The Eurozone is making significant progress in curbing inflation.

The Euro has slightly weakened, with recent data indicating a slowdown in wage growth within the Eurozone. This trend suggests that the European Central Bank (ECB) is likely to further reduce interest rates, primarily due to the slowdown observed in Germany. Currently, investors see more than a 90% chance of a rate cut in September due to weak economic conditions.

The Producer Price Index (PPI) in the Eurozone rose by 0.5% month-on-month in June after a 0.2% decline in May. This increase could slightly elevate inflation due to higher production costs faced by manufacturers, mainly driven by a rise in energy costs. Meanwhile, intermediate goods (products purchased for use in producing other goods) saw only a slight increase. On an annual basis, the PPI declined by 3.2%, which may not significantly impact production costs.

Wage growth in the Eurozone slowed to 3.55% in the second quarter of 2024, down from 4.74% in the first quarter, largely due to a significant slowdown in Germany, the largest economy in the Eurozone. This wage deceleration increases the likelihood of another interest rate cut by the ECB in September, which could help companies reduce some of their rising labor costs and potentially slow down inflation. The ECB continues to emphasize the importance of wage growth in its future policy decisions, with Philip Lane, the ECB’s Chief Economist, commenting that wage pressures are expected to continue easing, helping to keep inflation in check.

Consumer confidence in the Eurozone rose by 1% from the previous month to -13 in July, marking a continued improvement since February. This improvement is likely due to the ECB’s interest rate cut in June and the expectation of further rate cuts in September and possibly December. Additionally, political concerns in France have eased following the latest parliamentary elections.

The Manufacturing PMI dropped to 45.6 in August, its lowest level in eight months, representing a significant decline. New orders fell sharply, and employment in the manufacturing sector also decreased as reduced orders led to higher production costs at lower volumes, forcing companies to cut labor costs. Furthermore, the production cost inflation rate remains at its highest level in 18 months, exerting cost pressures on businesses.

Meanwhile, the Services PMI rose to 53.3 in August, marking the strongest expansion in service sector activity since April. This growth was largely driven by support from the upcoming Olympic Games, coupled with an increase in service activities across the Eurozone.

Techical analysis data (5H)

Resistance: 0.8979, 0.9011, 0.9029

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 0.8909 - 0.8928 but cannot break the support at 0.8928, you may set a TP at approximately 0.9011 and SL at around 0.8877 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 0.8979 - 0.9011, you may set a TP at approximately 0.9029 and SL at around 0.8909 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 0.8979 - 0.9011 but cannot break the resistance at 0.8979, you may set a TP at approximately 0.8909 and SL at around 0.9029 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 0.8909 - 0.8928, you may set a TP at approximately 0.8877 and SL at around 0.9011 or according to your acceptable risk.

Pivot point August 23, 2024 10:31 PM. GMT+7