Dollar Rises To 2-month High

Trading 26 juil 2019 Commentaire »

The U.S. dollar gained significant ground against most major currencies and the dollar index hit a two-month high on Friday.

The dollar was driven largely by data showing the U.S. economy slowed at a less-than-expected pace in the second quarter of current fiscal and on reports the U.S. government will not intervene in the currency markets.

According to CNBC reports, White House economic adviser Larry Kudlow said the Trump administration has ruled out intervening in the currency markets.

The reports said White House trade adviser Peter Navarro presented Trump with ideas on how to devalue the dollar to gain an upper hand in the trade fight with China, but the president quickly dismissed the proposals.

Trump had tweeted earlier this month that Europe and China are keeping their currencies artificially low to boost exports.

Traders were looking ahead to the upcoming Federal Reserve's monetary policy meeting, due on July 30 & 31. It is widely expected that the central bank will announce a 25 basis points reduction in interest rate.

The dollar index, which rose to 98.09 from around 97.80, and was last seen hovering around 98.00, gaining about 0.2%.

Against the euro, the dollar strengthened to 1.1113 before paring some gains and drop down to 1.1128, still up in positive territory with a modest gain of 0.16%.

Against Pound Sterling, the dollar fared even better, moving on to $1.2376, from previous close of $1.2455. The sterling was last seen at $1.2388, down more than 0.5% from previous close.

The Japanese yen, which moved in a tight band against the dollar, was last seen at 108.65 a dollar, after having eased to 108.56 from an early high of 108.83.

Against the loonie, the dollar was up slightly at 1.3168.

Against the Aussie, the greenback gained 0.6% at 0.6910, while against Swiss franc, it was up 0.25%, at 0.9933.

Data from the Commerce Department showed U.S. economic growth slowed in the second quarter but still exceeded economist estimates.

The Commerce Department said real gross domestic product climbed by 2.1 percent in the second quarter following the 3.1 percent jump in the first quarter. Economists had expected the pace of GDP growth to slow to 1.9 percent.

The stronger than expected GDP growth reflected positive contributions from consumer spending, federal government spending, and state and local government spending.

Meanwhile, negative contributions from private inventory investment, exports, non-residential fixed investment and residential fixed investment limited the upside.


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Oil Futures End Higher On Geopolitical Tensions

Trading 26 juil 2019 Commentaire »

Crude oil futures edged higher on Friday after swinging between gains and losses as traders weighed demand and supply prospects for the commodity.

Data showing U.S. GDP to have grown more than expected in the second quarter contributed a bit to oil's uptick.

While the likelihood of supply disruptions due to escalating tensions in the Middle East and data showing a drop in oil rigs count in the U.S. supported oil prices, lingering concerns about growth continue to cause uncertainty about near-term energy demand.

West Texas Intermediate Crude oil futures for September ended up $0.18, or about 0.3%, at $56.20 a barrel.

On Thursday, WTI crude oil futures for September ended up $0.14, or about 0.3%, at $56.02 a barrel.

For the week, crude oil futures notched up a gain of about 0.8%.

According to a report from Baker Hughes, oil rigs count in the U.S. dropped by three this week to 776.

Tensions between Iran, the U.S. and the U.K. remain high following the seizure of the British-flagged tanker Stena Impero by Iran's Revolutionary Guard last week in the Gulf.

The U.K. government said it would provide a Royal Navy escort for British-flagged ships passing through the Strait of Hormuz.

Meanwhile, Iran has reportedly test fired a ballistic missile in a bid to improve the "range and accuracy" of its weapons.

Data released by the Commerce Department this morning showed that U.S. economic growth slowed in the second quarter but still exceeded economist estimates.

The data said real gross domestic product climbed by 2.1% in the second quarter following the 3.1% jump in the first quarter. Economists had expected the pace of GDP growth to slow to 1.9%.


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Gold Futures Settle Modestly Higher

Trading 26 juil 2019 Commentaire »

Gold futures ended higher on Friday, even as the dollar gained some ground against most major currencies ahead of next week's monetary policy meeting of the Federal Reserve.

