5 August, 2015
EURUSD, closed sharply lower on Tuesday in the wake of fresh comments from the U.S. Fed’s Lockhart who suggested that “upcoming U.S. economic data would have to disappoint significantly to get the FOMC to delay a tightening in September.” The market reacted to the hawkish comments with the fresh buying of U.S. dollars, accelerating the downward pressure on the EURUSD pair. Now that the EURUSD has broken through the support turned resistance area of the 1.0920’s, and the fact that price has failed to hold a new higher low above the 1.1120.s, as well as, bearish momentum oscillator analysis, this leads me to hold firm my view that EURUSD prices will continue to trade firmly lower within the multi-week downward price channel towards my target area near the 1.0750’s over the coming days.
As the interest rate spread between the USD and the GBP against the EUR widens, and the expectation that the U.S. and the U.K will begin to raise rates, further supports the buying interest in the U.S. dollar and the British pound in the near term. Traders should also take note of the recent hawkish comments from the BoE and the Fed board members who have been dropping clues of pending rate hikes.
The AUD made a large move on Tuesday following better than expected trade and retail sales data, and then a change in language in the RBA statement following the anticipated decision to leave the cast rate at 2.0%. The Board said in its statement that “the Australian dollar is adjusting to the significant declines in key commodity prices.” The AUDUSD rallied nearly 165 pips on the statement.
Currency Pairs, Grouped Performance (% change)
The new Currency Movers Charts show the percentage change from previous day’s close to the current moment against the other major currencies.
The GBP is trading higher against the majors as the latest PMI data continued to show solid growth. The AUD is retracing lower after yesterday’s strong advance.
Significant daily support and resistance levels for these pairs are:
Main Macro Events Today
• EUR Services PMI: The services reading was revised to 53.9 from 53.8 and the composite to 53.9 from 53.7. Overall, the Eurozone economy is so far showing resilience and data is consistent with the ECB’s assessment that economic activity continues to broaden.
• USD ISM Non-Manufacturing: July service sector producer sentiment is out on later today and should reveal a 56.0 (median 56.2) headline for the month, steady from June. Other measures of producer sentiment for the month have been mixed but should allow the ISM-adjusted average for July to maintain the increase to 53 that we saw in June.
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