Caution Over Euro-Dollar Decline as Post-ECB Rally Pauses

Caution Over Euro-Dollar Decline as Post-ECB Rally Pauses

15.09.2023

In the U.S. currency market yesterday, the U.S. dollar rose against the yen immediately after the release of the U.S. August Producer Price Index, which showed a year-over-year increase of 1.6%, up from 0.8% the previous month.The USD/JPY pair rose from 147.007 to 147.554. However, the rally did not hold, and the pair eventually pulled back to 147.011. On the 4-hour chart, USD/JPY is showing trendless movement straddling the 20-period moving average (MA), so we will wait and see how prices develop ahead of next week’s FOMC meeting.

Despite the European Central Bank (ECB) raising its policy interest rate by 0.25% at its meeting announced yesterday, the euro became the weakest currency as economic growth forecasts for next year and beyond were revised downward.The euro fell against the U.S. dollar from 1.0751 to 1.0631. A sharp decline was observed, extending from just below the 20-period moving average on the 4-hour chart down to the -3σ level of the Bollinger Bands. We will continue to monitor the situation closely, comparing the euro’s strength relative to other currencies to determine whether this downward trend will persist.

Today, Norway’s trade balance will be released at 15:00, France’s consumer price index at 15:45, and the Eurozone’strade balance at 6:00 PM, a press conference by ECB President Lagarde at 6:45 PM, Israel’s Consumer Price Index at 8:00 PM, Brazil’s retail sales at 9:00 PM,at 9:30 PM, U.S. import and export price indices, Canadian manufacturing sales, and the U.S. New York Fed Manufacturing Survey; at 10:15 PM, U.S. industrial production; and at 11:00 PM, the U.S. University of Michigan Consumer Sentiment Index. We should remain highly vigilant regarding the downside potential of the euro/dollar pair, as its rebound has paused.