US stocks slump after OECD global forecast cut
Yesterday, US stocks ended the day slightly lower as traders reacted to several pieces of negative news. Firstly, OECD was the latest organization to lower the guidance for global growth. This was its second time in a few months to lower the guidance. Secondly, US trade deficits rose to the highest levels in more than 10 years, a reflection of the negative effects of US tariffs. Thirdly, traders are still waiting for an announcement on the ongoing trade negotiations. As a result of all this, the Dow and S&P 500 declined by 133 points and 18 points respectively.
The euro was little moved ahead of the European Central Bank (ECB) decision. The bank is expected to release the interest rates decision at 13:45 (GMT). While the bank will leave rates unchanged, traders will focus on what the bank will say. In the previous releases, officials have guided to a rate hike after summer. However, with the European economy being weak, there are chances that the bank could hold rates for longer. The negative interest rates present a risk to the EU in case of a no-deal Brexit and in case the economy slides into a recession. This is because the ECB will not have adequate tools to react. The region will also release the final reading of the Q4 economic numbers.
After two difficult days, the Australian dollar rose slightly today after the release of retail sales and trade data. In January, the trade surplus increased to A$4.5 billion, which was higher than the expected A$2.85 billion. In December, the surplus was more than A$3.7 billion. The improvement in the surplus was because of the 5% increase in exports and 3% increase in imports. Retail sales rose by 0.1%, which was slightly lower than the expected 0.3% but better than December’s contraction of –0.4%.
The EUR/USD pair moved slightly lower ahead of the ECB interest rates decision. The pair is trading at 1.1305, which is slightly lower than the 23.6% Fibonacci Retracement level. On the four-hour chart, the pair is slightly below the short and medium-term moving averages. The pair is also establishing a symmetrical triangle pattern as shown below, which is a sign of consolidation, which happens before a breakout. This breakout could happen after today’s ECB decision or after tomorrow’s US jobs numbers.
The Canadian dollar continued its slump against the USD after the BOC released its interest rates decision yesterday. In the statement, the bank said it could hold rates for longer. The pair reached a high of 1.3460, which is along the 61.8% Fibonacci Retracement level. The level is also along the upper line of the Bollinger Bands and above the short and medium-term EMAs. At the same time, the RSI has risen sharply to above 80. The pair will likely continue the upward trend, with any declines forming important entry points.
After a few days of sharp declines, the AUD/USD pair rose in overnight trading after the release of retail sales and trade data. The pair is trading at the 0.7050 level, which is above this week’s low of 0.7020. The short and medium-term moving averages appear to be crossing one another, while the commodities channel index has risen sharply to the highest levels since Friday. The pair could resume the downward trend as traders focus on the RBA statement earlier this week.