A fairly strong second-quarter GDP data drove the dollar higher.

The dollar index, which was a bit subdued to start with, edged higher as the session progressed and hit a high of 98.09 before paring some gains. Still, at 98.01, the greenback was up by about 0.2% from previous close.

Gold futures for August ended up $4.60, or about 0.3%, at $1,419.30 an ounce.

On Thursday, gold futures for August ended down $8.90, or about 0.6%, at $1,414.70 an ounce. Gold futures shed about 0.5% in the week.

Silver futures for September ended down $0.014, at $16.397 an ounce, while Copper futures for September settled at $2.6850 per pound, down $0.0185 from previous close.

Data released by the Commerce Department this morning showed that U.S. economic growth slowed in the second quarter but still exceeded economist estimates.

The data said real gross domestic product climbed by 2.1% in the second quarter following the 3.1% jump in the first quarter. Economists had expected the pace of GDP growth to slow to 1.9%.

The stronger than expected GDP growth reflected positive contributions from consumer spending, federal government spending, and state and local government spending.

Meanwhile, negative contributions from private inventory investment, exports, non-residential fixed investment and residential fixed investment limited the upside.

The Federal Reserve will review its monetary policy on July 30 and 31. It is widely expected that the Fed will announce a modest 25-bps rate cut. In the event of the central bank holding rates unchanged, gold prices could see a significant drop next week.


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Treasuries Close Roughly Flat Following Choppy Trading Day

Trading 26 juil 2019 Commentaire »

Treasuries showed a lack of direction throughout much of the trading session on Friday before ending the day roughly flat.

Bond prices spent most of the day lingering near the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.081 percent.

Bond traders seemed reluctant to make any significant moves ahead of the Federal Reserve's highly anticipated monetary policy announcement next Wednesday.

The Fed is widely expected to cut interest rates by at least 25 basis points, although recent economic data has generated some uncertainty about the outlook for rates.

Adding to the uncertainty, the Commerce Department released a report showing U.S. economic growth slowed in the second quarter but still exceeded economist estimates.

The Commerce Department said real gross domestic product climbed by 2.1 percent in the second quarter following the 3.1 percent jump in the first quarter. Economists had expected the pace of GDP growth to slow to 1.9 percent.

The stronger than expected GDP growth reflected positive contributions from consumer spending, federal government spending, and state and local government spending.

Meanwhile, negative contributions from private inventory investment, exports, non-residential fixed investment and residential fixed investment limited the upside.

"Now in its longest expansion on record, the U.S. economy continues to look healthy," said Oxford Economics' Chief U.S. Economist Gregory Daco and U.S. Economist Jake McRobie.

They added, "However, given the persistent protectionist draft, the lingering policy uncertainty breeze, the sniffling global economy, and the cooling room temperature at home, now may be an opportune time for a Fed immunization shot."

The Fed's monetary policy decision is likely to be in the spotlight next week, although the Labor Department's monthly jobs report is also likely to attract attention.

Traders will also keep an eye on reports on consumer confidence, pending home sales, private sector employment, manufacturing activity, and the trade deficit.


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EURUSD: Much more. Another fly in the ointment for the euro from ECB economists

Trading 26 juil 2019 Commentaire »

Today is practically empty for fundamental data that could have led to at least any change in the current market situation. Economists continue to analyze yesterday's series of statements by the President of the European Central Bank, which still keeps major players from further action before the weekend.

Let me remind you that yesterday, Mario Draghi noted a good growth in employment and wages, which continue to support the economy, but pointed to the threat of protectionism and geopolitical factors that increasingly affect business and worsen market sentiment. The European Central Bank also signaled its readiness to reduce interest rates and, together with the launch of a number of mitigating measures. However, it should be noted that this meeting did not discuss the scale of rate cuts and the volume of asset purchases.

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Skepticism in the market added a forecast of economists of the European Central Bank, which lowered the inflation forecasts in the eurozone in the coming years. This revision is not surprising in the current environment, where the economy is once again showing a slowdown, even despite the stability of the labor market. Most likely, during the next meeting of the central bank in September this year, ECB leaders will announce new measures to stimulate the economy.

