Decelerating Inflation, Fed’s Policy, and NFP Outlook
Major Barrier Touched: EUR/USD at Key Support.
Signs of inflation deceleration are present across the board, yet Fed heads still see the need for restrictive monetary policy. Friday, New York Fed President Williams iterated that “will need to maintain a restrictive stance of monetary policy for some time”. The US Dollar erased most of the losses incurred that day.
The U.S. Core PCE Price Index showed a 0.1% change, lower than the consensus of 0.2%. The Eurozone Core Consumer Price Index (year-over-year) dropped to 4.5%, while the forecast was 4.8% and the previous, 5.3%.
EUR/USD dropped to 1.0488 last week, only to rebound higher during the last 2 days of the trading period. The Euro is currently selling for 1.0580 US Dollars after having reached a high of 1.0617.
Key Data for the Week Ahead
On Monday, at 2:00 pm GMT, traders will focus on the ISM Manufacturing Purchasing Managers’ Index, which is a leading indicator of economic health, focused on the manufacturing sector. Later in the day, at 3:00 pm GMT, Federal Reserve Chair Jerome Powell will participate in a roundtable discussion with workers and small business owners. It can create market volatility, especially if he touches on the sensitive matter of monetary policy.
Wednesday the ADP Non-Farm Employment Change will offer an early look into the U.S. labor market. The report is scheduled for release at 12:15 pm GMT and acts as a precursor to the more important, government-issued NFP report. The same day, at 2:00 pm GMT, the ISM Services PMI comes out and is expected to show a minor decline: 53.5 from the previous 54.5.
Friday, a trio of significant data is set to roll out at 12:30 pm GMT. The Average Hourly Earnings are projected to show a reading of 0.3%, an increase from the last reading of 0.2%. The Non-Farm Payrolls (NFP) report is predicted to show a figure of 168,000, a decrease from the previous 187,000. The Unemployment Rate is predicted to drop to 3.7% from the previous 3.8%.
Technical Outlook – EUR/USD
Last week we saw a picture-perfect bounce at 1.0500, which is a technical support, as well as a psychological one due to its BRN (big round number) status. By the looks of things, the pair is prone to a bigger bounce, which will possibly reach the previous support at 1.0635.
The Relative Strength Index was oversold when the pair touched 1.0500, which contributed to the bounce. This condition of the RSI could be a trigger for an extended rally but overall the pair is clearly on a bearish path.
The week is filled with important economic releases, which will likely shape the direction of the US Dollar and the EUR/USD pair.
