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Asset Watch
Wednesday, September 13, 2023
The EUR/USD await the release of the US inflation report for August, which is scheduled for today. This report will play a key role in helping the Fed’s members in assessing the inflation levels trend and to predict their direction in the coming months, which will reflect directly on their interest rates forecast in the Fed dot plot.
The market expects the CPI headline to increase from 3.2% to 3.6% in August, largely due to recent increases in energy prices. However, in terms of the core consumer price index expectations are for it to decline from 4.7% in July to 4.3% in August. Therefore, any higher-than-expected data could keep alive the possibility that the Fed will hike rates in the upcoming November meeting, which would likely support the value of the US dollar, and vice versa.
On the other hand, the markets are also eagerly awaiting tomorrow’s interest rate decision by the European Central Bank (ECB). It is widely expected that the ECB will keep interest rates unchanged at 3.75%. Market participants will closely follow the press conference of the ECB President, Ms. Christine Lagarde, to gain further insights into the central bank’s monetary policy stance in the coming period. They will be particularly interested in understanding the extent to which the ECB is willing to tolerate high levels of inflation with declining GDP in Europe, as well as the central bank strategy against possible stagflation, should it occur.
Chart source ADSS Platform
On September 7, the EUR/USD fell to a multi-month low at 1.0686 then bounced back as some traders took profits. Currently, the pair moves within the trading zone 1.0760-1.0559 and it could be on the way for a test of the low end of that zone. Nonetheless, the support levels located between 1.0657 and 1.0629 should be monitored.
On the other hand, a daily close above the high end of the aforementioned trading zone may encourage traders to rally the price towards 1.0830. That said, the support level at 1.0830 located near the 200-day moving average and the bearish trendline originating from the July 27 high should be kept in focus.
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