Weekly Technical Analysis For August 6th to 10th, 2018
EUR/USD: The US dollar stayed tall against major currencies after the Federal Reserve gave an upbeat assessment of the US economy and stayed on course to gradually lift interest rates.
Additionally, last week's US Jobs Report showed the US economy created fewer jobs than expected in July. The US Non-Farm Payrolls printed at 157K, below the expected 193K. Average Hourly Earnings came in at 0.3% m/m, 2.7% y/y as expected. On the other hand, the unemployment rate ticked down to 3.9% from 4.0% last month. US Jobs Report continues to paint a picture of a solid labor market poised for strong job creation.
In the upcoming week, keep your eye on US CPI numbers. July's US customer price index is expected to come out at 3.0%, higher than the previous 2.9%. On the other hand, Core CPI inflation is expected to stay at 2.3%, the same as the previous month. Acceleration in headline inflation may support rate hikes from the Fed.
The EUR/USD pair found sellers from the 1.1720 resistance level and then closed last week below the major level of 1.1607. As long as the price stays below 1.1607, on a daily basis, the selling pressure may continue and we will follow 1.1531 and 1.1446 as support levels. On the other hand, if the price rises above 1.1607, the next resistance level will be placed at 1.1720.
Support: 1.1531 – 1.1446 – 1.1367
Resistance: 1.1607 - 1.1720 – 1.1812
GBP/USD: The Sterling received additional pressure last week after Governor M. Carney said it needs to raise rates because the slow rate of growth in the UK economy is likely to generate too much inflation. The Bank of England has raised the interest rates for only the second time in a decade. The rate rose by a quarter of a percentage point, from 0.5% to 0.75% - the highest level since March 2009.
Carney also noted that Brexit is weighing on business investments, adding that risk premia on GBP assets have increased somewhat. Still, on Brexit, Carney said negotiations are entering a critical period, while limited and gradual tightening of monetary policy is likely to be needed. Governor Carney also added that Q1 slowdown was primarily due to weather rather than economic conditions.
Looking ahead, the UK GDP for the first quarter will be in focus on Friday. The UK GDP is expected to rise to 1.3% from 1.2% on a year-on-year basis. A higher than expected reading would support the Sterling.
In order for the bearish action to continue, the GBP/USD pair needs to break down 1.2961 and stays below that level on a daily basis. Otherwise, the fall may be limited and we will see resistance levels at 1.3050 and 1.3152.
Support: 1.2961 – 1.2916 – 1.2873
Resistance: 1.3050 - 1.3152 - 1.3241
USD/JPY: The USD/JPY pair jumped up from 110.86 after the BOJ's announcement about introducing more flexibility with bond operations and intending to keep very low rates for an extended period of time. However, the greenback could not retain gains and gave up all versus the yen last week.
Japan GDP Growth will be an important release for the yen in the upcoming week. Japan GDP for second-quarter will be announced. The economy is expected to show growth at an annualized rate of 1.4%. A higher than expected reading should be taken as positive for the Yen.
In the event that the USD/JPY pair shows a downward movement, we will see 110.86 and 109.90 as key support levels. On the other hand, if the price moves up, we will face the daily resistance level of 111.66.
Support: 110.86 – 109.90 - 109.35
Resistance: 111.66 - 112.46 -113.63
Gold: The Gold price hit fresh low level since July 2017 and then showed an upward reaction after US Jobs Report last week. In order for the upward reaction to continue, it needs to go beyond 1215. In this case, the next resistance level can be found at 1225. Otherwise, we will see the daily support level of 1207 again.
Support: 1207 – 1197 - 1177
Resistance: 1215 - 1225 – 1235