INVESTORS DOUBT ABILITY OF TRUMP ADMINISTRATION TO CONDUCT REFORMS

The EUR/USD price corrected downwards amid fixing of positions by the bulls after a strong rally by the European currency. The euro rally started yesterday after traders received hints on reduction of the asset purchasing programme in the Eurozone coming as soon as September or October. At the same time, numerous news from the US pulled the greenback down. The IMF lowered the GDP growth forecast in America to 2.1% in 2018, which is 0.4% worse than previous estimates. The Republican majority in the US Senate postponed voting on Medicare reform that in turn increased doubts about the capability of Donald Trump to conduct promised reforms. Slight support for the greenback today came from better than expected statistics on the trade balance deficit that in May was 65.9 billion dollars against the forecasted 66.2 billion dollars. Lower trade volumes and nervousness of investors due to possible shifts in monetary policy parameters in the US and Eurozone led to high volatility.

Support for the pound today came on the back of news from the UK on the increase of the house price index, calculated by the Nationwide agency, according to which prices grew in June by 1.1% after three months of decline. Growth potential for GBP/USD is restrained by fears concerning the outcome of Brexit talks with the EU.

Depreciation of the US dollar together with increased interest in safe haven assets resulted in the growth of gold and the Japanese yen. Tonight a slight impact on the USD/JPY quotes will come from the retail sales report in Japan at 23:50 GMT.

The Australian dollar could not continue positive dynamics despite an improvement in prices for iron ore and gold that traditionally have an impact on the aussie. Oil traders are monitoring data on crude oil inventories in the US. Imbalances between supply and demand on the market will keep supporting the bearish sentiment of oil.

EUR/USD

The common currency sharply retreated today after significant growth during the last few days which reached the highest levels in 10 months. Traders decided to fix positions amid the uncertainty concerning the possible tightening of stimulus measures in the Eurozone starting from autumn. After the recent correction to an important 1.1300 level, the quotes may resume to increase with the first goals at 1.1420 and 1.1500. At the same time, we do not eliminate the possibility of a further retreat of EUR/USD to 1.1230 or 1.1200.

GBP/USD

The GBP/USD quotes showed a strong rise in volatility on the background of the speech by the Bank of England’s Governor Mark Carney. We recall that during the last vote on interest rates, 3 members of the Monetary Policy Committee supported the idea of tightening the monetary policy and speculation about a possible rate hike may lead to sharp price leaps. The volatility of the pound is likely to remain high during the next weeks amid speculations on Brexit negotiations with the EU. A further increase is possible to 1.3000 and a multi-month high near 1.3050. In the case of descending correction, the first target will be 1.2800.

USD/JPY

The USD/JPY slightly rolled back and is currently consolidating slightly above 1.1200. While moving within the current ascending channel the immediate target will be 113.10. In order to switch to the descending trend, quotes need to break through the local minimum at 111.40. As a result, we may see continued decline to 110.90 and 109.60.

AUD/USD

The aussie quotes keep moving within the upward channel after it tested its lower limit. The closest objective in the case of a further increase will be 0.7635. In order to resume a decline, the price needs to fix beyond the limits of the local rising channel and break through the support at 0.7580. Approaching of RSI on the 15-minute chart to the overbought zone may be an additional stimulus for the bears to pull the price down. Volatility growth is possible after the publication of Australian macro statistics on new home sales in May tomorrow at 01:00 GMT.

Gold

The bullion price could not continue its upward movement and keeps consolidating near the level of 1250 dollars per troy ounce. Gaining a foothold above it may become the trigger for the bulls to push the quotes of the precious metal up to 1260 and 1270. Breaking through the resistance at 1260 will lead to the completion of the double bottom pattern that is traditionally considered a reversal pattern. A fall is likely to be restrained by strong support at 1240.

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WTI

The price of WTI is consolidating below the strong resistance at 44.25. Overcoming of this level may be a confirmation of a buy signal after the quotes have left the limits of the descending channel which they have been moving within since May. Production volumes in the US will remain at the centre of attention of oil traders as will any tensions amongst the OPEC members. Following the recent price increase, we do not rule out a downward correction to 43.00 or even to 42.20. Volatility is likely to rise today.