By Gabriel Ojimadu, Alpari
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On Wednesday the 30th of August, trading on the euro/dollar closed down. Despite aggressive rhetoric from Pyongyang, tensions surrounding North Korea seem to have subsided. The UN Security Council labelled their missile launch as a threat to global security, but fell short of proposing any new sanctions. Investors have accordingly started to move away from safe haven assets (bonds, the Swiss franc, yen, and gold), which has bolstered the US dollar. Later, the US dollar surge gathered momentum after a favourable ADP jobs report and revised GDP data were released. The euro fell 103 pips from 1.1984 to 1.1881.
The statistics from Automatic Data Processing showed an increase in employment of 237,000 (forecast: 185,000) on the previous month, whose value was revised upwards from 178,000 to 201,000.
The GDP index for the second quarter was revised upwards to 3% YoY. The corresponding figure for the first quarter was 1.2% YoY. The inflationary components of the GDP index remain at relatively low levels.
Day’s news (GMT+3):
EURUSD rate on the hourly. Source: TradingView
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This is what it is to overestimate geopolitical risks. No good comes from it, except for an increase in volatility, which is like oxygen for traders.
From its high of 1.2070, the euro has since fallen by 1.6%, or 199 pips. The correction amounted to 157 degrees. It’s not a crucial support level, so I’m expecting the euro to continue its slide until the 180th degree. As the price approaches this mark, we should keep an eye on trading volume. Prices are falling at a decent pace, so if we don’t see a major buyer appear around the trend line, prepare for the euro to drop to around 1.1800.