USD FALLS AGAINST EURO AS TRADERS WAIT FOR KEY US DATA
The USD fell against the euro after US data on inflation missed forecasted expectations. The core CPI rose by an annualized rate of 2.2%. This was lower than the 2.4% traders were expecting. The core CPI strips the volatile energy and food prices. The headline CPI number rose by an annual rate of 2.7%, which was lower than the expected 2.8%. In July, the CPI rose by 2.9%, which was the highest level since 2012. This data came a day after the PPI data also failed to meet expectations. On Wednesday, the data showed that producer prices rose by 2.8%, which was lower than the expected 3.2%. Still, the Fed is expected to hike interest rates later this month and in December.
Today, the USD will be the most active currency for two reasons. Firstly, traders will continue to focus on the current hurricane that has left more than 250K people without power in North and South Carolina. More than 1 million people have been forced to flee. Secondly, the US will release key data including retail sales, industrial and manufacturing production, consumer confidence, and business inventories. Also, the Chicago Fed president, Charles Evans will deliver a speech, which will be followed closely.
Asian stocks rose as the US and China tried to restart trade talks. These talks are meant to prevent a further escalation of the ongoing trade conflict. The US has pledged to add tariffs on Chinese goods worth more than $267 billion. Today, data from China showed that it is not being affected by the trade war. Its industrial production rose by 6.1% in August. This was higher than the expected 6.0%. Retail sales increased by 9.0%, which was higher than the expected 8.8%. On the other hand, the fixed asset investments rose by 5.3%, lower than the expected 5.5%. This was the lowest growth pace in record. Recent data showed that Chinese exports to the US were increasing too.
Yesterday, the EUR/USD pair moved above the symmetrical triangle pattern that had formed in recent weeks. It is now trading at 1.1694 as it attempts to reach the important support of 1.1720. As it traded past the upper line of the triangle, the pair’s 21 and 14-day EMA had a crossover as shown below. This is an indication that the pair will likely continue moving higher as traders wait for US data.
The GBP/USD pair rose sharply yesterday after the BoE committed itself to a gradual tightening process. It rose from an intraday low of 1.3025 to a high of 1.3122. Today, it was little moved in the Asian session. It is now trading at 1.3110, which is between the middle and upper line of the Bollinger Band. It is also along the 61.8% Fibonacci Retracement level. The RSI is flat at about 65. Today, the pair could continue moving higher and if it does, it will test the 1.3200 resistance level. If it moves lower, it will test the 50% Fibonacci level of 1.3010.
In the past few days, the USD/CHF pair has been moving in a horizontal pattern. It has traded between 0.9757 and 0.9640, which are now its key support and resistance levels. It is now trading at 0.9650, which is close to the support level. Today, the pair is likely to reverse and start moving up again.