Market Beat: Oil and Dollar Jump before the Bank of England’s Meeting

August 4, 2016

BoE Interest Decision and U.S NFP. Upcoming News events and expected impacts.

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This article is originally referred from FXGlobe Daily Analysis

The Dollar got a boost from the slightly better than expected ADP Employment Report yesterday as traders got confident regarding Friday’s official release on the U.S. labor market. The USD rose against all of its major counterparts with the exception of the Canadian Dollar, which was pushed higher by the surge in the price of oil. Forex markets were generally choppy in Wednesday as today’s Bank of England decision remained in the center of attention.

Oil rocketed higher following the bullish U.S. Crude Inventories data and it finished right at the intraday high, back near the crucial $41.25 support/resistance level, as we expected. Despite the advance of the crucial commodity, the New Zealand Dollar got sharply lower, and the Aussie also declined following the worse than expected Chinese Services PMI, that paints a bleak picture of the prospects of the export sectors of the two countries.

EUR/JPY (current price: 113.05)

The pair had a choppy and flat session, as the Yen got slightly weaker against its peers following a very bullish week that was started by the BOJ’s hawkish statement. The Eurozone Services PMIs were mixed, and the BOJ’s monetary meeting minutes revealed nothing new about last week’s decision. Eurozone Retail Sales were unchanged in July, as analysts expected, showing a weak growth environment, and a low level of consumer confidence. The cross is now even closer to its prior lows after it fell below the 113 level on Tuesday, as we expected.

Our assessment: EUR/JPY is still in a short-term decline, and it’s now back below the prior trend-channel, following the strong correction in July.

EURJPY after a choppy consolidation-day on the Daily Chart, Created by FxGlobe MT4

EUR/JPY after a choppy consolidation-day on the Daily Chart, Created by FxGlobe MT4

 

EUR/USD (current price: 1.1141)

The most traded currency pair continues to trade without a clear long-term direction since hitting a low near 1.05 more than a year ago. The recent developments regarding the European financial system and the Brexit referendum might be enough to move the pair out of its long-term neutral trading range. The U.S. economy is also showing signs of weakness, possibly making Friday’s employment report even more important than usual. The cross moved below the crucial 1.12 level yet again on Wednesday, as European banks remained under pressure.

Our assessment: EUR/USD is holding up above the short-term trend channel, but another test of the 200-day MA below is possible, should Friday’s U.S. jobs number come in much better than expected.

EUR/USD on the Daily Chart, Created by FxGlobe MT4

EUR/USD on the Daily Chart, Created by FxGlobe MT4

NZD/USD (current price: 0.7160)

The New Zealand Dollar fell by more than 1% yesterday despite the better than expected GDT Dairy Price Index that rose by 6% in the past two weeks after being unchanged in the previous period. The pair has been relatively strong in recent weeks, but Wednesday’s weakness might signal a deeper correction, with strong support levels at 0.7050 and near 0.6950 providing support for the Kiwi on the short-term. The rising 200-day MA is also close to the current rate at 0.68 currently.

Our assessment: The cross is under pressure this week as the Royal Bank of Australia cut interest rates in for the second time in 4 months, placing the RBNZ in a dovish position. NZD/USD getting sharply lower after the  RBA decision on the Daily Chart, Created by FxGlobe MT4

Gold (current price: $1358.00) and Silver (current price: $20.24)

Precious metals corrected slightly after getting close to new bull market highs in the first two days of the week, as the better than expected ADP report eclipsed the weak Services PMIs in the U.S. and China. Stock markets remained stable, and that weighed on the safe have assets, as well as the slight weakness of the Japanese Yen. The long-term trend is still bullish, despite the negative day, and today’s BOE decision might give another boost to the metals.

Our assessment: Gold is still just 1% off its previous high, and Wednesday’s correction could be easily erased should the BOE decide on a larger than expected monetary easing package today.

Gold trading between $1350 and $1375 on the Daily Chart, Created by FxGlobe MT4

Gold trading between $1350 and $1375 on the Daily Chart, Created by FxGlobe MT4

Economic Releases

Thursday will the first of the two most important days of the week regarding economic releases, as all eyes will be on the Bank of England’s rate decision and monetary statement before Friday’s U.S. Non-Farm Payrolls number. The ECB’s Economic Bulletin will also be released in the morning, while the afternoon session will be highlighted by the U.S. New Unemployment Claims number. Investors will likely focus on the RBA’s statement in the evening as well, after Tuesday’s rate cut by the central bank.

Original Source: FXGlobe Daily Analysis

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