The Dow Jones, Nasdaq 100, and S&P 500 indices declined after weak bank earnings. JP Morgan, the biggest American bank, saw its earnings decline by more than 20% after it added provisions for credit losses. Its total loans at the end of quarter were over $1.10 trillion, down from the previous $1.07 trillion. Meanwhile, Morgan Stanley said that its net revenue dropped to $13.1 billion while its net profit rose to $2.5 billion. These results show that the American economy is slowing dramatically as inflation rises. Other banks that will publish their results on Friday are Citigroup and Goldman Sachs.
The US dollar moved sideways after the US published more strong inflation data. According to the Bureau of Labor Statistics, the producer price index (PPI) rose from 10.9% to 11,3% in June. It also rose at a faster pace than expected on a month-on-month basis (from 0.9% to 1.1%). Excluding the volatile food and energy prices, the PPI rose by 8.2%. These numbers came a day after the US published strong consumer inflation data. Therefore, analysts expect that the Federal Reserve will embrace a more hawkish tone. In a statement, Fed’s Christopher Waller said that he supported a larger hike than it did in June. He said:
“If that data – retail sales – comes in materially stronger than expected, it would make me lean towards a larger hike at the July meeting to the extent it shows demand is not slowing down fast enough to get inflation down.”
The Australian dollar declined slightly after the latest economic data from China. The numbers revealed that the economy contracted in the second quarter as the country continued with its Covid zero strategy. Sadly, some cities have restarted lockdowns in a bid to fight the decease. The next key data to watch will be the upcoming US retail sales. Economists expect the data to show that the total sales rose by 0.8% in June after falling by 0.3% in the previous month.
EURUSD
The EURUSD pair declined to a multi-decade low of 0.9950. It is now trading slightly above the parity level. On the four-hour chart, the pair moved below the 25-day and 50-day moving averages. It also moved below the Ichimoku cloud while the Stochastic Oscillator has moved below the oversold level. Therefore, the pair will likely continue falling as sellers target the next key support at 0.9900.
XBRUSD
The XBRUSD pair declined to a low of 92.45 ahead of Biden’s meeting with Saudi’s crown prince and other Middle East leaders. The pair is now trading at 95.24, which is below the important support level at 97.18. It has moved below the 25-day and 50-day moving averages while the MACD has moved below the neutral point. The pair will likely keep falling as sellers target the support at 90.
USDCAD
The USDCAD pair jumped sharply as the dollar strength continued. The pair rose to 1.3223, which was the highest point in years. It rose above the 25-day and 50-day moving averages while the Relative Strength Index and Stochastic Oscillator are pointing upwards. The pair will likely keep soaring ahead of the latest US retail sales data.
