Euro falls as intro-EU trade falls sharply in June
US futures rose sharply as investors’ fear about trade and an inverted yield curve waned. The Dow and Nasdaq are set to rise by 228 and 85 points respectively. During the week, investors were worried after yield curves in the US and UK inverted. A yield curve inversion is watched closely by investors because it is a major predictor of a recession. Investors were also worried about the weakening European economy, the ongoing trade war, and the increased tensions in Hong Kong.
The euro continued the downward momentum as traders continued to worry about the health of the European economy. These concerns accelerated today after weak data from the region was released. The numbers showed that intra-EU trade had weakened at the fastest pace in over 6 years. The value of the trade weakened by 6.6% in June. In addition, the EU exports to the rest of the world dropped by 4.7%, which was the worst data since August 2016. This decline was mostly because of the weak performance of raw materials, machinery, and transport equipment. EU exports to China declined by 3.4%. While monthly data can be volatile, the broad-based slowdown is nonetheless worrying.
From the United States, investors received the building permits and housing starts data. In July, the housing starts declined to 1.19 million from the previous 1.24 million. Investors were expecting the starts to increase to 1.257 million. In the same month, the building permits rose to 1.336 million from the previous 1.232 million. This was a growth of 8.4% on a MoM basis. Later today, the market will receive the consumer expectation and the current conditions data from Michigan University.
On Wednesday, the EUR/USD pair crossed the important support of 1.1163. Since then, the pair has been moving lower. Today, the pair reached a low of 1.1066, which is slightly below the 23.6% Fibonacci Retracement level. The price is below the 14-day and 28-day moving averages while the RSI has continued to remain at the oversold level. The average directional index rose to a high of 33, which is a signal that the pair will continue moving lower.
The GBP/USD pair rose sharply today as traders continued to believe that parliament will do something to prevent a no-deal Brexit. The pair rose to an intraday high of 1.2173, which was the highest level since August 8. This week, the pair has risen from a low of 1.2010. On the hourly chart below, the RSI has moved to the overbought level of 77 while the price is above the 14-day and 28-day moving averages. The ADX indicator rose to a high of 50, which is a signal that the upward trend could continue. With Brexit being a volatile issue, the trend could change during the weekend.
The EUR/GBP pair ended the sharp upward trend that has been going on for months. The pair has declined from a high of 0.9324 to a low of 0.9088. The RSI of the pair has declined to the current oversold level of 22 while the pair is below the short and medium-term EMAs. The momentum indicator has also tanked too. The pair will likely continue to move lower to test the important support of 0.9050.