US DOLLAR JUMPS AFTER IMPRESSIVE Q3 ECONOMIC GROWTH
Wall Street is set for a lower open today after disappointing earnings from Alphabet and Amazon. The numbers released in the post-trading hours yesterday showed that the Alphabet’s ad revenue was falling. Amazon, on the other hand, lowered its guidance for the fourth quarter holiday season. Snap reported better revenues and earnings but said that its daily active users (DAU) will continue to decline. On a positive note, Intel reported better-than-expected revenues and earnings. It also raised its guidance for the fourth quarter. The Nasdaq futures are down by 175 points. YTD, the index has gained by just 4.4% while this month, the index has fallen by almost 10%.
The US released impressive third-quarter GDP numbers. The numbers from the commerce department showed that the economy expanded by 3.5% in the quarter. This was higher than the 3.3% that traders were expecting. It was, however, lower than the second quarter’s GDP growth of 4.2%. This growth was mostly attributed to increased consumer spending. In the quarter, consumer spending rose by 4%, which was higher than the expected 3.9%. The numbers are likely to press the case for the Fed to hike interest rates.
The Japanese yen strengthened against the USD as global growth risks increased. Its gains were also attributed to an important meeting between Japanese and Chinese leaders that happened in Beijing. During the summit, the two countries agreed to reset relations by agreeing on a number of issues including a three-year $30 billion credit swap between the BOJ and the PBOC. They also agreed to cooperate more in the international community. This was the first visit to Beijing by the President of Japan, Shinzo Abe which came few months after Chinese Premier, Li Keqiang visited Japan. The relations between the two countries broke down in 2012 after the Japanese government purchased the Senkaku Islands which are claimed by China. Meanwhile, the Chinese renminbi fell to the lowest level in more than 7 years against the USD.
Gold reached a YTD low of $1160 in August. Since then, the price has been moving higher and today, it reached a high of $1240. The rise in gold happened at a time when the USD was rising. On the daily chart below, today’s high was along the 28.6% Fibonacci Retracement level. It is also slightly below the closely-watched 200-day EMA and slightly above the 100-day EMA. The XAU/USD pair is likely to continue moving higher as global risks rise and growth starts to slow.
The CHF/JPY cross continued the downward decline, reaching a low of 111.74. This was the lowest level since September 26 when the pair reached a high of 118.07. Since then, the pair has moved down sharply as shown in the four-hour chart below; as this happened, the pair created an inverted cup pattern. Trend indicators like moving averages and ADX show that the trend is likely to continue. This is confirmed by the money flow index and the momentum indicators as shown below. The pair will likely reach a low of 110.70.
The EUR/USD pair continued the decline started early this month. It reached an intraday low of 1.1336. As shown on the eight-hour chart below, the pair is approaching the important support of 1.1300. This price is along the lower band of the Bollinger Bands and is lower than the 28 and 14-day moving averages. Therefore, as the pair approaches the important support of 1.1300, there it is likely that the strong downward trend could hit a pause.