By Orbex
The US dollar continued to decline on Tuesday. Fed Chair, Jerome Powell was speaking at an event. He said that the Fed was closely monitoring the escalation in trade tensions and could respond by cutting rates if the economy deteriorates.
The comments kept the pressure on the USD which has also been hit by a weak patch of economic data. The markets are giving a 90% probability for a rate cut in September. The equity markets posted a comeback with all three major indices closing in the green.
The common currency rose 0.10% on the day, brushing aside weak inflation data. Flash estimates for May put the inflation rate to rise by 1.2%. This was a sharp pullback from the 1.7% increase the month before and missed estimates of a 1.4% increase. Core inflation which excludes food and energy prices rose 0.8%, down from 1.3% previously.
The common currency posted gains, rising to settle above the 1.1200 handle by Tuesday’s close. Price action remains a bit volatile near the top as the euro currency is seen trading near the 1.1250 resistance level. If the bullish momentum is maintained, EURUSD could be seen advancing gains to test the 1.1400 level.
Construction activity in the United Kingdom slipped into contraction as activity fell to 48.6. Data from IHS/Markit saw construction activity falling to the lowest level since March 2018. Companies indicated a renewed decline in business activity with new orders falling due to subdued demand. The pound sterling was unmoved by the report.
Free Reports:
The GBPUSD currency pair continues to trade within the range of 1.2716–1.2606. Price action suggests that there could be potential for an upside breakout on a close above 1.2716. This will potentially open the way for the GBPUSD to test the 1.2895 level at the next resistance. The GBPUSD has been steadily posting gains for the past three consecutive sessions giving further weight to the upside bias.
The precious metal posted some modest gains on Tuesday after rising sharply in the previous two sessions. The gains stalled after the risk off sentiment moderated. Reports that Mexico was sending a delegation to the US to negotiate on the recent tariff hikes also helped the sentiment. However, with China, trade tensions continue to remain high.
Gold prices firmly remain above the 1320 handle. Yesterday’s session saw price closing with a spinning top candlestick pattern. A bearish follow-through is required for any hopes of a downside correction. In the event that gold closes above yesterday’s high of 1328.98, we expect to see further upside in store. The next main target to the upside comes in at the 1350 handle.
By Orbex