USD RISES AS Q2 GDP CLIMBS FASTER THAN INITIALLY REPORTED
The US dollar rose after the consumer confidence numbers released yesterday beat analysts’ forecasts. The Conference Board released the numbers that showed that consumer confidence for August jumped to 133.4, which was higher than the expected 126.7. This number was the highest it has been in 18 years. The number was also in contrast to the consumer sentiment number released by the University of Michigan a week ago. The latter showed sentiment at the lowest level in one year. The dollar’s strength accelerated after the labour department released impressive revised GDP numbers. Today’s report showed that the economy grew by 4.2% in the second quarter. This was higher than the expected 4.0% and last month’s preliminary reading of 4.1%. As the dollar rose, gold fell sharply and reached an intraday low of $1200.
The Canadian dollar rose slightly against the US dollar after the Canadian foreign minister arrived in Washington for trade talks. This came after the Trump administration announced a preliminary trade deal with Mexico on Monday. During the announcement, President Trump gave Canada a chance to re-enter the deal. Chrystia Freeland cancelled her trip to Europe to attend the urgent trade talks. If successful, the three countries will then move on with the initial bid to modernize the North American Free Trade Agreement (NAFTA). If it fails, it will be a big blow for the United States and Canada. 75% of Canadian goods are exported to the United States while Canada is the second biggest trading partner after China.
World stocks were mixed today with Chinese and some European stocks falling. The Shanghai Composite Index fell by 30 basis points while the Nikkei and Hang Seng rose by 20 basis points each. In Europe, Germany’s DAX and France’s CAC rose by 10 and 20 basis points respectively. The positive movements by European stocks were mostly about trade and the extended deadline for Brexit negotiations. US stocks futures point to a positive trend, which will extend the records the Nasdaq and S&P reached yesterday.
The XAU/USD pair ended the steep decline mid this month when it reached a low of 1160. Since then, it has continued to move up and yesterday, it reached a high of 1205. Today, the pair had a sharp decline mostly because of the stronger dollar. It is now trading at the important 1200 level, which is an important support in line with the 100-day Exponential Moving Average (EMA). As shown below, it is finding some resistance moving lower than this level. As the shorter-term MA tries to cross the shorter term EMA, the pair is likely to move lower, potentially to the 1180 support.
The USD/CAD pair rose slightly as discussions on trade continued in Washington. The pair rose from yesterday’s low of 1.2887 and today reached an intraday high of 1.2950. Yesterday’s low was the lowest the pair had reached since August 11. The current price is between the lower band of the Bollinger Bands. It is also below the 100-period EMA. The RSI has moved from a low of 28 and is currently at 40. The pair might resume the downward trend as the discussions in Washington continue. If it does, it will test the important support of 1.2800.
The EUR/USD pair declined from the yesterday’s high of 1.1732 as the dollar strengthened. The decline accelerated after impressive GDP numbers were released earlier today. It is now trading at 1.1660, which is the lowest level since Monday. As the pair dropped, the shorter-term EMA crossed the longer term EMA as shown below. This is a sign that the pair could continue moving lower. If it does, it will likely fall to the support level of 1.1600.