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Fundamental Analysis

The greenback are rallying higher after a chain of optimistic data, which lifted up the expectation for Fed rate hike. The EURUSD now is moving in a range between 1.1286 and 1.1492 in today’s trading session as the investors waited for the data of Non-Farm Employment Change from ADP institution, which is one of the indications for Fed rate hike decision.

eurusd d1

Fig. EURUSD D1 Technical Chart

A report from the Commerce Department on Monday (29/8) said that the core personal consumption expenditure price index in July, excluding the volatile food and energy components, soared 0.1%, matching with the analysts’ expectation of a 0.1%, gain in June. On a yearly basis, the core PCE, which is considered as the favorite inflation measure of Fed, in July edged up by 1.6%, below the objective of Fed of 2%.

In addition, the report implied that personal income grew 0.4% in July, after a 0.3% rise in June. The lifting wages as well as stable labor force would contribute mostly to lift up the consumer expenditure. Accordingly, personal spending, which accounts for more than two-thirds of U.S. economic activity, increased by 0.3% in the previous, getting in line with the expected data from analysts. Although the data was lower than the reading of a 0.5% advance in June, it still helped to ease the markets’ worries over economic health after sharp inventory decline and business investment downturn. Fed will partly base on these data of economy to launch its official decision. A stronger economic condition is expected to endure another Fed rate hike.

Furthermore, according to the survey published by the conference board on Tuesday (30/8), the consumer confidence index in August reached its highest level in nearly a year, 101.1, after a marginal decline in July. This statistics also surpassed the Thomson Reuters consensus estimate of 97. Since the consumer confidence index showed the opinion from 5,000 households surveyed on the current and future economic conditions, a higher figure means positive outlook, which would lead to the higher consumer spending in the future and prompt the economic development.

The CME Group’s FedWatch tool suggested that there is a 30% probability of Fed rate hike in the policy meeting taken place on 20-21 September and a 57.2% chance of another December Fed rate hike.

July’s upbeat this week’s data lifted the dollar .DXY against a basket of currencies to 96.04, up 0.64% from the opening price in Monday’s session.

On the other hand, the Koichi Hamada, an adviser to premier Shinzo Abe, told that the BOJ would take the plan of purchasing foreign bonds into consideration if the government intervention in the currency market is not accepted. This plan would help to halt the sharp rising Japanese yen, which forced traders to find another shelter to set aside their money safely, including the high-yield U.S dollar.

Meanwhile, data from the Federal Statistics Office showed on Wednesday (31/8) showed that the German retail sales rose by 1.7 % on the monthly basis in July, beating the Reuters forecast 0.5% rise. Yet, on the yearly basis, the retail sales in Europe’s largest economy fell by 1.5%, lower than the economists’ estimates of a 0.3% advance. This figure dampened hopes that consumer spending would be able to compensate for weakening foreign trade. However, market saw a stronger labor force in the report from Destatis on the same day. The number of people unemployed in Germany fell more-than-expected last month, with the number falling to minus 7,000 people. Analysts had expected German unemployment change to fall to -2,000.

This week, we received disappointed consumer price index from Eurozone. The CPI in German remains flat in August after a 0.3% growth rate the previous month. The Euro zone CPI last month did not see a positive sign either with the seasonally adjusted annual rate of 0.2%, lower than the anticipated pace of 0.3%. This index in French just ticked up by 0.3%, still missing the analysts’ forecast of a 0.4% soar.

Markets are paying much attention to the ADP Non-Farm Employment Change released today, which provides an early look ahead of the all-important Non-Farm Payrolls published on Friday (2/9)

Technical Analysis

eurusd h4

Fig. EURUSD H4 Technical Chart

Since last Friday, thanks to hawkish comments of Fed President Chair Yellen, the buck has edged up steeply and dragged down the pair EURUSD to fall further from the two-month high of 1.13664, which was created on August 18th. ADX (14) keeps stable around 36.4179, combined with DI- staying far from DI+, indicating that the bearish flag is still wavering.

eurusd h1

Fig. EURUSD H1 Technical Chart

 As can be seen from the hourly chart, the currency pair has been forming a slight down channel for several days with RSI (14) hovering low. The indicator currently is at 39.1039 and pointing downwards. This gives some suggestions that the downbeat of EURUSD is likely to continue. And EURUSD may hit the support of 1.11406

Analyses of Group Fiinvesting

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