Euro declines to two-month low ahead of ECB decision
The euro declined ahead of the decision by the European Central Bank. The bank, which began its monetary policy meeting yesterday, is expected to leave interest rates unchanged. The bank is also expected to announce a new stimulus package that is aimed at boosting the European economy. This is after a series of weak data. Yesterday, the flash PMI data from the region confirmed that the inflation was indeed slowing down.
The Dow Jones Industrial Average declined yesterday after weak reports by companies like Boeing and Caterpillar. The index declined by almost 80 points after two of its key components delivered weak earnings. Boeing reported weak earnings and announced that it could be forced to stop more production of the 737-Max, which is its best-selling plane. Caterpillar announced reports that missed the consensus forecasts. The company blamed weaker sales in China and higher wages. While the Dow dropped, the S&P 500 and Nasdaq indices closed at record highs.
The Australian dollar declined after the RBA governor said that the low interest rates will stay. This statement came two weeks after the central bank decided to lower interest rates for the second consecutive month. Later today, the market will receive the unemployment rate in Spain, the German business expectations and climate for July, and the durable goods orders from the United States. The Labor Department will receive the initial jobless claims data. The earnings season will also continue, with key companies like 3M, ABB, Amazon, American Airlines, Anglo American, and Hershey expected to release their earnings.
The Dow Jones Industrial Average ended the day lower after weak results from Boeing and Caterpillar. The index ended the day at $27315, which was above the day’s low of $27,207. On the hourly chart, the index is slightly above the 28-day and 14-day moving averages. The RSI rose slightly to the middle level of 50 while the accumulation/distribution indicator continued moving up. The index will likely move up to retest the previous high of $27,394 if 3M reports strong numbers.
The EUR/USD pair declined ahead of the ECB decision. At the time of writing, the pair is trading at 1.1134, which is close to the lowest level in two months. On the hourly chart, the pair is trading below the 14-day and 28-day moving averages. The RSI has dropped to the oversold level, while the bears power remains below the oversold level. The pair will likely continue moving lower to the important support level of 1.1105.
The AUD/USD pair dropped sharply after the dovish statement by Governor Lowe. The pair reached a low of 0.6943, which was the lowest level since July 11. The pair has been dropping since July 19th, when it reached a high of 0.7080. On the hourly chart below, the pair is below the 14-day and 28-day moving averages. The pair is slightly below the 38.2% Fibonacci Retracement level. The RSI remains close to the oversold level. The pair will likely continue moving lower to test the 23.6% Fibonacci level at 0.6950.