Sterling declines as Boris Johnson set to become new Prime Minister
Yesterday, US stocks moved slightly higher as investors waited for key corporate earnings. This week, hundreds of companies in the S&P 500 index are set to release their earnings. This includes companies like Google, Boeing, Starbucks and Caterpillar among others. Companies have already started releasing key information. Overnight, it was released that Apple was in advanced talks to buy Intel’s smartphone modem chip business in a deal that could be valued at more than $1 billion. In another acquisition, Starbucks announced that it had bought a stake in Brightloom, a tech company that specializes in mobile ordering and payments.
The British pound declined in overnight trading a day before Boris Johnson becomes the new Prime Minister. Boris, the former Mayor of London has said that he will be ready to take the UK out of the European Union even without a deal. According to the Bank of England and other organizations, leaving without a deal would have a significant hit to the country’s GDP in the short and medium term. This is because of the huge business disruption that would happen. However, in a bid to avert this, Parliament passed a bill to prevent Boris from leading the UK out of the EU without a deal.
Later today, the market will receive the existing home sales from the United States. Analysts expect the existing home sales data for June to be 5.35 million. This will be slightly higher than May’s 5.34 million. On a MoM basis, home sales are expected to decline by -0.2%, which will be worse than the previous growth of 2.5%. The house price index for May is expected to decline slightly to 0.3% from the previous 0.4%. The Richmond manufacturing index for July is expected to increase to 5 from the previous 3.
The S&P 500 index increased to a high of $2993 as investors expected earnings from most companies in the index. This was an increase from the day’s low of $2968. On the hourly chart, this price is along the higher line of the Bollinger Bands while the RSI has moved from the previous oversold low of 30 to the current 60. The pair will likely continue moving higher to test the important resistance level of $3000.
On Friday, the EUR/USD pair rose to an important support of 1.1280 and then started to move lower. The pair continued the decline and reached a low of 1.1195. On the hourly chart, the pair is trading below the 28-day and 14-day moving averages. The pair’s RSI has moved close to the oversold level of 30 while the average directional index has climbed to a high of 48. The pair will likely remain in a holding pattern along these 1.1200 levels ahead of the ECB decision on Thursday.
The AUD/USD pair declined to a low of 0.7020 in the Australian session. This was a continuation to the declines that started on Friday last week. On the hourly chart below, the pair is trading below the 14-day and 28-day moving averages. The RSI has moved closer to the oversold level of 30 while the ADX has moved to above 50. The pair could continue moving lower to the 61.8% Fibonacci Retracement level of 0.7015.