View Single Post
  #830  
Old 14-08-2023, 11:28
KostiaFM's Avatar
KostiaFM KostiaFM is offline
Level V Lasers Member
 
Join Date: Mar 2019
Posts: 1,228
Default Re: Daily Market Analysis by ForexMart

EUR/USD. Weekly preview. US retail sales, Fed minutes, ZEW indices

Over the course of the first two weeks of August, the EUR/USD pair has failed to establish a clear direction. Despite prevailing bearish sentiments, sellers have been unable to solidify their position at the base of the 9th figure, let alone breach the support level at 1.0870. All of this indicates that the bears are hesitant, who are eager to lock in profits as soon as the price dips below the 1.0950 level (the middle line of the Bollinger Bands indicator on the weekly chart). The significant events of the previous week, like China's foreign trade data, the downgrade of American banks' ratings by Moody's, and the US inflation reports, led to a certain level of volatility. However, once again, the price remained within the confines of the 9th figure, with a brief impulsive surge to 1.1062. The pair completed a circle and returned to it's previous positions.

The economic calendar for the upcoming trading week is relatively modest, although not entirely devoid of events. Let's review the main highlights of the next five days.

Monday - Tuesday
At the start of the trading week, the pair is likely to trade with the momentum of Friday. Monday's economic calendar is almost empty, with perhaps the German Wholesale Price Index being of interest. This indicator is expected to show a positive trend, but will still remain in the negative territory, both on a yearly basis (-2.6%) and on a monthly basis (-0.1%).

The main release on Tuesday is the US Retail Sales report. Positive dynamics are anticipated here. According to forecasts, retail sales volume in the US is expected to increase by 0.4% in July, following a 0.2% growth in June. Excluding auto sales, the indicator is also projected to rise by 0.4%. Additionally, the Empire State Manufacturing Index, which is based on a survey of manufacturers in the New York Federal Reserve District, will be released on Tuesday. Here, on the contrary, negative dynamics are expected, with the indicator predicted to decline to -0.3.

Furthermore, on Tuesday, Neel Kashkari, the President of the Federal Reserve Bank of Minneapolis, will be speaking. He could potentially generate increased volatility among the dollar pairs. Firstly, he holds voting rights in the Committee this year. Secondly, Kashkari has already commented on recent inflation releases, and his tone was rather positive. According to him, the US central bank has made "good progress" in combating inflation. If he voices similar rhetoric next week, the dollar might come under pressure again.

During the European session on Tuesday, traders should pay attention to the German ZEW Economic Sentiment indices. In particular, the business sentiment index for Germany in August is expected to remain at the July level of -12 points. The business expectations index is expected to deteriorate to -15 points (the worst reading since December 2022). The current situation index is also projected to worsen to -63 points (the lowest reading since November of the previous year).

Wednesday
On Wednesday, EUR/USD traders will focus on the minutes of the July Federal Reserve meeting. Recall that the outcomes of the July meeting did not favor the US dollar. Among all the possible scenarios, the Fed implemented perhaps the most dovish one. The US central bank tied the fate of the interest rate to the dynamics of key macroeconomic indicators. The central bank retained the key formulations of the accompanying statement in their previous form, and Fed Chairman Jerome Powell, during the final press conference, indicated that the September Fed meeting could end with either another rate hike or keeping it unchanged. He emphasized that the central bank in the fall will evaluate the entire set of macroeconomic data "with special emphasis on progress in the field of inflation." The Fed's indecisive stance was interpreted against the US dollar.

A hawkish tone in the minutes of the July meeting could provide support to the US dollar, especially since this meeting took place before the release of US inflation data for July. However, in my opinion, the document will likely reflect the Fed members' hesitant stance, considering the corresponding formulations in the final communique.

In addition, on Wednesday, the report on the volume of building permits issued in the US will be released (expected growth of 1.1%), as well as the industrial production report (also expected to grow by 0.3%, following two months of negative dynamics).

Thursday
On Thursday, traders should focus on the Philadelphia Federal Reserve's Manufacturing Index. The indicator has been in the negative zone since September 2022. According to forecasts, in August, the index will also remain below the "waterline" but will demonstrate positive dynamics, rising to the level of -9.8 points.

Furthermore, on Thursday, traders could also pay attention to the Initial Jobless Claims data in the US. Over the past two weeks, this indicator has been rising, and according to forecasts, this trend will continue: next week, the number of claims is expected to increase by 250,000 (last week - 248,000, the week before last - 227,000).

Friday
The economic calendar for the final trading day of the week is not packed with events for the EUR/USD pair. The only thing of interest is the eurozone inflation data for July. We will learn the final assessment of July's Consumer Price Index (CPI), which, according to forecasts, should match the initial assessment (a decrease in the Consumer Price Index and an increase to 5.5% in the core CPI).

Conclusions
The EUR/USD pair is in a hanging state. In order to develop a downtrend, sellers need more than just to establish themselves at the base of the 9th figure they need to overcome the support level of 1.0870 at this price point, the lower line of the Bollinger Bands indicator on the daily chart coincides with the upper and lower bands of the Kumo cloud. If the bears break through this price barrier, the Ichimoku indicator will form a bearish "Parade of Lines" signal, indicating the strength of the downward movement. This is not an easy task, considering the fact that over the last two weeks, the downward momentum has faded at the base of the 9th figure.

The bulls don't have an easy task either: they need to establish themselves above the 1.1050 mark this is the upper line of the Bollinger Bands, coinciding with the Kijun-sen line on the same timeframe. In that case, the pair can move towards the 11th figure. However, throughout August, buyers only impulsively tested the 1.1050 target, afterwards they retreated, locking in profits. Given the relatively uneventful economic calendar for the upcoming week, we can assume that the pair will continue to trade within the range of 1.0950 1.1050, with periodic attempts to establish themselves at the base of the 9th figure.
Reply With Quote