LOW INFLATION IN CANADA LEADS TO USD/CAD GROWTH
Investors focus today turned to data from European Union. The preliminary report on flash manufacturing PMI has shown a rise of 0.3 in June to 57.3. The average forecast was 56.9. At the same time, the flash services PMI declined to 54.7 against the forecasted 56.2.
The Canadian dollar turned to the downside after the release of data on the consumer price index showing an increase of only 0.1% in May. This was half the predicted figure and much worse than the increase in April of 0.4%. Decline of USD/CAD is possible if we see a rebound of oil prices or depreciation of the US dollar. Speaking about oil, there’s been a long price consolidation so many are now expecting some sharp movements due. The middle-term trend in oil prices remains negative, but in the near future, growth is possible within the correction.
Traders ignored the report on flash manufacturing PMI in Japan that in June declined to 52.0 against the forecasted increase to 53.4. This negative impact on the yen was compensated by the fall of the greenback amid week data on flash manufacturing PMI in the US. The index dropped to 52.1, which is 1.0 less than expected.
Gold prices are trying to break the limits of the local descending channel and change the current trend to positive. The reason for this movement is the uncertainty about another interest hike by the Fed during the year. Increased interest in defensive assets like gold is also due to fears of a downward correction on the stock markets.
The EUR/USD price today was trying to gain a foothold above 1.1160. For the continuation of rising dynamics, quotes need to break through the upper limit of the descending channel and resistance at 1.1200. In this case, the next target levels will become 1.1230 and 1.1280. Considering the fact that RSI is close to the overbought zone, we do not exclude the resumption of a price decrease with potential objectives at 1.1100 and 1.1020.
The main driver for the growth of the pound today was the decline of USD. We should note that investors are monitoring the negotiations between Tories and DUP that is popular in Northern Ireland. Political uncertainty in the UK, weakens positions in their talks with the EU on the terms of the country’s exit from the union. Now quotes are trying to fix above the angled support line that was broken today. In case of success we may see the growth up to 1.2800 and 1.2890. On the other hand, the first goals within the fall will be 1.2635 and 1.2600.
Investors decided not to hurry with building up positions ahead of the weekend. As a result, the data on new home sales growth in the US by 17 thousand to 610 thousand didn’t have much impact on the mood of the market. Volatility growth is possible after the speech of FOMC member Powel at 18:15 GMT, but it is likely to be limited. In order to continue the growth, quotes need to overcome the important level of 112.00. The immediate targets in case of growth will be 110.30 and 109.60, but first, quotes need to break through the support at 110.75.
The USD/CAD sharply rebounded after the release of the consumer price index report in Canada. Low inflation growth by only 0.1% in May will restrain the Bank of Canada from raising interest rates. Investors are closely watching the dynamics of oil prices, that usually have a significant influence on the USD/CAD quotes. After testing resistance at 1.3300, price resumed falling which was supported by the fact that previously the RSI on the 15-minute chart reached the overbought zone. The closest targets in case of further decline will be at 1.3200 and 1.3165.
The weakening of the US dollar today resulted in the growth of gold price. Ahead of the weekend traders were taking profits and fixing positions. At the center of attention remains rhetoric concerning the plans of the Fed to raise interest rates one more time during this year. Stronger than expected data on the housing market in the US resulted in the slight decline of the precious metal. In case of afurther drop, the next targets will be 1244 and 1240. Potential increase will probably be restrained by resistance at 1260.
The US oil benchmark – WTI keeps consolidating in anticipation of the report from oil service company Baker Hughes on the active oil rigs count. The stable growth in oil rigs number puts pressure on the quotes as this offsets the potential effect of production cuts in most of OPEC members and some other oil producing countries. The trigger for a trend switching to positive may come from breaking through the resistance at 44.25. The downward impulse looks exhausted, but we do not exclude a fall resumption with the first target at 42.20.