Varengold Bank Research Team
Varengold Wertpapierhandelsbank AG
Good morning from beautiful Hamburg and welcome to our last FX Report for this week. U.S. stocks fell as biotechnology shares retreated and media firms sank on a fresh round of disappointing earnings. Emerging-market equities and currencies tumbled amid the specter of higher U.S. interest rates. The Standard & Poor’s 500 Index lost 0.8 percent. Media stocks from Viacom Inc. to 21st Century Fox Inc. fell in the biggest two-day selloff since 2008, while Biogen Inc. led biotech shares lower. The MSCI Emerging Markets Index dropped 0.7 percent to a two-year low, while a gauge of developing- nation currencies slid to a fresh record. The S&P 500’s slide left it at the lowest level since July 27.The Dow Jones Industrial Average fell a sixth day to cap its longest losing streak of the year.
Anyway, we wish you a successful trading day and a relaxing weekend!
Market Review – Fundamental Perspective
The pound dropped the most in two weeks against the dollar as investors added to bets the Bank of England will lag behind the Federal Reserve when it comes to raising interest rates. Fewer BOE policy makers voted to increase interest rates than had been predicted by economists surveyed by Bloomberg, fueling speculation U.K. rates will stay lower for longer. The pound fell 0.6 percent to $1.5514 as of 2:49 p.m. in New York, the biggest decline since July 23. Sterling weakened 0.7 percent to 70.39 pence per euro. It touched 69.36 pence on July 17, the strongest level since 2007. The dollar touched a four-month high as filings for U.S. unemployment benefits hovered near the lowest level in four decades, boosting confidence in the economy. The U.S. currency slipped from its strongest levels reached as the jobless claims supported sentiment that Friday’s July employment report will show strong growth and may clear the way for the Federal Reserve to boost interest rates next month. The Bloomberg Dollar Spot Index was little changed at 1,215.32 at 5 p.m. in New York, after touching the highest on a closing basis since March 13. The greenback dropped 0.2 percent to $1.0925 per euro and fell 0.1 percent to 124.74 yen. Traders are pricing in a 48 percent probability that the Fed will raise interest rates in September, based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase. That compares with 38 percent on Monday. The central bank has held its short-term target at virtually zero since December 2008 to support economic growth.
Daily Technical Analysis
AUD/USD (4 Hours)
Since 2013 the bears took control in this currency pair. The current situation opens speculation if a significant low in short term was found now. It might be possible that this pairs starts a strong correction, if the downward trend line in addition to the next resistance will be broken sustainable. The support levels should be considered to place a protecting stoploss.
Support & Resistance (4 Hours) Support
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Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.