US dollar pauses ahead of the FOMC decision
The Australian dollar rose after the country reported better-than-expected inflation numbers for the second quarter. The headline CPI increased by 1.6%, which was higher than the first quarter’s 1.3%. The average consensus estimate was 1.5%. On a QoQ basis, the CPI increased by 0.6%, which was better than the expected increase of 0.5%. The trimmed mean CPI for the quarter rose by 1.6% while the weighted mean CPI remained unchanged at 1.4%. Meanwhile, in China, the manufacturing PMI in July increased to 49.7 from the previous 49.4.
The biggest headline today will be the Federal Reserve interest rates decision. The bank is expected to lower interest rates by 25 basis points, which will be the first rate cut in more than 10 years. Bank officials have signaled that the rate cut will help caution the US economy from the adverse effects of global economic easing. The Fed has been under heavy criticism from Donald Trump, who has blamed it for raising too fast. The rate cut will not be the biggest news because it has already been priced-in by the market. What will move the market will be the accompanying statement that will signal the number of rates to expect this year.
Later today, the market will receive the construction orders, housing starts, and household confidence in Japan. In Europe, they will receive the French CPI and the Spanish GDP data. Germany will release its employment and unemployment data while the EU will release its CPI data. In the US, ADP will release its reading of the nonfarm employment change data. Investors expect the data to show that the economy added 150K jobs in July. In Canada, investors will receive the GDP data. The EIA will also release the crude oil inventory data.
The EUR/USD pair was relatively unchanged in the Asian session and is currently trading at 1.1154. This is a level higher than the weekly low of 1.1100. The current price is slightly below the 50-day moving averages while the RSI has been moving on an upward trend. The same is true with the Chaikin indicator. Today, the pair will likely remain unchanged as investors wait for the Fed decision, which will come in the American session.
The AUD/USD pair rose today after positive economic data from Australia and China. The pair reached a high of 0.6892, which was along the 50-day moving average level. The RSI has moved from the oversold level of 30 to the current 60. The pair is likely to continue moving higher, to test the 23.6% Fibonacci Retracement level at 0.6915.
The XBR/USD pair has been on an upward trend after recent data that has shown significant reduction in US inventories. The pair has moved from a low of 60.97 to a high of 65. On the chart below, this price is along the 61.8% Fibonacci Retracement level. The price is also above the 25-day and 50-day moving averages. The RSI remains above the overbought level of 70 while the momentum indicator remains above the 100 level. The pair will likely continue moving higher.