AUSTRALIA GETS A NEW PRIME MINISTER AS US-CHINA TALKS FALTER
The Australian political crisis continued after Malcolm Turnbull was replaced as prime minister. He was replaced by Scott Morrison who beat Peter Dutton as the leader of the liberal party. He won by 45 to 40. Malcolm Turnbull became prime minister after successfully ousting Tony Abbott. Scott will now become the sixth prime minister in ten years. He inherits a country whose economy is trying to diversify itself. The country’s unemployment rate is at 5.6% and the RBA expects it to fall to 5.0% by 2020, while wage growth has stagnated. The RBA expects the current growth to continue until 2020 when it will start easing.
The Japanese Yen fell against the dollar after the country’s statistics office released disappointing inflation data. In July, the core consumer price index rose by 0.8%, which was lower than the expected 0.9%. The rise was in line with the consumer prices in June. The general CPI rose by 0.9%, which was higher than the expected 0.4%. These numbers showed how difficult it has been for the Japanese inflation rate to reach the 2.0% target set by the Bank of Japan (BOJ). Last month, the bank conceded that the inflation target will probably be reached in 2021. The bank has left its base lending rate at the negative, a measure it has hoped will help stimulate the economy. There is a likelihood that the BOJ will leave rates unchanged for an extended period unlike other central banks that are talking about tightening.
The trade talks between the United States and China continued but a deal seemed elusive. As the meetings started, the expectations from both sides were low. The United States has sought to address key structural issues about the Chinese model of business such as forced technology transfers, tariff and non-tariff barriers, and the stealing of intellectual property. Chinese on the other hand have insisted on increasing their purchases of American goods with the aim of reducing the trade deficit. The Chinese now hope to continue the discussions after the midterm elections that will happen in November. In the meantime, the US imposed additional tariffs on Chinese goods as the administration continued to deliberate about additional tariffs worth more than $200 billion. Meanwhile, in China, a meeting between the Japanese and Chinese finance ministers happened as the two countries tried to improve their ties.
On Wednesday, the EUR/USD pair reached a high of 1.1620. As it rose, it formed a cup pattern. Since then, the pair has continued to form a handle pattern, which was expected to reach the 1.1500 level. Today, the pair’s attempt to rise failed as the German Q2 GDP numbers remained unchanged at 2.3%. The MACD reached the lowest level since Wednesday last week and seemed like it will cross the neutral line. If it does, the pair has a likelihood of continuing the upward trend.
The USD/JPY pair jumped as the yen fell after the country released its inflation numbers. The pair’s rise was a continuation of the trend started on Tuesday when it was at 109.77. As it rose, it crossed a major resistance line shown below. On the four-hour chart, the price is above the 100 and 50-period exponential moving averages. The ADX is currently at 47, an indication that the bullish trend will continue, which will make it test the 112.52 resistance level.
The AUD/USD pair jumped after Australians got a new prime minister. Traders hoped that the new phase will bring more stability to the economy. It reached an intraday high of 0.7290, which is close to the 50% Fibonacci Retracement level. The MACD turned above the 0 line. This is an indication that the pair will likely continue moving up, potentially to the 0.7310 level.