During last week, the main currency pair in Forex was moving around 1.1250. Decline of retail sales in August, lower than expected, caused temporary drop of dollar, while EURUSD grew to 1.1280 area– the high since September 9 – for a short period. The core sales decreased by 0.3% after growing by 0.1% a month before and decline expectations by 0.1%. There were enough buyers of the American currency, who returned everything to the place by the end of the day. Already then, the markets showed the unwillingness to sell dollar shortly ahead September FOMC meeting with the results release on September, 21. On Friday, dollar bulls managed to shift significantly currency market based on strong inflation data. As released, August consumer prices increased by 0.2% against expected growth by 0.1%. Annual inflation rate reached again 1.1% getting back to the April level. The core inflation as well was better than expected. Its annual rate reached 2.3%. Earlier this year the above figure reached in June and February, and these levels were stable for the annual rate earlier in the beginning of 2012. They do not expect rate increase from the Fed meeting this week. However, traders will cautiously follow the changing of Fed rate forecasts for the end of the year. Earlier, FOMC was projecting 2 rate increasing for the current year. There are not many chances that this forecast will remain unchanged. Currently, possibility of even one increase until the end of the year estimated equally.
The pound as well suffered from Friday dollar demand on Forex. Though, the movement below 1.30 was the part of the trend which started before September 7. Eventually, despite of the relatively good economic indicators, during that time cable lost more than 4.5 patterns, having moved to the lower boundary of the channel that formed after brexit. By the time for the rate decision from FOMC the market may approach lower boundary dangerously close. In case of tough Fed decision, the pair may break the trading range that can lead to the powerful sales. However, there are more chances for the bounce forming and continuation of trading inside the range.
Last week the trading range was 1.5 times less than on the previous week and 2 times less in comparison with the fluctuations two weeks ago. In a short-term, uptrend support line is visible quite well. By the end of the week, it shifted to 102 area. If we consider the pair in a longer period, we can see that it remains inside the downtrend channel with the support line near 103 level. This week the pair is under double risk: on September 21, in the morning the bank of japan will announce its rate and QQE decisions, and in the evening the decision will come for federal reserve. It is unlikely that the weakening tendency of the range remains the same. Most probably, the trading rages will be broken and the market will close summer range trading.
Gold is under pressure since September 7, getting to the cautious sales due to strengthening of the American currency. In a long term, strong inflation (that reflects in the USA) should support price of gold and raw materials. However, on the first stage markets may be favored to the American currency, which leads the precious metal to come back to the area below 1300 and to lose the demand of a safe-haven asset in the conditions of the world uncertainty.
