EUR/USD: The German government has started a program to support the population
The euro zone currency is trading at a moderate gain, having retreated from another record low since the beginning of this week's session. EUR/USD reached 0.9950 within the framework of upward dynamics, but the "bullish" impulse has a vulnerable potential.
The day before the EU macroeconomic statistics was published, which showed negative trends. The services sector of Germany from S&P Global for August didn't meet expectations of zero dynamics and reached 47,7 points against 48,2 points in the past. The same indicator of the whole economic alliance was 49.8 points against 50.2 points in the previous one. Eurozone retail sales for July were up slightly by 0.3%, having posted a 1.0% decline in June the day before. The annual rate of sales declined to -0.9% from the previous -3.2%, with market expectations of -0.7%. The market remains under pressure from anxious sentiment about the outlook for the eurozone economy and further developments in the energy sector crisis. At the moment the ECB is not giving up on further interest rate hikes to combat rising inflation, economists fear a recession coming soon. Households are already hoping for additional government support as current electricity and gas rates make it impossible for them to pay their utility bills properly, and the situation will only worsen in the winter.
- Resistance levels: 1.0000, 1.0050, 1.0100 and 1.0150.
- Support levels: 0.9950, 0.9900, 0.9850, 0.9800.
AUD/USD: The pair is trading at 0.6800
The Australian currency is showing a mixed trend, testing the level of 0.6800. "Bulls" are trying to intercept the initiative in the pair, but notable resistance is provided by the regulator's decision to increase the interest rate.
According to preliminary estimates the RBA (Reserve Bank of Australia) has adjusted the rate by 50 basis points to the target of 2.35% explaining the move by the need to turn inflation around to the 2-3% target range. Regulator officials remain wary amid foggy prospects for the pace of global economic recovery, new hotbeds of Covid-19 and rising energy costs. The RBA's current forecast is for the consumer price index to reach 7.5% by the end of this year, a value that will subside to 4.0% in 2023 and continue to decline to a range with an upper ceiling of 3.0% in 2024. The day before analysts released data on cost of goods and services growth showing a 0.5% decline in inflation for August, an earlier adjustment of 1.2%, and annual growth slowed to 4.9% from 5.4% in the past. The Commonwealth Bank reported that Service Business Activity for August rose to 50.2 points from 49.6 points, against expectations of zero growth.
- Resistance levels at 0.6839, 0.6900, 0.6950 and 0.7000.
- Support levels: 0.6800, 0.6750, 0.6700, 0.6650.
USD/CAD: the asset trades multidirectional
Within the Asian trading session, the instrument USD/CAD shows a moderate decline, testing the indicator 1.3100. A number of technical factors contribute to the negative dynamics, nevertheless the global situation on the markets is not able to change sharply.
The American currency got support on expectations of continuation of aggressive measures from FRS of the USA on monetary parameters within the framework of the meeting announced on September 21, and the Canadian regulator will announce the decision this week. Economists' preliminary estimates suggest a 0.75% interest rate hike to the 3.25% target at once. July statistics on trade balance for exports and imports is also expected to be released; PMI from Ivey will also be announced. The current week will finish with the expected publication of the August report on the employment market situation. Analysts expect the number of employed to rise by 15.0 thousand against a drop of 30.6 thousand last month, but unemployment is also at risk of rising from July's 4.9% to 5.0%.
- Resistance levels: 1.3150, 1.3200, 1.3241, 1.3300.
- Support levels: 1.3100, 1.3050, 1.3000, 1.2950.
Oil market review
Brent "black gold" quotations made a successful attempt to reverse the price movement, after the unsuccessful attempt of breaking the level of 93.50, which allowed the asset to develop an upward dynamic.
The day before, the decision to set a cap on the cost of Russian oil and gas was announced, creating an additional positive incentive. Moreover, with their decision, the G7 finance ministers vetoed the issuance of insurance to ships that transport energy resources at an increased price, in order to stabilize the markets and reduce record inflation. As part of the mirror measures, Russia has refused to continue supplying oil to countries that violate the market pricing scheme. The legislative base for approval of the upper price limit has not been developed, but experts are confident in its approval, and investors have already started to put a probable deficit of energy resources into the price. Taking into account the whole news background and geopolitical crisis, the asset has a prospect of strengthening to the level of 102.00 and even more within the medium-term outlook.
- Resistance levels: 102.00, 110.00.
- Support levels: 93.55, 86.50.