EURUSD FORMS BULLISH FLAG AHEAD OF FLASH EUROZONE CPI

European stocks rose on Monday as investors reacted to the speech by Jerome Powell at the virtual Jackson Hole summit. In it, the Federal Reserve chair hinted that the bank could start tapering its asset purchases in the coming months if the US economic expansion continues. He also warned that the bank will not hike interest rates any time soon. In reaction to the speech, the US dollar index declined while American indices like the S&P 500 and Nasdaq 100 index rose to an all-time high. The DAX and CAC 40 indices rose by more than 0.22% and 0.12%, respectively. US index futures also rose by less than 0.20%.

The euro was little changed after the latest Eurozone sentiment numbers. According to the European Commission, the industrial sentiment declined from 14.5 in July to 13.7 in August. This decline was better than the median estimate of 13.4. In the same period, the sentiment among service providers declined to 16.8 as the Delta variant continued to hinder growth. The situation could worsen after reports said that the European Union was considering blocking nonessential travel from the US. Meanwhile, consumer confidence declined to -5.3 while the business and consumer survey fell to 117.5. The currency will react to the upcoming flash Eurozone and German CPI data.

The US dollar index was in a tight range as investors continued to reflect on the statement by Jerome Powell. With the speech done, the focus shifts to key economic data from the US. Later today, the National Association of Realtors will publish the latest pending home sales numbers. Economists expect these numbers to show that pending home sales rose by 0.4% in July after falling by 1.9% in the previous month. Last week, data by the Census Bureau showed that the country’s existing and new home sales numbers rose substantially in July. Later this week, the dollar will react to the US consumer confidence data followed by non-farm payrolls.

EURUSD

The EURUSD pair was little changed today as investors remained focused on the Fed tapering. On the hourly chart, the pair has formed a bullish flag pattern, which is usually a bullish sign. It is also hovering near the highest level on August 16. The pair has also risen above the 25-day and 15-day moving averages while the Relative Strength Index (RSI) has moved below the oversold level. Therefore, the pair may soon break out higher as investors target the key resistance level at 1.1850.

SPX500

The S&P 500 index futures are hovering near the all-time high after the statement by Jerome Powell. The futures are trading at $4,510, which is substantially above this year’s low at $3,667. On the four-hour chart, the index moved above the 25-day moving average while the RSI has moved slightly below the overbought level at 70. The accumulation and distribution indicator has also been rising. Therefore, the path of least resistance for the index is to the upside.

GER30

The DAX index rose slightly today as the market momentum improved. It rose to a high of €15,882, which was above last week’s low at €15,623. On the four-hour chart, the pair has moved above the 25-day moving averages. The RSI has also moved to 57. The index will likely hold steady ahead of the latest Eurozone and German preliminary inflation data.