MARIO DRAGHI SUPPORTS BULLS IN EUR/USD
The EUR/USD quotes showed a confident increase after the speech of ECB President Mario Draghi, during which he stressed the necessity of maintaining stimulus policy, but also noted the recovery in Eurozone’s economy and inflation improvement. Rising inflation may support the idea of a reduction in the asset purchasing programme in the euro area or even a possible interest rates hike by the ECB. These actions would provide a strong stimulus for the appreciation of the common currency.
Another spike in volatility is anticipated today after the speech of the head of the Federal Reserve Janet Yellen at 17:00 GMT. Hints about the Fed’s intention on another interest rate increase by the end of 2017 may lead to the loss of previously gained positions by the EUR/USD.
Oil prices are gaining positions on following the statement by the Russian deputy oil minister about the reduction of oil output in Russia by 300 barrels per day. At the same time, traders are speculating about the possibility of Nigeria joining the oil production cut agreement after it restored production levels to 2.0 million barrels per day. Gold regained some positions due to the selling of the dollar against euro and ahead of possible big moves after the statement of Janet Yellen.
Analysts in Morgan Stanley lowered the forecast on iron-ore prices by 23% in the third quarter to 50 US dollars per ton. We recall that the price of AUD/USD is highly dependent on commodities including iron ore. At the same time, NZD/USD keeps showing the high level of volatility after the release of the disappointing trade balance report according to which the surplus was only 104 million in May against the forecasted 420 million.
After some consolidation of EUR/USD quotes near the upper limit of the descending channel, we saw a sharp rise to 1.1300. Overcoming this resistance may lead to further growth up to 1.1400 and 1.1450. The reason for a rapid increase was the statement of Mario Draghi about the strengths of Eurozone’s economy. The RSI on the 15-minute chart is near the overbought zone that indicates a possible rollback with decline potential to 1.1230. Volatility is likely to remain high today.
The British pound renewed the positive trend and broke through the resistance line at 1.2750. Depreciation of the US dollar and positive data on retail sales report from CBI supported the bullish sentiment on the market. The balance of retail sales in the UK was 12% in June, 8% more than forecasted. In order to continue the positive move, quotes need to overcome the important level of 1.2800, that may result in growth to 1.2890 and 1.2940. The potential upward movement will be restrained by the fears of traders concerning the Brexit negotiations.
The Aussie quotes were unable to fix above 0.7600 and corrected downward within the local rising channel to its lower limit. In a case of further decline, the first targets will be at 0.7565 and 0.7520. Potential increase in the near future will be limited by the strong resistance at 0.7635. Traders will keep monitoring the price dynamics in the commodity markets and statements of the Fed officials today at 15:15 GMT and 17:00 GMT.
The volatility on the price chart of the New Zealand dollar remains elevated due to the recent publication of conflicting trade balance data according to which the surplus has not met expectations - however volumes of both imports and exports showed increases indicating the strong growth of the national economy. Currently, the quotes are trying to leave the limits of the local rising channel that in turn may result in reaching the next targets at 0.7220 and 0.7190. A potential increase will likely be limited by the local maximum around 0.7340.
The gold price resumed a decline after reaching the upper limit of the descending channel and resistance near 1250. Bulls are reluctant to build up positions ahead of today’s speech of the Fed’s chief Janet Yellen at 17:00 GMT. In the case of hawkish rhetoric concerning the pace of monetary policy tightening in the US, the price of gold will accelerate the current negative movement. The closest targets, in this case, may become 1240 and 1230. Additional pressure on the precious metal came from the increase in the consumer confidence index in the US calculated by the Conference Board that increased to 118.9 against the forecasted 116.1.
The price growth of the American crude oil benchmark, WTI, accelerated following the news from Russia on production cuts by 300 barrels per day after signing the agreement with some other large oil producing countries. Quotes broke the limit of the descending channel that was formed in May. Overcoming the strong resistance at 44.25 may become a signal for the trend change with potential targets at 45.20 and 46.00. With a downward correction, the oil price may return to the support line at 43.00.