Latest data show that the inflation in Germany is slowing down, reaching -0.1% in May, or 6.1% compared to the previous year. This represents a further decrease from 6.5% in April and 7.2% in March y/y. At the same time, core inflation in the Eurozone dropped to the level of 5.3% in May y/y, from 5.5% posted during the previous month, while inflation rate y/y reached 6.1% y/y from 6.3% in April. Figures posted for the US during the previous week showed that the US jobs market added 339K jobs in May, which was far more than estimated 190K. Despite the strong figures, the unemployment rate in May was 3.7%, higher from 3.5% posted in April. Analysts are noting that this comes as a result that many entrepreneurs are closing their small businesses and seeking employment in large corporations. Certainly, the most significant news during the week was approval of the debt-ceiling deal, which was approved by the US Congress and signed by the US President Biden on Saturday. Now, markets can be certain that the US will not default, however, there are pending questions when it comes to the future Fed's monetary moves. Whether the interest rates are going to be increased by 25 bps in June`s or maybe in July`s meeting is about to be seen. Majority of market participants are of the opinion that rate increase might be postponed for July, as wages just modestly increased in May.
The US dollar weakened a bit against the Euro during the previous week. Its highest weekly level was at 1.0636, after which USD started its modest reversal toward the lowest weekly level at 1.0773. Still, the currency pair is finishing the week around the 1.07 level. RSI did not reach the clear oversold side of the market, instead, the indicator reverted a bit toward the level of 42. Still, selling orders are dominant for Euro, after the US signed a debt-ceiling deal, which might drive the value of USD during the week ahead. Moving average of 50 days is slowing down its divergence from MA200 counterpart, indicating that convergence might be in store in the coming weeks. In technical analysis, this would indicate a trend reversal, however, it is still too early in time to discuss potential reversal.
USD will most probably continue to be supported by the deal agreement, which was signed by the US President on Saturday. In this sense, the EURUSD might move for one more time toward the 1.06 level. At this moment, there is a low probability that the USD might go higher from this level against the Euro. On the opposite side, 1.08 might be tested again. There is some potential for 1.09, based on current charts, but it will depend on some stronger sentiment and fundamentals.
Important news to watch during the week ahead are:
The US dollar weakened a bit against the Euro during the previous week. Its highest weekly level was at 1.0636, after which USD started its modest reversal toward the lowest weekly level at 1.0773. Still, the currency pair is finishing the week around the 1.07 level. RSI did not reach the clear oversold side of the market, instead, the indicator reverted a bit toward the level of 42. Still, selling orders are dominant for Euro, after the US signed a debt-ceiling deal, which might drive the value of USD during the week ahead. Moving average of 50 days is slowing down its divergence from MA200 counterpart, indicating that convergence might be in store in the coming weeks. In technical analysis, this would indicate a trend reversal, however, it is still too early in time to discuss potential reversal.
USD will most probably continue to be supported by the deal agreement, which was signed by the US President on Saturday. In this sense, the EURUSD might move for one more time toward the 1.06 level. At this moment, there is a low probability that the USD might go higher from this level against the Euro. On the opposite side, 1.08 might be tested again. There is some potential for 1.09, based on current charts, but it will depend on some stronger sentiment and fundamentals.
Important news to watch during the week ahead are:
- Euro: Euro Area GDP growth rate Q1
- USD: ISM Services PMI for May
