Article by ForexTime

The EUR/USD is nearly unchanged on the session following the monthly inflation report which was in-line with expectations.  Although inflation continued to slide, the drop was expected and not the major decline likely needed for the ECB to initiate a bond purchase program.

Eurozone unemployment remained steady at 11.5% in July, unchanged from June, as expected. The country breakdown continues to show considerable divergences across the Eurozone, with rates ranging from 4.9% in Germany and Austria and 24.5% in Spain, although the latter was down from 24.6% in the previous month and continues the decline seen in Spanish jobless numbers in recent months. By contrast rates in France in Italy, which are lagging in their reform efforts, reported a renewed pick up in headline unemployment, which is worrying. The same holds for the still very high youth unemployment rates and despite the drop in the overall number Spanish youth unemployment actually picked up to 53.8% in July from 53.4% in June.

Eurozone August  HICP inflation fell to 0.3% year over year from 0.4% year over year in the previous month. The decline was in line with consensus expectations and not quite the significant drop towards deflation territory, the ECB source story this week suggested would be necessary for further ECB action next week. Especially as core inflation actually rose to 0.9% year over year, from 0.8% year over year in the previous month, highlighting that base effects from energy and food prices remain a key driving factor in the low headline rate.

German Jul retail sales disappointed with a 1.4% month over month contraction. This was even weaker than forecast for a 1.0% month over month decline, which was already considerably below consensus for a rise of 01.% month over month. At the same time the June number was revised own to 1.0% month over month from 1.3% month over month reported initially. This left sales down 0.5% in the less volatile three months comparison, which ties in with the sharp decline in GfK consumer confidence and is not a good sign for Q3 GDP numbers.

Support on the EUR/USD currency pair is seen near 1.3145, which resistance is seen near the 10-day moving average at 1.3237.  Momentum remains negative with the MACD (moving average convergence divergence) index printing a negative number with a downward sloping trajectory.  The only caveat is that the RSI is printing near 28, which is below the oversold trigger level and could foreshadow a correction.

Article by ForexTime

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