Kiwi declines to 5-year low after weak business confidence data
Sterling declined in the Asian session in reaction to the decision by Boris Johnson to suspend the House of Commons. This suspension raised the likelihood that the country would leave the European Union without a deal on October 31. The announcement was condemned by both the Labor party and the Conservatives. In an editorial, the Financial Times said that Johnson had “detonate a bomb under the constitutional apparatus of the United Kingdom”.
The editorial added that Parliament should bring down the government and let the people have their say. In his election campaign, Johnson said that the country would not seek another extension from the EU in October. This brings forward a difficult situation, in which Parliament will likely vote about not leaving the EU without a deal.
The price of crude oil declined slightly in the Asian session. This is after making some significant gains in the American session after the EIA released the inventories of the past week. Data showed that inventories declined by slightly above 10 million barrels. This was a bigger decline than the consensus estimates of about 2.1 million barrels. In the previous week, inventories were at 2.7 million barrels. The distillate stocks declined by more than 2 million barrels while gasoline inventories declined by more than 2 million barrels.
Today, the market will release the unemployment data from Germany for the month of August. The unemployment rate is expected to remain at 5.0%. The unemployment change is expected to rise by 4k. In Italy, the market will receive the industrial orders for the month of June. From the EU, the market will receive the business climate and consumer confidence data.
In the United States, investors will receive the second quarter GDP from the US. Analysts expect the GDP number to be revised down to 2.0%. Weaker data could force Trump to start considering a deal with the Chinese. The GDP price index is expected to decline from 2.5% in June to 2.4% in July. The initial jobless claims are expected to increase by 215k.
The EUR/USD pair was unchanged in the Asian session. It is now trading at 1.1083, which is still lower than Friday’s high of 1.1163. On the hourly chart, the price is along the 14-day and 28-day moving averages. As a result of the consolidation, the RSI remained a bit unchanged at the neutral level of 47. The on balance volume and the accumulation/distribution indicators have continued to remain under pressure. The pair will likely remain unchanged ahead of German and US data.
The price of Brent crude oil declined to a low of $59.4 after soaring to a high of $60.37 yesterday. On the hourly chart below, the pair is trading slightly below the right shoulder of the head and shoulder pattern. This is usually a signal that the downward momentum will prevail. The price is also between the lower and the middle lines of the Bollinger Bands while the RSI is at 47 moving downwards. There is a likelihood that the pair will continue moving lower, to test the important support of 59.
The NZD/USD pair continued to decline after the release of weaker business confidence data. The pair is trading at 0.6310, which is the lowest level it has been since July 2015. On the four-hour chart, the price is trading along the lower line of the Bollinger Bands while the RSI has dropped to the oversold level of 30. The Bears Power has continued to strengthen. There is a possibility that the pair will continue declining.