USD rises as investors slash their rate cut expectations
Global stocks declined today as investors continued to react to te Friday’s jobs report from the US. In Asia, the Nikkei and Shanghai indices declined by 212 and 77 points respectively and in Europe, the Stoxx and DAX declined by 2 and 35 points respectively. In the US, Dow and S&P futures declined by 67 and 6 points respectively. Before the positive jobs data, investors were pricing-in a 75-basis points rate cut this year. This has reduced to the current forecast of 50 basis point cuts. In response, the US dollar index increased slightly.
The price of crude oil was relatively unchanged today after Iran announced that it will breach parts of the nuclear deal that was signed in 2015. In a statement yesterday, the country’s deputy finance minister said that the country will increase its nuclear enrichment program in response to the US exit of the deal. This was in line with what the nuclear deal said. In recent weeks, tensions between Iran and the United States have increased. Two weeks ago, it was reported that Trump called for a military strike and cancelled it at the final moment. While the rhetoric could continue, there is a likelihood that dialogue between the two countries could start as the economic situation in Iran gets dire.
The euro moved lower against the USD after Germany released its trade data. The numbers from the statistics office showed that exports increased by 1.1%, which was better than the consensus estimates of 0.5%. In April, exports had declined by -3.4%. In May, imports declined by -0.5%, which was lower than the expected increase of 0.3%. As a result, the country’s trade surplus increased to EUR 18.75 billion. Meanwhile, in Germany, the core machinery orders declined by -7.8% in May, which was lower than the expected decline of -3.6%. On a YoY basis, the machinery orders declined by -3.7%.
The EUR/USD pair declined slightly to a low of 1.1210. On the hourly chart, the current price of 1.1220 is below the 25-day and 50-day moving averages while the RSI has moved up from an oversold level of 11 to the current 40. The price is also slightly lower than the 23.6% Fibonacci Retracement level. There is a likelihood that the pair will continue the downward trend to trade below the important support level of 1.1200.
The price of crude oil was relatively unchanged after the news on Iran. The XBR/USD pair is trading at the 63.91 level, which is slightly below Friday’s high of 64.54. On the hourly chart, this price is along the 38.2% Fibonacci Retracement level. It is also below the month-to-date high of 66.62, which was reached on July 2. It is higher than the month-to-date low of 61.91. It is also slightly higher than the 50-day and 25-day moving averages. The pair will likely continue moving higher to test the important resistance level of 65.
The USD/CHF pair reached a low of 0.6963 on June 25. Since then, the pair has been moving higher, and today, it reached a high of 0.9933. On the four-hour chart, this price is along the 38.2% Fibonacci Retracement level. It is also along the upper line of the Bollinger Bands and above the 50-day and 25-day moving averages. The pair will likely continue moving higher, to test the important support level of 0.9967.