- Published: 23 November 2015
- Written by Editor
The common currency started to attract the market attention again by the end of last week, after The ECB president Mario Draghi assured on the ECB's readiness to take more stimulus measurements saying that "ECB Will Do What It Must to Spur Price Gains".
Oct EU CPI came last Monday showing rising by 0.1% y/y following falling in September by 0.1%, while the ECB inflation target is 2% yearly or what's close but below it.
This current low inflation level which is far from this rate drove Draghi to repeat several times since the recent ECB governing council meeting on last Oct. 22 that "there will be reassessment of the QE impact next December" raising the odds of taking new easing decision.
It should be mentioned here that the energy prices played a key role in directing the inflation in EU even by a transitory way helping the ECB to prompt its QE plan in the first quarter of this year, before watching later sluggish inflation rebounding to the positive territory.
The ECB's QE started to be enact on last Mar. 9 buying €60b monthly of EU governmental bonds till September 2016 with no change until now.
While EU Q3 GDP seasonally adjusted growth in the third quarter has been by 0.3% undermined by lower than expected growth in Germany and also Italy which has grown quarterly by only 0.2% with no GDP quarterly change in Portugal which is facing currently unstable political situation because of the austerities measurements.
From another side, the FOMC's minutes of its recent meeting on Oct. 28 came last week to show that the participants wanted to transmit that a December rate hike may be appropriate as most members anticipated that the required economic conditions for taking this decision could well be met by the time of the next meeting on Dec. 16.
But in October meeting, it was still appropriate to wait for additional information to clarify whether the deceleration in the pace of labor market progress in September was transitory or not.
So, The upbeating Oct US labor report release could make crucial change of the interest rate outlook in US supporting the greenback.
To realize the difference between the current situation and the situation directly following the dovish release of September US labor report, I can mention to you that UST 2YR yield has fallen to 0.54% directly following the release of US September labor report but now UST 2YR yield is at 0.92%,
The change has been also materialized in the prime market, as Nov. 9 auction of UST 3YR issuance ended on yield rising to 1.271% from 0.895% on last Oct. 6 Auction.
EURUSD opened last week on a downside gap at 1.0740 and it could hardly fill this gap last Thursday by rebounding to 1.0763, after falling to 1.0616.
EURUSD way down below 1.0616 can be faced by supported level at 1.0570 facing 1.0520 which could prop the pair up on last Apr. 13 to form higher low above 1.0462 which capped the pair falling on last Mar. 13.
While the way up is in need now getting over 1.0763 before facing higher resistance at 1.0829 which capped its rebound from 1.0674.
EURUSD is now in its day number 23 of continued being below its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today 1.0762.
The pair is having its daily RSI-14 in the neutral area but close to the oversold area below 30 reading now 33.184.
EURUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is having also its main line now in the neutral region close to the oversold area below 20 reading 34.146 and also its signal line which is reading 31.955.
Have a good day
FX Market Strategist
Walid Salah El Din
Mob: +20 12 2465 9143