECB members have made hawkish comments recently.
EUR/USD is still within the general uptrend. A weekly close below 1.1900 may set the ground for further correction to the downside. The 200-week MA at 1.1750 should act as support ahead of 1.1700. The level of 1.2000 represents a key psychological level. The pair’s inability to close above it on Tuesday together with daily MACD divergence points at the necessity to visit support levels. In addition, pay attention to the fact that EUR/USD ran into the Ichimoku Cloud and 50-period MA at the monthly chart – these things create resistance.
The US economic calendar is going to be light. Take into account our technical analysis considerations and prepare for volatility during the ECB meeting & press conference.
