The USD weakened as the ISM manufacturing PMI indicated a contraction in the economic activity of the US manufacturing sector. The indicator’s reading for August, dropped below the reading of 50.0, reaching as low as 49.1, the lowest reading since the beginning of 2016. Please note that a rate cut from the Fed in September, has now been fully priced in by the market and a second-rate cut is also expected in October. Recession fears were also fuelled by Trump yesterday, as he tweeted that should when he wins the elections, a “deal would get MUCH TOUGHER” on China. It should be noted that trust among US and Sino negotiators is fading, as they struggle to set a meeting in order to restart negotiations. We could see volatility continue for USD and should recession fears continue to dominate investor’s sentiment we could see it weaken further. EUR/USD rose yesterday during the American session, breaking the 1.0950 (S1) resistance line, now turned to support. Should recession fears about the US economy, continue to dominate the market, we could see the pair rising further, however it should be noted that the green candles during the Asian session tend to get smaller and smaller. Should the pair’s long positions be favour by the market, we could see the pair braking the 1.1000 (R1) resistance line and aim for the 1.1050 (R2) resistance level. Should the pair come under the selling interest of the market, we could see the pair breaking the 1.0950 (S1) support line and aim for the 1.0910 (S2) support level.
Brexit roller-coaster continues for the pound
It’s been a roller-coaster day for the pound yesterday as intense sentiments of despair and hope for Brexit interchanged. Despair over Brexit characterized the beginning of the day, as cable reached the lowest point for over 4 years trading below 1.2000. However later in the European afternoon, the pound’s direction changed as a Tory MP crossed the ail and defected towards the Liberals, which cost Boris Johnson and the UK government its working majority. The UK Parliament took over control over its agenda and is to vote on a law blocking a no deal Brexit today. Should there be further positive headlines about avoiding a hard Brexit today, we could see the pound strengthening some more today. Cable initially dropped yesterday, yet later on rallied and broke the 1.2050 (S1) resistance line, now turned to support. Should there be further positive headlines about Brexit, we could see the pair rising further. Should the bulls maintain control over the pair’s direction, we could see the pair breaking the 1.2135 (R1) resistance line and aim for the 1.2210 (R2). On the flip side should the bears take over once again, we could see cable breaking the 1.2050 (S1) support line and aim for the 1.1950 (S2) support level.
Other economic highlights today and early tomorrow
Today during the European session, we get Eurozone’s Composite final PMI reading for August, UK’s services and Composite PMIs for August and Eurozone’s retail sales growth rate for July. In the American session we expect BoC ‘s interest rate decision to be the main release. The bank is widely expected to remain on hold at 1.75%, yet may choose to adopt a more dovish tone in order to keep the door open for a possible rate cut in tits next meeting. Should the bank sound more dovish than what the market expects, we could see the CAD weakening, otherwise the Looney could be getting some support. Also in the American session we get the US and Canada’s trade data for July. In tomorrow’s Asian session, we get Australia’s trading data for July. As for speakers we tend to single out BoE Governor Mark Carney’s speech before the UK Parliament today. Also ECB’s Lane, NY Fed President Williams, Dallas Fed President Kaplan, St. Louis Fed President Bullard, ECB’s De Guindos, Minneapolis Fed President Kashkari and Chicago Fed President Evans are scheduled to speak today.
GBP/USD H4
Support: 1.1950 (S1), 1.1865 (S2), 1.1790 (S3)
Resistance: 1.2050 (R1), 1.2135 (R2), 1.2210 (R3)
EUR/USD H4
Support: 1.0910 (S1), 1.0865 (S2), 1.820 (S3)
Resistance: 1.0950 (R1), 1.1000 (R2), 1.1050 (R3)
