DOLLAR FALLS AHEAD OF THE G7 MEETING IN CANADA
The euro continued its recent gains against the dollar today as traders remained hopeful that the ECB would stop the Quantitative Easing (QE) program and start normalizing in September. Yesterday, the Chief Economist for the ECB said that officials would discuss the topic in their meeting next week. The euro rose even as factory orders in Germany declined amid a slowdown in domestic and international demand. The factory orders declined by 2.5% in April, which was the fourth month of straight declines. Analysts were expecting a 0.8% increase. This decrease was driven by a 4.8% decrease in domestic orders and a 9.9% decrease in orders from the Eurozone. Orders from other countries rose by 5.4%.
The US dollar fell against its major peers today as traders’ concerns about a trade war continued. This comes a day before the G7 meeting happens in Quebec, Canada. In the meeting, the agenda includes issues like gender equality, preparing for the jobs of the future, and foreign threats. Nonetheless, the focus will be about trade. The leaders will seek an explanation from the US about the tariffs and why the US is treating them as enemies. As such, the US will – again – be isolated in what many are calling a G7 minus one or G6 plus one. In the bilateral talks that will happen, there are chances that some deals will be made on trade.
The cable rose today after a report said that David Davis - Secretary of State for Exiting the European Union – would not step aside as many had expected. In the afternoon however, the pair reversed and fell to the lowest level since Tuesday. The decline came after Davis’ camp said that the backstop on negotiations should be limited. This means that the camp would oppose the EU proposals on separation. Davis was supported by the former Brexit minister, David Jones. In addition, Theresa May’s office announced that the house of Lords would vote for the customs union issue next week.
In the past few days, the GBP/USD pair has been rising. Today, it reached an intraday high of 1.3470 before reversing to the important support of 1.3374. As the pair dropped, it crossed the important 30 and 60-day moving averages. The MACD too moved lower. There are chances that the pair could reverse the downward trend and continue the upward momentum especially after failing to cross the support of 1.3374.
The EUR/USD pair continued the upward momentum today, reaching an intraday high of 1.1837. This was the sixth day of straight gains by the euro. Yesterday, the 60-day moving average crossed the 30-day SMA in a show that the upward momentum could continue. The pair’s RSI is currently nearing the overbought level, which means that while more upside is possible, in the short term a pullback is likely to happen.
This month, gold has risen from a low of $1290 to a high of $1,300. The pair is now trading at $1,299. The recent gains are probably the result of a dollar that is losing momentum amongst its global peers. As the pair has risen, it has formed a symmetrical triangular pattern as shown below. This means that as the triangle continues to form, the pair could break out to either the upwards or downwards side. Most likely, the pair – which has just crossed the upper band of the Bollinger bands – could break out to the upside as the dollar weakens.