The US inflation data for September was published during the previous week. Inflation on a monthly basis was higher by 0,2%, a bit hotter from market estimate of 0,1%. Inflation reached 2,4% on a yearly basis, again by 0,1% higher from the market estimate. At the same time, core inflation remained elevated, reaching 0,3% for the month, and 3,3% compared to the previous year. The Producers Price Index remained flat at 0% in September, bringing the index to the level of 1,8% for the year. The Michigan Consumer Sentiment preliminary for October reached the level of 68,9 which was a bit lower from the market estimate of 70,8. The five year inflation expectations were decreased in September to the level of 3%, from 3,1% posted for the previous month.
Factory orders in Germany were down by -5,8% in August, which was higher from market forecast of -2,0%. At the same time, the industrial production in Germany was higher by 2,9% in August, higher from market consensus of 1,0%. Germany’s balance of trade reached Eur 22,5B in August, which was higher from market expectation of Eur 19,0B. Retail Sales in the Euro Zone were higher by 0,2% in August for the month, which was in line with market expectations. Retail Sales were higher by 0,8% for the year.
The US inflation data were the main trigger for the eurusd currency pair to push the USD to the higher grounds, for another week in a row. The currency pair started the week around the level of 1,097 and moved to the lower grounds, testing the 1,09 level. Still the currency pair is ending the week at 1,0937. The RSI indicator reached the level of 35 at Friday’s trading session, but the clear oversold market side has not been reached. This leaves some space for the currency pair to test modestly lower grounds, from where a short term reversal will start. Moving average of 50 days continues to diverge from MA200, in which sense, there is no indication that the cross might occur anytime soon.
The ECB meeting is scheduled for the week ahead, as well as the EURO interest rate decision. As per Reuters poll, the current market sentiment is on the side that the ECB will cut both in October and December by 25 bps. More than 90% of participants in the Reuters poll were of this opinion. However, it should be considered that regardless of the market opinion, the most important is ECB members opinion. In case of some surprises by the ECB at their meeting which will be held on October 17th, the market reaction could be stronger and bring some higher volatility to the eurusd currency pair. As per current charts, there is only a small space for testing the downside, at least to the level of 1,088, from where the short reversal might start. Charts are pointing to the potential for resistance at 1,10 to be tested in the coming period.
Important news to watch during the week ahead are:
EUR: Industrial Production in the Euro Zone in August, ZEW Economic Sentiment Index for the Euro zone for October, EuroZone inflation rate final for September, ECB Interest Rate decision,
USD: Retail Sales in September, Industrial Production in September, Building Permits preliminary in September