AUSSIE JUMPS AFTER THE HAWKISH RBA STATEMENT
The Australian dollar rose today after the interest rate decision from the Reserve Bank of Australia. While the officials left interest rates unchanged at 1.50%, the governor reiterated that the economy was strong. Officials expect the unemployment rate to drop from the 5.5% level it has remained at for the past one year. They also expect the economy to grow by 3% this year. Still, they were concerned about the global economy, the low wage growth numbers, the falling housing market in Sydney and Melbourne, and the increasing mortgage rates.
The euro rose slightly against the dollar after a deal between Angela Merkel and her interior minister. Yesterday, the minister had threatened to resign following the deal between Germany and other European Union leaders. The deal averts a major showdown between Merkel’s party and its coalition partners. Still, traders are waiting to see whether the deal will be ratified by the coalition members. In addition, the European Union (EU) released weaker-than-expected retail sales for the month of May. In the month, sales rose at an annual rate of 1.4%, which was lower than the expected 1.5% increase. As the trade conflict escalates, traders will be focusing on these numbers to get an indication of whether the trade rhetoric is affecting the marketplace.
The cable rose today after the UK released impressive construction PMI numbers. Data from The Chartered Institute of Purchasing and Supply (CIPS) showed that the PMI for June was at 53.1. This was higher than the expected 52.5. It was the highest level the PMI has reached since December last year. It is a sign that the construction industry is going on well. Further, the Bank of England (BOE) released the minutes of its Financial Policy Committee (FPC) meeting held a while ago. In the meeting, officials agreed to leave the UK countercyclical capital buffer (CCyB) rate at 1%.
On Friday, the AUD/USD pair started falling from the 0.7408 level. The downward momentum continued yesterday and reached a floor at the 0.7309 level. Today, after the hawkish RBA statement, the pair recovered most of those losses and is currently trading above the 61.8% Fibonacci Retracement level. It is also trading above the 50 and 25-day moving average levels. The pair could continue moving up to the 0.7408 level which is Friday’s high as well as the price of the upper Bollinger band.
The EUR/USD pair was up slightly after tensions in Germany eased. The pair is now trading at the 1.1646 level which is also the 61.6% Fibonacci retracement level. It is also the middle band of the Bollinger bands. The level is also slightly lower than the intraday high of 1.1672. If the pair crosses the current Fibonacci level, it could go down and test the important support of 1.1626 which is also the 50% Fibonacci level.
After reaching the monthly low of 1.3048 on Thursday last week, the GBP/USD pair has been attempting to recover. Today, the pair gained slightly after the positive construction data. It is currently trading at the 1.3186 level which is higher than the 25 and 50-day moving average. As shown below, the pair has formed a symmetrical triangle pattern and the current price is slightly above the upper line of the triangle. If the pair moves higher, there is a likelihood that it will test the 1.3220 support level.