According to today's report, ECB experts have reduced inflation forecasts until the end of 2021.

Thus, 52 experts interviewed by the central bank said that they forecast inflation at the level of 1.3% in 2019, and at the level of 1.4% in 2020. In 2021, inflation will decrease even more and will be 1.5%. As for longer-term inflation, it is expected at 1.7%, that is, in any case, it will not reach the target of 2.0% set by the European Central Bank. All this once again indicates how difficult it is for the European regulator to resolve the situation with low inflation, even despite the low and negative interest rates in the eurozone.

As for the risks that could further aggravate the situation with inflation, they include a slowdown in the eurozone economy, as well as weak growth rates of global GDP. The situation on foreign markets, which already rolled down in a recession, the manufacturing sector of the eurozone, also has a disinflationary impact.

As for the fundamental data that came out today in the morning, we can only note the consumer confidence in France, which, surprisingly, increased in July this year.

According to the statistics agency, the consumer confidence index in France in July this year rose to 102 points against 101 points in June, while economists had forecast a decline in the index to 100 points.

As for the technical picture of the EURUSD pair, it is still unchanged.

The market is still in the balance, but the bears will try to continue the downward trend. This requires a breakthrough of the intermediate support of 1.1125, which will push the trading instrument even lower in the area of the monthly lows of 1.1100 and 1.1040.

If buyers of risky assets try to return to the market, then an intermediate area of 1.1155 will act as resistance, but a larger level is seen in the area of 1.1185.

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Stronger Than Expected U.S. GDP Data Lifts Dollar

Trading 26 juil 2019 Commentaire »

The U.S. dollar gained traction against its major counterparts in the European session on Friday, as the U.S. economy expanded more than expected in the second quarter, supporting the likelihood of a less dovish stance from the Federal Reserve next week.

Data from the Commerce Department showed that real gross domestic product climbed by 2.1 percent in the second quarter following the 3.1 percent jump in the first quarter. Economists had expected the pace of GDP growth to slow to 1.9 percent.

The stronger than expected GDP growth reflected positive contributions from consumer spending, federal government spending, and state and local government.

The data came on the back of encouraging jobless claims data and durable goods orders released Thursday that helped recede hopes for a larger cut at next week's meeting.

U.S. Treasury yields have been rallying since overnight comments from ECB President Mario Draghi, who suggested little risk of a recession in the currency bloc.

This prompted investors to assess that the Fed is unlikely to be too dovish when it meets next week.

Market participants are widely pricing in a reduction of 25 basis points at the Fed meeting ending July 31.

The currency held steady against its major counterparts in the Asian session, excepting the pound.

The greenback appreciated to a 9-day high of 1.2411 against the pound from yesterday's closing value of 1.2447. The currency is likely to find resistance around the 1.22 level.

For the first time since July 10, the greenback strengthened to 108.83 against the yen. The pair had ended yesterday's trading at 108.63. Should the greenback rises further, 111.00 is likely seen as its next resistance level.

Data from the Ministry of Internal Affairs and Communications showed that consumer prices in the Tokyo region of Japan rose 0.9 percent on year in July.

That was shy of expectations for a gain of 0.9 percent and down from 1.1 percent in June.

The greenback gained to 1.1126 against the euro, following a decline to 1.1151 at 11:30 pm ET. The greenback is seen finding resistance around the 1.09 level.

Data from Destatis showed that Germany's import prices declined at a faster-than-expected rate in June.

Import prices declined 2.0 percent on a yearly basis in June, following a 0.2 percent fall in May. Economists had expected a 1.5 percent fall.

The U.S. currency strengthened to more than a 2-week high of 0.9934 against the franc, up from Thursday's closing value of 0.9908. Next immediate resistance for the greenback is possibly seen around the 1.005 region.

