The single currency could not find a way but retreating back across the broad after the ECB president dovish comments which have signaled keeping of the interest rate as it is possible while the inflation outlook in EU is moving down forming no concern about keeping its upside risks well-contained indicating that they are now related to the indirect taxes which are imposed for sustaining the financial positions of the EU countries and also the commodities prices warning of the impact of the current geopolitical stance which can push them up.
The ECB has seen improvement of the economic activity and confidence indicators in it and it has mentioned that it has upgraded its expectation the EU GDP this year to be shrunk by 0.4% from 0.6% in its previous estimation expecting the growth next year to be by 1% from 1.1% in has mentioned nearly 3 months ago. It has expected also the inflation to be this year at 1.5% from 1.4% it has mentioned previously but it kept it unchanged at 1.3% for 2014.
From another side, the greenback has found strength across the broad after the release of US jobless claim which raised the expectations of having tapering of the Fed’s QE this month by falling again to 323k in the week ending on 30th of August to offset the release of US ADP employment change of August which came lower than expected adding 178k which the market was waiting for 180k from 198k in July.
We have seen also August US ISM non-manufacturing index coming at 58.6 which is its highest value of expansion above 50 since Feb 2011 while the market was waiting for easing back toward 55 from 56 in July to repeat what has happened with August US ISM manufacturing index which rose to 55.7 which is the highest since April 2011 while the market was waiting for easing to 54 from 55.4 in July showing really higher probability of tapering this month by God’s will.
The greenback could make a good rally specially versus the gold which has been actually under pressure after failing in having a place over 1400$ yesterday as the equities markets worries about long sharing of war against the Syrian regime have got down following the senate new draft release to keep rising again today but the risk of having a reaction from it and from Iran can keep the volatility of gold high.
By God’s will, The single currency which has got down below its 200 moving average over the 200 days too today versus the greenback can meet now in its way of easing back after falling below 1.3137 which could underpin it earlier this week supporting level at 1.3064 and its breaking can lead to 1.2992 again below 1.30 psychological level which can be followed by 1.2865, 1.2808 before the area between 1.2754 to 1.2736 which could hold the pair down side pressure two times this year while rising back again now can be met by resistance at 1.3226 which could cap the pair today and it can be followed by 1.3255,1.3345,1.3409 before 1.3451 whereas the pair recent top of last August and breaking it can open the door for meeting higher resisting levels at 1.3515, 1.3595 before 1.3709 which is the top of this year until now and it has been reached in the beginning of last February.
Kind Regards
FX Market Strategist
Walid Salah El Din
Mob: +20 12 2465 9143
E-Mail:
mail@fx-recommends.com