BREXIT FEARS PULL DOWN THE POUND
The euro is growing on the back of strong macro data from the flash manufacturing PMI in Germany. According to preliminary data, there was an increase by 59.4 in August vs expected 57.7. The same indicator but for the entire Eurozone increased to 57.4, which is a 0.8 uplift compared to July. The support for the common currency came from the US where President Donald Trump stated that he is willing to close down the government to build the Mexico wall. The market already got used to unexpected statements of Mr. Trump and the influence of his words is likely to be short-lived. The greenback was also negatively affected by data from the new home sales in America which revealed a decline to 571,000 vs 611,000 forecasted. Investors remain nervous ahead of the speech of the Fed’s Chairwoman Janet Yellen on Friday in Jackson Hole.
The lack of confidence regarding Brexit talks is a serious obstacle for the British economy and the GBP/USD remains under the pressure of fears about negative economic implications. One of the signs pointing to the worsening of the situation is the price fall of VIP housing in London. Traders are waiting for the preliminary report on the British GDP for the second quarter that will be released tomorrow.
The New Zealand dollar today was under the pressure of worsening GDP expansion forecast in the country for 2017/2018 to 3.5% vs 3.7% previously estimated. Another volatility spike is possible ahead of the publication of the trade balance report in New Zealand at 22:45 GMT.
The EUR/USD price is trying to gain a foothold above the important level of 1.1800. In case of success we are likely to see continued increase up to 1.1900 and 1.2000. In the coming days the volatility will probably remain high due to expectation of important news from the Jackson Hole symposium. In order to resume negative dynamics, the price has to break through the support at 1.1750 that may become a signal to sell with potential targets at 1.1620 and 1.1550.
The GBP/USD rate is consolidating near 1.2800 and fixing below this support will open the way for the further drop with potential objectives at 1.2635 and 1.2590. The upward correction is limited by the upper limit of the descending channel and the resistance range 1.2880 - 1.2900. Most likely scenario will be the weakening of the pound against the US dollar.
The New Zealand dollar is approaching to the important support of 0.7200. Breaking through this line may become a trigger for massive selling, with the fall potentially reaching to 0.7000 - 0.7040. On the other hand, we do not exclude a slight upward correction in the near future to SMA100 on 15-minute chart. The amplitude of price fluctuations may increase after the country’s trade balance report release tonight.