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Judging by yesterday's good reports and the fall of the US dollar against the euro and the pound, even against the backdrop of good indicators on industrial production and sentiment, market participants are preparing to lower interest rates in the US, in which no one doubts. Another matter is whether there will be another rate cut this year, or the Fed will decide not to rush. But a lot will depend on the development of the situation in the global economy and US trade conflicts with China and the EU.
As noted above, industrial production in the US in August increased significantly compared to last month, which is a very good signal for the economy. According to the US Federal Reserve, industrial production in August grew by 0.6% compared to the previous month, while economists had expected growth of only 0.2%.
The good news was the revision of the indicator for July to -0.1%, while earlier it was reported a fall of 0.2%. But compared to the same period of the previous year, industrial production in August increased by only 0.4%, which is worse than in July 2018.
A good indicator to support the economy was the growth of production in the manufacturing industry in August by 0.5% compared to the previous month. Capacity utilization increased to 77.9% with a forecast of 77.6%.
The report on the growth of sentiment of American builders is also good news for the Fed, as recently there has been a decline in this area. According to the National Association of Home Builders, the housing market index rose to 68 points in September 2019 from 66 points in August. Economists had expected the index to remain unchanged in September. Let me remind you that the value of the index above 50 indicates a positive assessment of the builders of their conditions.
Today's lower interest rates may add optimism, as it will make financing and mortgage lending more affordable. However, even though borrowing costs are low, the housing market remains volatile.
Yesterday, a report came out from Fed-New York. According to the data, business leaders believe that the current conditions in the economy worsened in September this year. The index fell by 18 points to -15.6 points.
Weekly sales data in The Retail Economist and Goldman Sachs were ignored by the market. According to the report, the retail sales index for the week from September 8 to 14 increased by 0.6%, and 2.5% compared to the same period in 2018.
According to Redbook, retail sales for the reporting week increased by 5.4% compared to last year, and for the first 2 weeks of September, on the contrary, decreased by 0.9%.
As for the technical picture of the EURUSD pair, buyers of risky assets completely blocked all the fall of Monday and returned to the level of 1.1075, from which, most likely, will be the main movement after the decision of the Federal Reserve on interest rates.
A break of last week's maximum in the area of 1.1110 will cause larger purchases of the trading instrument, which will lead to an update of the levels of 1.1150 and 1.1230. However, it is worth noting that the market has already taken into account today's rate cut, so the situation can unfold in the same way as last Thursday when the ECB lowered rates, the euro fell sharply, and then returned to all positions and resumed growth. In the scenario of EURUSD decline, the support will be at the level of 1.0990, and larger areas are already located at the lows of this month in the areas of 1.10950 and 1.0920.
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