USD KEEPS LOSING TRACTION AFTER WEAK LABOR MARKET DATA
It was a busy trading session today with a number of important data releases. The current account balance in Japan increased to 2.03 trillion yen in July versus the 1.65 trillion yen expected. However, investors were disappointed by economic growth in Japan which expanded by only 0.6% for the second quarter which is 0.1% less than the average forecast. Though even weak statistics from Japan were not able to offset negative sentiment of traders concerning the US dollar that was caused by unexpectedly high initial unemployment claims in the US and the negative impact of hurricanes Harvey and Irma on the American economic activity.
Investors remain bullish on the EUR/USD despite the fall of the German trade surplus in July to 19.5 billion euro, 0.8 billion less than the predicted figure and 1.7 billion less than in June. Germany has the largest economy in the Eurozone and the health of its local economy impacts largely on the whole of the Eurozone. By the end of the trading session we may see profit taking after a rally in EUR/USD and ahead of the weekend.
The British pound quotes have shown positive dynamics due to the improvement in manufacturing production numbers that showed growth of 0.5% in July. Another positive came from the report on trade balance data, the deficit of which in July was only 11.6 billion pounds against 12.7 billion in June. Further strengthening of the pound is possible on the background of the USD weakening, but is likely to be limited by uncertainty around the outcome of the Brexit talks with the EU.
The EUR/USD price approached the resistance at 1.2100 but was unable to overcome it and fix above the 1.2070 mark. Currently quotes are falling within the correction and if they overcome the closest support at the psychologically important 1.2000, the next targets will be at 1.1925 and 1.1825. Additional stimulus for the fall may be the recent crossing of SMA 100 on the 15-minute chart.
The British pound keeps growing within the rising trend and by overcoming immediate resistance at 1.3250, it will open up the way for continued growth up to 1.3400 and 1.3600. The MACD signal line started to decline and that may point to a price correction soon with the closest targets at 1.3150 and 1.3050.
The USD/JPY has broken through the lower boundary of the descending channel but was not able to fix beyond its limits and returned to the important 108.00 mark. The next targets in case of continued growth will be located at 108.85 and 109.60. On the other hand, if it resumes falling then the closest objective will be 107.00.