DOLLAR RISES AFTER POWELL HAWKISH STATEMENTS DURING CONGRESSIONAL TESTIMONY
The US dollar rose today after yesterday’s hawkish statement from Fed chair, Jerome Powell. When testifying before the Senate, the chair said that the current gradual tightening pace by the Fed was the best way. He backed this by the positive economic numbers the economy is currently seeing. The unemployment rate has dropped to 4.0% and there is room for it to drop further. In the first quarter, the economy expanded by 2% with the Fed expecting it to grow at a faster rate in the second quarter. However, he cautioned that there were risks brought about by the ongoing trade conflict between the US and its trading partners.
The dollar’s rise ignored the disappointing housing numbers from the Department of Commerce. The numbers showed that a total of 1.27 million building permits were issued in June compared to the 1.30 million in May and the expected 1.33 million. Growth shrunk to negative 2.2%, which was worse than the expected 2.2% positive growth. These numbers are the earliest indicators of the impacts of the trade war that started a month ago as people keep a wait and see attitude before they start building.
US futures pointed to a slightly lower open after the European Union gave Google’s parent company Alphabet a $5.5 billion fine. This is one of the largest penalties in the technology industry and it comes after another fine a year ago. The EU is carrying out more investigations on Google. The current fine was because of Google’s requirement for Android carriers to preinstall its own applications like search engine and browser apps.
The UK pound fell against the major peers after the country released lower than expected CPI numbers. The numbers from the Office of National Statistics (ONS) showed that the CPI for the month of June rose by an annualized rate of 2.4%, which was lower than the expected 2.6%. The core CPI, which excludes volatile food and energy products, rose by 1.9%, which was lower than the expected 2.2%. The house price index rose at an annual rate of 3.0%, which was lower than the expected 3.8%. The pound fell even after Theresa May’s proposal for Brexit passed narrowly in parliament.
The EUR/USD pair fell today and is currently trading at 1.1620, which is also the 0.0% Fibonacci Retracement level. This drop was a continuation of the declines started yesterday when the pair reached a high of 1.1745. This price is below the 25 and 50-day moving average and is an important support level. If the pair breaches this price, the likely scenario is where the pair continues moving lower to test the 1.1590 support.
Yesterday, the Nasdaq fell after disappointing growth numbers by Netflix. The index later recovered from the losses and is currently trading at $7397, even with the large fine for Google from the EU. The current price is below 50 and 100-day Exponential Moving Average (EMA). The RSI has fallen slightly from the overbought level of 70 and is currently at 56. As the market opens, traders will ignore the fine and focus on the earnings. This could see the index continue to move higher.
The GBP/USD pair dropped sharply today after the weak inflation data released by the Office of National Statistics (ONS). It is now trading at 1.3043, which is the lowest level since November 2017. Its price is below the 50 and 100-day EMA while the RSI is slightly higher than the day’s low of 12.4. It is also moving higher from the lower band of the Bollinger Bands. While the pair could continue moving lower, traders should also consider the likelihood of a reversal.