Daily Analysis EURUSD - 28 Aug 2023

Federal Reserve Chair Jerome Powell, speaking at his annual address in Jackson Hole, Wyoming, early on Friday, stated that central bank policymakers were attentive to signs suggesting that the economy might not be cooling as anticipated. This poses a dichotomy: while faster-than-expected economic growth benefits corporate earnings and leads to higher Treasury yields for valid reasons, the surge in yields places pressure on growth stocks, whose future earnings are evaluated against the risk-free Treasury rate, as well as on indebted companies that must refinance their obligations at elevated rates.

Christine Lagarde's recent lack of clarity on the European Central Bank's (ECB) policy direction has brought attention to a crucial week in the Eurozone. Although she acknowledged persistent inflation, she refrained from addressing the upcoming September 14 meeting, allowing room for public debate among colleagues regarding potential interest rate increases. The upcoming consumer-price data will set the stage for a significant decision, as officials assess whether further monetary tightening is necessary or if a weakening economic outlook warrants a pause.

Key factors in this decision include the Eurozone inflation numbers, particularly the core measure excluding volatile elements like energy. The service sector's relative strength compared to the struggling industry sector contributes to this nuanced inflation situation. ECB officials expressed varying views on the matter, with some advocating for rate increases and others suggesting a pause due to economic uncertainties. Overall, caution regarding inflation was evident, affecting Germany's short-term debt.

The EURUSD is breaking the confluence point of 1.0800 making a new lower low where the next target will be around the 1.0700 support level.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.1090	1.1050	1.1000	1.0850	1.0800	1.0700