THE POUND FALLS AFTER MARK CARNEY’S SPEECH
Today was a relatively calm trading session. The main news for the markets are coming from the UK where the Governor of the Bank of England, Mark Carney, suggested holding interest rates unchanged even amid the uncertainty of the outcome of negotiations on the Brexit terms. We should mention that weak data on the British economy may force the Prime Minister Theresa May to accept softer scenarios for the country’s exit from the union and that in turn will support the pound.
The EUR/USD price has been slightly pressured by the Eurozone’s current account balance report according to which the surplus in April was only 22.2 billion euro against expected 31.3 billion euro. We should mention that the same indicator in the US showed a deficit of 117 billion dollars in the first quarter that is 7 billion dollars better than the forecast. Tonight at 19:00 GMT FOMC member Kaplan will be speaking on his views about future steps of the Fed and that may increase the volatility.
The WTI crude oil benchmark tumbled today under pressure from the bears. The growth of oil production in the US continues to counteract efforts of OPEC and other oil producing countries to lead the market out of the supply and demand imbalance. Tomorrow’s report on crude oil inventories in the US may lead to a further price drop.
The quotes of AUD/USD and NZD/USD could not continue the rally driven by the decline in US 10-year Treasury notes that usually turns investors’ attention to government securities of Australia and New Zealand.
The EUR/USD price is falling thanks to disappointing data on the current account balance in the Eurozone for April and the hawkish views by the Fed on the issue of raising interest rates in the US. As a result, quotes are trying to overcome the local resistance near 1.1140. Within the current decline, EUR/USD may approach the lower boundary of the descending channel and the 1.1100 mark. We do not exclude an upward correction with a potential increase to 1.1200 that is explained by the RSI on the 15-minute chart getting closer to the oversold zone.
The pound accelerated its fall and as a result renewed the local lows near 1.2635. This will stimulate bears to push the quotes further down to 1.2500. The reason for these dynamics is dovish rhetoric from Bank of England Governor, Mark Carney. The RSI on the 15-minute chart is near the oversold level and that indicates the exhaustion of the current impulse. As a result, we may see an upward rebound back to 1.2680 and 1.2700, after which the drop may resume. Volatility is likely to remain high.
The Aussie price today was affected by a number of factors among which was the publication of the previous RBA meeting minutes, according to which the interest rates remained at the same level due to weak economic growth in the country. Now traders are paying attention to the fall of oil prices that traditionally influence the commodity-dependent Australian dollar. In the case of leaving the limits of the local upward channel and breaking through the support at 0.7565, the fall may continue to 0.7520 and 0.7420. Potential of growth in the nearest future will likely be restrained by resistance at 0.7635.
The price decline of American crude oil benchmark WTI accelerated under strong pressure from the bears. Investors can’t find fundamental reasons to resume buying oil futures amid growing oil production in the US that is offsetting any effect from the oil production agreement between OPEC and some other oil-producing countries. The USD/WTI price has reached strong support at 43.00 and we do not exclude an upward technical correction due to profit taking. On the other hand, the next goal in case of a continued decline within the downward channel will be 42.20.
Gold price is consolidating at the important level of 1244. The main pressure on the metal comes from the Fed, which commented last week on their plans to raise the interest rate one more time this year. Additional negativity comes from the US stock markets where investors calmed down after speculations about a possible correction of tech sector giants. Low demand for safe haven assets makes gold less attractive. The immediate objectives in case of an upward correction will be 1252 and 1260. Fall quotes may reach the next objectives of 1230 and 1215.
The USD/JPY quotes are consolidating below the resistance line of 111.70 in anticipation of the release of the previous Monetary policy meeting minutes at 23:50 GMT and the speech of the FOMC member Kaplan at 19:00 GMT. The divergence in the monetary policy settings of the US and Japan will continue to support the price growth of USD/JPY. The reason for the price increase acceleration may come from breaking through the important support at 112.00. The possible drop today is likely to be limited at 110.75. Tomorrow investors will pay attention to the data on All Industries Activity Index at 04:30 GMT.