Two trades to watch: EUR/USD, FTSE

Close-up of market chart
Fiona Cincotta
By :  ,  Market Analyst

EUR/USD looks to US retail sales

After modest gains yesterday, EUR/USD is heading lower, remaining below parity. German wholesale inflation unexpectedly fell in August to 18.9%, down from 19.5% in July and below the 21% forecast. However, consumer prices are still rising in France, with CPI at 6.6% YoY in August, up from 6.5%.

Investors are also digesting the EU commissions proposals to mitigate the energy crisis. Among the proposals is the introduction of a windfall tax on energy firms’ profits, with the €140 billion being targeted set to go towards shielding consumers and businesses from surging energy costs.

Meanwhile, the USD is rising as attention turns to US retail sales. Sales have proven resilient throughout the year due to strength in the US jobs market.

Retail sales are expected to be flat in August. Jobless claims are forecast to be 225k

Where next for EUR/USD?

Having run into resistance once more at the falling trend line resistance, the price has rebounded lower. EUR/USD has broken below its 50 and 20 sma, which, together with the receding bullish bias on the MACD, supports further downside for the pair.

Support can be seen at 0.9864, the 2022 low. A break below creates a lower low and opens the door to 0.9845, the falling trendline support.

Buyers need to head back over parity to expose the 50 sma at 1.01, with a rise over 1.02 required for a higher high.

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FTSE edges higher helped by banks

The FTSE is edging higher after steep losses in the previous session. Weak risk sentiment following through from the US inflation shock saw the FTSE close 1.4% lower.

Today, UK stocks are rising, although sentiment remains fragile. Mining stocks and banks are helping the FTSE higher. Banks are finding support from the prospect of high-interest rates ahead of the BoE rate decision next week.

The market is now pricing a 70% probability of a 75 basis point rate hike at the September meeting, which would support net interest income.

Shell is rising after naming Wael Sawan to replace Ben van Beurden as chief executive, who will be stepping down at the end of the year.

Data is in short supply today, and confidence remains fragile. The latest YouGov survey shows that consumer confidence fell to its lowest level since mid-2020 in the depths of the pandemic lockdown.

Where next for the FTSE?

After facing rejection at 7500 the FTSE fell through its 20 & 50 sma. However, the long lower wicks on the most recent candles suggest that there wasn’t much appetite at those lower prices. The range between 7000 and 7600 has held for several months now, with choppy trading the order of the day.

The index holds above a multi-month rising trendline, but we have also seen a series of lower highs, painting a mixed picture.

Buyers will look to rise over 7370 the 20 & 50 sma to head back up towards 7500. Sellers will look to break below 7260 yesterday’s low ahead of 7200 the rising trendline support. A break below 7135 could create a lower low.

 

 

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