Euro rises as inflation falls to a three-year low

The euro rose slightly against the USD as traders continued to place their bets on fiscal stimulus from Germany. This is after preliminary CPI data from the EU showed that inflation had dropped to 0.9% from the previous 1.0%. This was the lowest level it has been in three years. The core CPI, which excludes the volatile food and energy products rose slightly from 0.9% to 1.0%. Just last month, the ECB lowered its inflation target for 2021 to 1.5% from 1.8%. Meanwhile, in Germany, the PMI for September declined to 41.7 from the previous 43.5. The Spanish PMI declined from 48.8 to 47.7.

The Australian dollar declined after the country’s central bank lowered interest rates for the third time this year. The bank lowered rates by 25 basis points to 0.75% from the previous 1.0%. The bank also lowered the inflation target for both 2020 and 2021. In the statement, Governor Philip Lowe said that low interest rates were needed for the country to achieve low unemployment rates. In the past few months, major central banks have slashed rates and warned of further cuts as the global economy moves towards a recession.

The Japanese yen rose slightly against the USD after a series of mixed economic data from the country. In August, the country’s unemployment rate and the jobs/applications ratio remained unchanged at 2.2% and 1.59 respectively. Capex in large industry declined by 6.6% from the previous 7.4%. The big manufacturing index in the third quarter declined to 2 from the previous 7 while the large non-manufacturers index declined to 21 from the previous 23. The manufacturing PMI for September remained unchanged at 48.9. 

EUR/USD

The EUR/USD pair rose slightly as traders placed their bets on fiscal stimulus from the European countries. The pair rose to a high of 1.0910 from the intraday low of 1.0878. On the hourly chart, the price is along the 28-day and 14-day EMAs. The pair is trading below the diagonal resistance level shown in yellow below. The two lines of the Stochastic oscillator are close to the overbought level. The pair will likely resume the downward trend to retest the previous low of 1.0878.

XAU/USD

The price of gold has been declining after reaching a high of $1556 in September. The XAU/USD pair declined to a low of 1461.30, which is along the lower line of the Bollinger Bands. The price is slightly above the 38.2% Fibonacci Retracement level while the RSI has moved to the oversold level. The momentum indicator has continued declining. The pair will likely continue moving lower to test a low of 23.6% Fibonacci Retracement level of 1440.

GBP/USD

The GBP/USD pair declined to a low of 1.2267, which is along the 50% Fibonacci Retracement level on the four-hour chart. The pair is trading along the lower line of the Bollinger Bands while the RSI has moved to slightly above the overbought line. Dots of the Parabolic SAR indicator are trading above the price. There is a possibility that the pair will move to test the 38.2% Fibonacci Retracement level of 1.2195.