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 came in higher than expected 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 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 move 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, starting just below the 20-period moving average on the 4-hour chart and extending down to the -3σ level of the Bollinger Bands. We will closely monitor whether the euro’s decline continues, while comparing its relative strength against other currencies.

Today, Norway’s trade balance will be released at 3:00 p.m., France’s consumer price index at 3:45 p.m., and the Eurozone’strade balance at 6:45 p.m., a press conference by ECB President Lagarde at 6:45 p.m., Israel’s Consumer Price Index at 8:00 p.m., Brazil’s retail sales at 9:00 p.m.,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 should remain highly vigilant regarding the downside potential of the euro/dollar pair, as its rebound has paused.