Some mixed data from around Europe and the USA today ahead of the Fed Chair Powell speech. It is unlikely the Fed will prime the markets with new info with regards to the monetary policy decisions today, so we could get a reversal into the close.
Market Wrap
The forex complex looks very similar at the end of the London session as it did at the start. The US dollar is the strongest currency with moves still into the yen and Swiss franc. The commodity pairs are suffering under the weight of the greenback which is appreciating against a backdrop of worsening US economic data. The main difference is that the Antipodeans are struggling with COVID-19 and lockdowns which has seen a flight from them, especially New Zealand into the safe-haven currencies.
US industrial production month over month came in better than expected though the previous months reading was revised down, so net, still positive. US retail sales month over month for July came in under market expectations at -1.1% down from the previous month of positively revised data to 0.7%. The US dollar may be positioning itself based on industrial production or ahead of the US Fed’s Powell speech which is due to commence in a couple of hours’ time.
US homebuilder confidence declined to the lowest level in 13 months in August, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) as did the Canadian housing starts data.
The US dollar index has moved higher in an impulsive move that threatens to break above the current resistance zone. If that should be helped on by Powell today, I’ll be looking for what sort of reaction we get at the next supply zone around the $94.00-$94.50 area.
We had received good data from the UK and Europe this morning the Eurozone's GDP increased by 2% in the second quarter of the year and the European Union gained 1.9%. Employment figures rose by 0.5% in the euro area and 0.3% in the United Kingdom. The combination of good European data, Covid-19 disruptions, and mixed data from the USA will have wrong-footed a lot of traders today.
The uncertainty surrounding Australia and whether the RBA can keep their more Hawkish tone considering the continued COVID lockdowns has pushed the AUDUSD through recent support and now we’re likely to target the 0.7000 level. Only a massive reversal in the US dollars fortunes could scupper the move which should culminate in the double bottom being swept for liquidity.
Gold has risen into a previous market structure which is acting as resistance currently. This will also fall if the US dollar continues to appreciate and again my most logical target would be the double bottom from March/April this year. Oil and most of the energy complex are currently holding up quite well but grains and precious metals are feeling some heat.