As expected the ECB did not make any changes in the last week’s meeting. Governing Council (GC) of the ECB decided that the interest rate remain unchanged. The GC also announced that the changes in the QE will likely be announced at the October.

The overall trend remains bullish and the EUR strength likely to continue to the October meeting.

 Data Review:

  • Spain Services PMI posted 56.0 in August, down from 57.6 in July
  • Italy Services PMI 55.1 in August, down from July’s ten-year high of 56.3.
  • France Services Activity Index at 54.9 slightly down from 56.0 in July.
  • 5,
  • Germany Services PMI posted 53.5, up from July’s ten-month low of 53.1.
  • EZ PMI Services posted at 54.7, down from 55.4 in July
  • Retail trade fell by 0.3% in the EA and by 0.2% in the EU
  • ECB decided that the interest rate remain unchanged.

Upcoming data:

This week’s EZ calendar is quiet, focus on ECB officials’ speech.

  • Wed, Sep 13: EA Industrial production

Barclays: We expect euro area industrial production to make a weak start to Q3, with a flat July growth. Such an outcome would imply a Q3 carry-over of +0.1% q/q, significantly lower than the 1.2% q/q growth recorded in Q2.

Speeches: (Source: Barclays)

Tue, Sep 12: ECB Vice-President Constâncio speaks at ECB Workshop “Monetary Policy in non-Standard Times” in Frankfurt, Germany

Thu, Sep 14:

  • ECB Executive Board Member Mersch speaks at a panel on “Are EU digital and Fintech initiatives up to the challenges?” at Eurofi Financial Forum 2017 “What way forward for the EU27 and Eurozone?” in Tallinn, Estonia.
  • ECB Executive Board Member Mersch speaks in closing session “Economic and Financial Priorities for relaunching the
  • Eurozone and the EU” at Eurofi Financial Forum 2017 “What way forward for the EU27 and Eurozone?” in Tallinn, Estonia

 Fri, Sep 15:

  • Eurogroup meeting in Tallinn, Estonia
  • ECB Executive Board Member Mersch speaks at a panel on “EU CCP systemic issues (EMIR review, CCP, R&R)” at Eurofi
  • Financial Forum 2017 “What way forward for the EU27 and Eurozone?” in Tallinn, Estonia
  • ECB SSM Chair Nouy speaks at 33rd SUERF Colloquium & Bank of Finland Conference “Shadow Banking: Financial
  • Intermediation beyond Banks” in Helsinki, Finland
  • ECB Executive Board Member Lautenschläger speaks in an exchange of views on “Banking Union: How to make existing pillars
  • more effective?” at Eurofi Financial Forum 2017 “What way forward for the EU27 and Eurozone?” in Tallinn, Estonia

TECHNICAL VIEW

EURUSD rejected at the supply zone 1.2070 and 1.2130 settles below 1.2000. In our “ECB Review” article last week we reported, “We believe EURUSD likely to peak typically in the near term”.

Supports moved to 1.1910/1.1900, 1.1840 and 1.1770. Earlier support base finds 1.1690-1.1660.

The recent pullbacks are shallow.  The higher low pattern remains (H4 chart), a break below, then this could confirm the near term retracement to earlier support base.

Resistance seems at 1.1980/1.2030, 1.2070 and 1.2130.

 

View: We believe the EUR dip to be bought to the October meeting.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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