The greenback rose to more than a 4-week high of 1.3194 versus the loonie, more than 2-week highs of 0.6918 against the aussie and 0.6634 against the kiwi, from its prior lows of 1.3155, 0.6955 and 0.6665, respectively. The next possible resistance for the greenback is seen around 1.33 versus the loonie, 0.68 against the aussie and 0.645 against the kiwi.


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The US GDP report provided strong support to the dollar

Trading 26 juil 2019 Commentaire »

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US: Economic growth slowed less than expected in the second quarter, and consumer spending eased the decline in exports. In general, the data ease concerns about the state of the leading world economy. However, a rather optimistic report of the US Department of Commerce will not stop the Fed rate cut, given the growing economic risks, especially from the trade war between the US and China. Despite higher than expected GDP figures, business investment declined for the first time in more than three years, and housing for the sixth consecutive quarter. The head of the Fed Jerome Powell earlier this month called investment in business and housing weak spots in the economy. But high consumer spending and a strong labor market will not reduce the rate of 50 basis points at once and may raise doubts about a further easing of monetary policy this year.

The government reported that GDP grew by 2.1% year-on-year in the second quarter. The GDP report showed weaker inflation growth in the last quarter, although the trend remains favorable. The inflation indicator monitored by the Fed rose by 1.8% last quarter, slightly below the US Central Bank's target of 2%. Inflation rose by 1.5% compared to the second quarter of 2018. After the data, the dollar continued to rise against a basket of major currencies, while US Treasury bond prices fell, as did US stock index futures. Consumer spending, which accounts for more than two-thirds of US economic activity, grew by 4.3% in the second quarter, the best result since the fourth quarter of 2017. The increase in spending is supported by the lowest unemployment rate in the last 50 years.

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U.S. Economic Growth Slows Less Than Expected In Q2

Trading 26 juil 2019 Commentaire »

U.S. economic growth slowed in the second quarter but still exceeded economist estimates, according to a report released by the Commerce Department on Friday.

The Commerce Department said real gross domestic product climbed by 2.1 percent in the second quarter following the 3.1 percent jump in the first quarter. Economists had expected the pace of GDP growth to slow to 1.9 percent.

The stronger than expected GDP growth was partly due to a substantial acceleration in the pace of growth in consumer spending, which soared by 4.3 percent in the second quarter after rising by 1.1 percent in the first quarter.

A 7.9 percent spike in federal government spending also contributed to the GDP growth along with a 3.2 percent increase in state and local government spending.

Meanwhile, the Commerce Department said negative contributions from private inventory investment, exports, non-residential fixed investment and residential fixed investment limited the upside.

The report also said imports, which are a subtraction in the calculation of GDP, inched up by 0.1 percent in the second quarter after tumbling by 1.5 percent in the first quarter.

"What dragged down overall GDP growth was a big drag from inventories, which subtracted 0.9% points from GDP growth, and net external trade, which subtracted 0.7% points," said Paul Ashworth, Chief U.S. Economist at Capital Economics.

The slowdown in GDP growth compared to the first quarter reflected downturns in inventory investment, exports, and non-residential fixed investment, which were partly offset by the accelerations in consumer and government spending growth.

"Now in its longest expansion on record, the U.S. economy continues to look healthy," said Oxford Economics' Chief U.S. Economist Gregory Daco and U.S. Economist Jake McRobie.

They added, "However, given the persistent protectionist draft, the lingering policy uncertainty breeze, the sniffling global economy, and the cooling room temperature at home, now may be an opportune time for a Fed immunization shot."

On the inflation front, the Commerce Department said a reading on core consumer prices, which exclude food and energy prices, showed price growth accelerated to 1.8 percent in the second quarter from 1.1 percent in the first quarter.


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The dollar wiped its nose to all skeptics

Trading 26 juil 2019 Commentaire »

Too much bad news. So, you can call the results of the week to July 26 for the single European currency. The decline in business activity in the German manufacturing sector to the lowest level in the last seven years, the IMF's decline in forecasts of global GDP growth to 3.2%, an increase in the probability of a disorderly Brexit, Mario Draghi's hints at lowering the deposit rate and restarting QE. What could be worse for EUR/USD bulls? When US GDP at the end of the five-day period pleased traders, it became clear that the attempts of fans of the euro to counterattack, most likely, doomed to failure. The US dollar may be weak, but it is not so weak as to retreat before weakened macroeconomic statistics, political risks, and the ECB's intentions to follow the path of monetary expansion.

