EURUSD: Fed decides on interest rates Inflation figures in the US were in the market spotlight during the previous week. Posted data shows an inflation rate of 0,2% in February, bringing the yearly inflation to the level of 2,8%. The core inflation was also at the level of 0,2%, while its yearly level was standing at 3,1%. The new job openings in the US in January reached 7,74M which was above the market estimate of 7,63M. The Producers Price Index in February was standing at 0% for the month, while core PPI was -0,1%. Both figures were below market estimates. Although February inflation figures did not bring any specific surprise to the market, still, Michigan Consumer Sentiment figures were a bit surprising. Namely, as per Michigan survey, consumers in the US are now expecting further increase in inflation figures, with a preliminary estimate of 4,9%. At the same time, the Consumer Sentiment dropped to the level of 57,9 in March, from 64,7 posted for the previous month. This figure was also lower from market consensus of 64,3.
Trade balance in Germany reached euro 16B in January, which was below market estimate of euro 21B. German exports dropped by -2,5% in January. Industrial production in Germany in January was higher by 2% on a monthly basis, and above market estimate of 1,5%. Wholesale prices in Germany ended February by 0,6% higher from the previous month, while its yearly level was 1,6%.
Fear of inflation and economic slowdown was at the core of market sentiment during the previous week. The US Dollar weakened to the level of 1,094 against euro, which was the highest weekly level of the currency pair. Still, eurusd ended the week at the level of 1,0879. With the latest move, the RSI clearly reached the overbought market side, indicating that the potential short term reversal might be ahead. The moving average of 50 days started stronger convergence toward the MA200, but there is still a distance between two lines, so the cross might be postponed.
The week ahead brings FED rate decision on March 19th, as well as FOMC economic projections. This day might bring some volatility back on the market, and will be closely watched by all market participants. With the latest move of the currency pair, the level from November 2024 has been reached. The first half of the week, markets will continue to test the 1,09 resistance level. In case that this resistance level is breached, then the currency pair will continue its move toward the 1,10, the next resistance. However, at this moment there is a lower probability for such a scenario. There is also a probability that the market will enter into a short correction, where the 1,08 support level will be tested for one more time.
Important news to watch during the week ahead are:
EUR: ZEW Economic Sentiment Index for March in Germany, Inflation rate in February for the Euro Zone, Producers Price Index in February for Germany,
USD: Retail Sales in February, Building Permits preliminary for February, Housing Starts in February, Industrial Production in February, FED interest rate decision on March 19th, FOMC Economic Projections, Fed Press Conference after the meeting, Existing Home Sales in February,
