STERLING REMAINS VOLATILE AS MAY WARNS OF DIFFICULT DAYS AHEAD
The Aussie gained after Australia released solid job numbers. In October, the country’s unemployment rate remained at 5.0%, which was better than the consensus estimate of 5.1%. The participation rate increased to 65.6% while the employment change increased by 32.8K. This was almost double than what investors were expecting.
The US dollar index rose after investors were told to prepare for more rate hikes ahead. In an interview with Dallas Fed President Robert Kaplan, Fed Chairman Jay Powell credited the Fed for the current strength of the economy. He also said that the Fed could hike interest rates ‘at any time in 2019’. If this happens, it will be a major change in Fed policy. Over the past few years, the Fed has adopted the policy of forward guidance, which allows investors to anticipate policy changes in advance. He also said that the global economy was ‘gradually chipping away’. The Fed is expected to hike rates in December making it the fourth hike this year.
The price of crude oil resumed declines overnight. This was mostly because of increased US crude oil stocks. According to the American Petroleum Institute (API), inventories rose to 8.79 million barrels. This was higher than the previous week’s increase of 7.83 million. Another report from EIA suggested that US frackers were increasing production. It was estimated that they will increase production by almost 150K barrels per day. Today, the EIA will release its weekly reading of the inventories.
Sterling continued its volatility overnight. This is even after Theresa May’s cabinet accepted the deal that was passed by the UK and the EU. However, investors are concerned about what will come next in parliament. In a statement, Theresa May predicted that the coming days will be difficult for the country. This is because many in her party have disagreed with the deal that was announced. They argue that she gave Brussels too much. In a statement, she said that the agreed deal was the best that could be negotiated.
The AUD/USD pair rose sharply to an intraday high of 0.7280. This was the highest it has been since October 8. It was also a continuation of the upward trend that started on Tuesday this week. The pair’s short-term EMAs show that the upward trend could continue. This is confirmed by the RSI, which is at 67 and the Demarker indicator. More upward movements will likely take the pair to test the 0.7300 level.
The EUR/USD made small gains in the Asian session as traders waited for the important retail sales data from the US. On the 30-minute chart, the pair’s price was along the upper band of the Bollinger Bands. The RSI was largely unmoved at around the 59 level while the momentum indicator moved slightly above the 100 level. The pair will likely continue moving up to test the 1.1350 level.
Yesterday, the price of Brent moved higher slightly. Overnight, the XBR/USD pair resumed the decline and reached a low of 66. This was close to the previous low of 65. On the four-hour chart, the pair’s double EMA show no signs of a reversal, which is an indication that it could continue the downward trend. This is confirmed by the MACD and the RSI as shown below. There is a likelihood that the pair will continue moving lower to below 65.