The link between global GDP and German exports is very strong. The slower the global economy grows, the worse Germany gets. It is not surprising if the share of deliveries abroad from this country is 47% of the gross domestic product. In this regard, an increase of 3.2% compared to +3.6% in 2018 and + 3.8% in 2017 causes irreparable damage to the Germans. According to BloombergEconomics, global GDP will slow to 2.6% in the second quarter.

Mario Draghi did not find it difficult to implement his ideas to weaken monetary policy, as the main opponents, "hawks", are tied with Germany. If its economy feels unimportant, even such an ardent opponent QE as the President of the Bundesbank, Jens Weidmann, becomes meek as a lamb. The head of the ECB said that the deposit rate will be at -0.4% or lower, and the central bank will begin to consider the content and scope of QE. Previously, the words "or lower" was not possible, so the signal of a weakening of monetary policy sounded in September.

European debt bonds responded by falling yields, and in Germany and in Greece – to historically low levels. At the same time, the cost of borrowing decreased, and the euro finally took away from the yen the status of the main funding currency. The cost of carry-trade in the regional currency is now lower than that of the "Japanese".

Dynamics of the value of Japanese and European borrowings

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What can it do? For example, if the Fed does not aggressively weaken monetary policy, the correction of US stock indices will lead to the closure of positions by players on the difference. The euro from the rollback of the S&P500 is likely to suffer more than the yen.

The key events of the week by August 2 will be the FOMC meeting and the release of US labor market data for July. After strong US GDP statistics (2.1% growth with forecasts of +1.8% q/q), the derivatives market reduced the probability of federal funds rate cuts by 50 basis points in July to 19%. The Fed can afford not to use monetary expansion at all, which together with strong employment will make the dollar a favorite on Forex. However, in this scenario, the wrath of the President of the United States will be terrible.

Technically, the exit of EUR/USD limits of the diamond is a bad sign for the "bulls". They try to counterattack from the level of 88.6% and 113% of the XC pattern "Shark" wave, however, the chances of success are not yet impressive.

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GBP/USD: plan for the American session on July 26. The pound continues to lose ground even at the end of the week

Trading 26 juil 2019 Commentaire »

To open long positions on GBP/USD, you need:

Buyers are trying to form a false breakdown at the low of 1.2418, forming temporary support around 1.2410. While trading will be above this level, you can expect an upward correction in the resistance area of 1.2456, where I recommend taking the profit. However, given the situation with Brexit and the uncertainty that only grew after the victory of Boris Johnson, the growth of the GBP/USD pair is unlikely to be protracted. The support breakout of 1.2415 in the second half of the day will lead to new lows of 1.2383 and 1.2342, from which you can buy the pound immediately on the rebound.

To open short positions on GBP/USD, you need:

Bears took advantage of good data on US GDP growth, which was better than economists' forecasts, but to form a more powerful downward momentum is not yet possible. The repeated support test of 1.2415 will still force the bulls to leave the market and retreat to the lows of 1.2383 and 1.2342, where I recommend taking the profits on short positions. In the case of GBP/USD growth in the second half of the day, you can sell immediately on the rebound from the resistance of 1.2456. Given the lack of important fundamental statistics at the end of the week, volatility will remain extremely low, but on the side of the pound sellers.

Indicator signals:

Moving Averages

Trading is below 30 and 50 moving averages, which indicates a further decline in the pair.

Bollinger Bands

In the case of an upward correction, the upper limit of the indicator in the area of 1.2460 will act as a resistance.

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Description of indicators

  • MA (moving average) 50 days – yellow
  • MA (moving average) 30 days – green
  • MACD: fast EMA 12, slow EMA 26, SMA 9
  • Bollinger Bands 20
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