US stocks gain as Powell signals flexibility to lower rates
US stocks rose sharply after a few days of major losses. The Dow, Nasdaq and S&P 500 gained by 512, 195 and 60 points respectively. These gains were because of a statement by Federal Reserve chair, Jerome Powell, who said that the Fed was ready to cut rates if the trade war hit the economy. He was speaking at an event hosted by the Federal Reserve Bank of Chicago. He was not the only Fed speaker to suggest a rate cut. Others who spoke at the event like John Williams and Lael Brainard said that the Fed was prepared to cut rates as a way of supporting the economy.
There was more bad news for the Australian economy a day after the RBA slashed interest rates to historic lows. Today, data from the statistics office showed that the economy grew at the slowest pace in a decade in the first quarter. The economy grew by an annualized rate of 1.8% in the quarter after growing by 2.3% in the fourth quarter of last year. This was also below the long-term average of 3.5%. On a QoQ basis, the economy grew by just 0.4%. The country has had 28 straight years of expansion.
Today, investors will receive employment data from the United States. The number from ADP is expected to show that the economy created 180K jobs in April. This will be lower than the 275K jobs created a month ago. This number will come two days before the official jobs number from the government. The ISM non-manufacturing PMI is expected to remain unchanged at 55.5. In addition, the EIA will release crude inventory data, which is expected to show a drawdown of more than 849K barrels.
The EUR/USD pair remained at the important resistance level of 1.1260. This level is slightly below the 50% Fibonacci Retracement level and above the 25% and 50% moving averages. The RSI remains above the overbought level of 70, while the accumulation/distribution indicator has eased a bit. The pair will likely remain along these levels ahead of the ECB decision tomorrow.
The AUD/USD pair was relatively unmoved today after the GDP numbers. The pair is trading at 0.6997, which is slightly lower than yesterday’s high of 0.7004. On the hourly chart, the price is slightly above the 25-day and 50-day moving averages. The RSI has remained slightly below the overbought level of 70. It is also between the equidistant channel shown below. It is likely that the pair will see a short-term decline after forming a double top pattern. If it does, it will test the 50% Fibonacci level at 0.6940.
The NZD/USD pair continued rising, reaching a high of 0.6637. This was the highest level since May 6. On the four-hour chart, this price is slightly below the 38.2% Fibonacci Retracement level. The price is along the upper line of the Bollinger Bands while the RSI remains above the overbought level. The standard deviation too has been rising. The pair will likely continue moving higher to test the important 38.2% Fibonacci level at 0.6657.