EURO FLIES AS ECB OFFICIALS POINT TO NORMALIZATION IN SEPTEMBER
The Euro rose today after the ECB reiterated its decision to start normalizing in September. A rate hike will come soon afterwards. In a statement, Peter Praet, the Chief Economist for the ECB said that officials believe that inflation is rising, which will lead to normalization. This January, the ECB reduced its monthly bond purchases to $35 billion. After the announcement, the euro jumped by almost 50 basis points. European bonds too jumped with Germany’s 10 year bonds jumping by 50 basis points, the highest jump in a week.
The US dollar fell against its main peers even after China sweetened the deal to the US to avoid a full out trade war. China announced that it would boost US purchases by $70 billion. It will increase its purchases of natural gas and agricultural products. However, experts believe that the deal is a non-starter. This is because the US does not currently have the capacity to export more agricultural products to China. The natural gas would need to be diverted from other markets to China. In addition to this, the US productivity growth rose by 0.4% compared to the expected 0.6%. Also, data showed that the trade deficit fell to a 7-month low.
The Australian dollar rose after the data from the bureau of statistics showed that the country’s economy expanded at a faster rate than analysts were expecting. In the first quarter, the economy expanded by an annual rate of 3.1%, boosted by the mining sector and government spending. Analysts were expecting the GDP to grow by 2.8%. The economy was also boosted by increased exports and the slightly higher commodity prices.
On Thursday, the EUR/USD pair halted its decline when it reached the 1.1509 low. Then, the pair started an upward trend. Today, the pair continued with this trend and reached an intraday high of 1.1770. Today, the pair’s price is above the 60 and 30-day moving average. Its RSI is currently at 61 and MACD shows signs that the pair could have some more upside to go. This will be supported by a hawkish ECB.
In early May, the AUD/USD pair ended a multi-month downward trend when it reached a low of 0.7410. Then, the pair started an upward trend, which saw it reach the highest level since late April today. The pair is now trading at 0.7660, and is showing signs of more gains especially because of the growing economy. As shown below, the pair’s current price is above the double simple moving average. The RSI is currently at 61, an indication that it could continue the upward trajectory.
Two weeks ago, the USD/JPY pair crossed the important support level of 110.06 as shown below. The pair continued to drop and found another support at 108.09. Since then, the pair has been rising and today, it reached an intraday high of 110.06. This was the previous support. The pair could continue moving higher and attempt to cross the resistance level of 111.40.