Caution over the downward trend in the euro-dollar exchange rate as the post-ECB rally takes a breather

Caution over the downward trend in the euro-dollar exchange rate as the post-ECB rally takes a breather

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 came in at 1.6% year-over-year—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 fell back to 147.011.On the 4-hour chart, USD/JPY is showing trendless movement straddling the 20-day moving average, so we will wait and see how prices move ahead of next week’s FOMC meeting.

Despite the European Central Bank (ECB) raising its policy rate by 0.25% at its meeting announced yesterday, the euro became the weakest currency in Europe as economic growth forecasts for next year and beyond were revised downward.The EUR/USD pair fell from 1.0751 to 1.0631. A sharp decline was observed from just below the 20-period moving average on the 4-hour chart down to the -3σ Bollinger Band. We will keep a close eye on whether the euro’s decline continues, while comparing its relative strength against other currencies.

Today’s schedule includes Norway’s trade balance at 3:00 PM, France’s consumer price index at 3:45 PM, the Eurozone’s trade 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, and 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 Index; at 10:15 PM, U.S. industrial production; and at 11:00 PM, the U.S. University of Michigan Consumer Sentiment Index. We must remain highly vigilant regarding the downside potential of the EUR/USD pair, as its recent rebound has paused.