16.09.202109:10 Analisis Forex & Kajian: EUR/USD. Fed's "silence mode" and pressure from USD bulls

The EUR/USD pair continues to trade in a narrow price range, namely at the base of the 1.18 level. The timid attempts of the pair's buyers to develop an upward correction are stopped. Even the contradictory data on inflation growth in the US did not help the pair's bulls: the euro marked a local maximum at 1.1840, after which it "laid down its arms".

The American inflation did not break the US currency, although the August figures reflected a slowdown in CPI growth (especially with regard to the core consumer price index). Apparently, the market came to an important conclusion, which actually kept the dollar afloat. Based on traders' general opinion, the current inflation levels still allow the Fed to start curtailing QE, albeit not this month. There are three Fed meetings left until the end of the year – in September, November, and December. Therefore, if we exclude the September meeting, it can be concluded that the regulator will decide on the first steps to normalize monetary policy at the end of this year. This fact provides background support for the EUR/USD bears, as the European Central Bank intends to continue its accommodative policy next year – according to general expectations, the PEPP will be replaced by an "enhanced" ARR program, the volume of which can be increased to 30-40 billion euros.

Exchange Rates 16.09.2021 analysis

The members of the US regulator must observe the "silence mode" 10 days before the Fed meeting, meaning they should not speak in public. Therefore, traders are now left "on their own" – one on one with an army of specialized experts and insiders. The information comes in very diverse, and most importantly, contradictory, so EUR/USD traders can not decide on the vector of their movement. On the one hand, cautious sentiments prevail in the market – according to the general opinion of experts, the regulator will take a wait-and-see position, complaining about the contradictory August Nonfarm data and no less contradictory inflation data. On the other hand, some analysts still admit the possibility that the Fed will present a "hawkish surprise", despite the nondescript CPI figures. Arguing their position, they point to the August CPI, which rose to an 11-year high, as well as to the PCE, which is one of the most important inflation indicators for the Fed. In turn, it surged last month to a 30-year high. All this indicates that inflationary pressure should continue in the coming months, which theoretically allows the Federal Reserve to announce the curtailment of QE as early as next week.

In other words, the assumptions are extremely contradictory, and the stakes are quite high. Therefore, EUR/USD traders mostly prefer to stay on the side, not investing in the US dollar, but not getting rid of it. The euro, in turn, cannot take the lead, since the results of the last ECB meeting disappointed with their understatement. The regulator allowed the possibility of reducing the pace of asset purchases under the PEPP program, but did not provide any details of these intentions. Most of the analysts surveyed expressed confidence that the decision on the gradual curtailment of the PEPP will be made by the European regulator no earlier than December of this year. At the December meeting, Lagarde will most likely declare that the PEPP will be replaced by an "enhanced" APP program.

As a result, the pair got stuck in a narrow price range of 1.1780-1.1840, reflecting the indecision of both bears and bulls of the pair.

Today's release may "stir up" traders. The US retail sales data will be published during the American session on Thursday. The July data disappointed investors: the volume of retail trade fell by 1.1% (excluding car sales – by 0.4%). According to the general forecasts of experts, the August release should also come out in the negative area (-0.7%, -0.1%). If the indicators exceed the zero value, the US dollar can strengthen its position, settling in a pair with the euro within the level of 1.17.

Exchange Rates 16.09.2021 analysis

Today, another indicator is also worth paying attention to – the US labor market. The number of initial applications for unemployment benefits last week rose by only 310 thousand, which is a new low since the start of the coronavirus pandemic. A further decline in the indicator will also support the US dollar.

Exchange Rates 16.09.2021 analysis

From the technical point of view, the pair on the D1 timeframe is located on the middle line of the Bollinger Bands indicator, which coincides with the lower border of the Kumo cloud. This indicates the uncertainty of the situation. If sellers manage to push the price below the Kijun-sen line on the same timeframe (level of 1.1780), the Ichimoku indicator will form a bearish "Parade Line" signal, which will declare the priority of short positions. The main downward target is the level of 1.1710, which corresponds to the lower line of the Bollinger Bands indicator on the daily chart.

* Analisis pasaran yang disiarkan di sini adalah bertujuan untuk meningkatkan kesedaran anda, tetapi tidak untuk memberi arahan untuk membuat perdagangan.

Irina Manzenko,
Pakar analisis InstaForex
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