GREENBACK FALLS AS TRUMP CONTINUES HIS CRITICISM OF THE FED
The Australian dollar rose today after the Reserve Bank of Australia (RBA) released the minutes for the previous meeting. The minutes showed that the bank was not likely to raise rates in the foreseeable future. They highlighted the problems in the housing markets in Sydney and Melbourne, the ongoing drought in Queensland and New South Wales, and the issue of trade. They also showed that officials expect the unemployment rate to fall to 5.0% in 2020 from the current 5.6%. Wages are expected to rise gradually during this time. The minutes were in contrast to yesterday’s statement by the RBA governor who asked Australians to prepare for higher interest rates. Other significant news from down under was of a political nature. Prime Minister, Malcolm Turnbull, narrowly survived his leadership position as the country prepares for an election early next year. Since 2007, Australia has had 5 prime ministers.
The US dollar was lower today after Donald Trump increased his criticism of the Federal Reserve. Early this year, the president replaced the hawkish Janet Yellen with Jerome Powell. He expected Powell to favour easy money policies. After swearing in, the new chair addressed Congress and committed to increasing interest rates gradually. Since then, he has reiterated about his desire to keep hiking. The Fed is expected to hike in September and December. The president’s policies are favoured by the Atlanta Fed chairman, Raphael Bostic. In an interview yesterday, Bostic said that he was unlikely to support any decision that will invert the yield curve. In another report, economists in the United States and Europe forecasted that the US economy was set to have the fastest growth since 2005. The report noted that wages will likely continue to lag, while consumer confidence will likely rise. Personal savings are in good health with a savings rate of 6.7%.
The UK pound was up slightly against the US dollar after data from CBI showed that the manufacturing sector was in robust shape. The report attributed the growth to expanding global growth and a weak pound. On the other hand, the report predicted that a hard landing Brexit would be damaging to the UK and the EU. According to CBI, 13 of the 17 sectors reported expansion.
The EUR/USD pair continued rising, reaching a two-week high of 1.1540. On the 30-minute chart, the price is on the same level as the 42 and 21-period moving average. The ADX is moving down and is currently at 25. The pair is forming a cup and handle pattern, which means that the upward trend is likely to continue until it reaches a high of 1.1620, where it will have a pullback.
The GBP/USD pair rose to an intraday high of 1.2845. This was the highest level in two weeks and was partly attributed to the weaker US dollar. On the hourly chart, the pair has found resistance at the 23.6% Fibonacci Retracement level. Further upward movements will see the pair test the important 1.2900 resistance level while further downward movements will see it test the 1.2660 support.
Early this month, the AUD/USD pair reached a high of 0.7452. Then, the pair fell and reached a low of 0.7200 on Wednesday last week. Since then, it has been in an upward trajectory and today, it reached a high of 0.7366, where it is finding some resistance. This level is also the 61.8% Fibonacci Retracement level. As shown below, it has formed a symmetrical triangle pattern. Further upward movement will see it test the two-week high of 0.7452 while downsides will see it test the 0.7300 level.