Releases of data on European inflation and US employment and GDP showed what investors are now paying more attention to. The recovery in consumer prices in Germany to 1.8% and in the eurozone to 1.5% in August could not support the bulls in EUR/USD against the backdrop of the acceleration of the US economy in the second quarter to 3% and the positive dynamics of employment in the private sector shown by the ADP report. The main currency pair lost more than two figures and returned to the levels from which it started, listening to the intense speeches of Janet Yellen and Mario Draghi. Certainly it was not without locking in profits on long positions, although it should not be ruled out that ECB will intervene if the currency went to the above the level of 1.2. Who can now confirm or deny this?
Dynamics of European inflation
Source: Financial Times.
Investors' fears that Mario Draghi, on behalf of the Governing Council, will express concern about the strengthening of the euro, putting a barrier on the path of the EUR/USD to the north. In my opinion, this is not to be feared. The growth of consumer confidence in the eurozone to a 16-year peak, the index of economic optimism - up to a 10-year high, coupled with a positive GDP and inflation dynamics make it possible to consider the possibility of declaring the start of the QE exit process already in September. Currently, the market expects to receive information about the discussion on this topic, and expects to to see the signal in October. The ECB can pleasantly surprise the "bulls" in the main currency pair much earlier.
Moreover, the latest study of the Bundesbank once again highlighted the problems of Germany's banking system: ultra-soft monetary policy and low rates allow banks to forecast a 9% decrease in profits and 16% in revenues over the next five years. In 2015, according to the latest figure, the figure was 25%. However, the head of the Bundesbank, Jens Weidmann, does not see the need for the extension of QE and is ready to tolerate low inflation. Most likely, it will not be too long for this to be necessary: consumer prices in Germany in August rose by 1.8% y / y.
The counter-arguments of the dollar do not look very convincing. While for the last 7 months the actual data on non-farm payrolls have surpassed the forecasts, August is an extremely dangerous month for the indicator. Not once in the past 6 years the initial report did not justify the estimates of Bloomberg experts, although in most cases it was revised upwards in the future. Negative overestimation can happen if hurricane "Harvey" is taken into account. According to Goldman Sachs, it will take 0.2 pp from the US GDP in the third quarter due to, among other things, unemployment growth.
The slowdown of the US economy from July to September, the uncertainty about the tax reform and the ceiling of the national debt will continue to put pressure on the USD index, helping to restore the uptrend in EUR/USD.
Technically, to develop a correction for the "bears", it is necessary to break through the support at 1.185 and the lower limit of the upward trading channel. In this case, the risks of activation of the "Shark" pattern with a target of 1.139 will increase. Failure, on the contrary, will help restore the "bullish" trend and continue the rally in the direction of 1.215.
EUR / USD, daily chart
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