EUR/USD: Bid Raised To 1.1740
Growth Aces | Aug 01, 2017 05:37AM ET
EUR/USD: Bid raised to 1.1740
Macroeconomic overview: U.S. President Donald Trump ousted recently hired White House communications chief Anthony Scaramucci. Trump was annoyed about Scaramucci's lewd comments to The New Yorker magazine published last Thursday and at how the abrasive New York financier appeared to inflate the strength of their friendship, since he had started the 2016 presidential election cycle as a fundraiser for two Trump rivals, Scott Walker and Jeb Bush.
Republicans fear that staff chaos at the White House could derail any attempt to revive efforts to repeal and replace the Obamacare healthcare law and a plan to overhaul the U.S. tax system.
The U.S. dollar hit a more than 2-1/2-year low against the euro on Monday on month-end portfolio adjustments and uncertainty over the U.S. political outlook after Scaramucci's departure.
U.S. economic data this week include the jobs report on Friday. Investors will also focus on the core personal consumption expenditures (PCE) price index due later on Tuesday.
Euro zone GDP increased 0.6% in the second quarter on the quarter and 2.1% on the year, in line with market forecasts. The EU statistics office revised slightly down the quarterly growth figure for the first quarter to 0.5% from the previously estimated 0.6%.
Factories in the euro zone started the second half with buoyant growth, which although slightly weaker than previously estimated was broad-based and appears to be sustainable, a survey showed on Tuesday. PMI manufacturing index dipped to 56.6 from June's six-year high of 57.4, slightly down from a flash estimate of 56.8.
Technical analysis: Bull sentiment increases further as the pair break the 1.1800 level and sets a new trend high Further gains look likely as RSIs remain biased up with o divergence.
Short-term signal: We raised our bid to 1.1740 and target 1.1990.
Long-term outlook: Bullish
AUD/USD: RBA stepped up its rhetoric against rising AUD
Macroeconomic overview: The Reserve Bank of Australia left interest rates at 1.5% at its August policy meeting, as widely expected, but ratcheted up its disapproval against the higher currency.
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"An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast," said RBA Governor Philip Lowe.
While the RBA did sound upbeat about the overall economy, its optimism was restrained by tepid inflation, record-low wages growth and mounting consumer debt. Subdued inflation, however, is not an Australian phenomenon. Consumer prices remain low or sluggish in most major economies including the United States, Europe and China even as growth has stayed largely solid. That has partly led the Federal Reserve to tamp down on market expectations over the future pace of tightening.
Core inflation - the main focus for policymakers - has remained below the RBA's target band since early 2016, prompting it to lower interest rates twice last year.
One positive is the recent pick up in the labour market with more full-time jobs than part-time. Corporate profits are surging while measures of business confidence and conditions are the strongest since 2008. Still, wages growth is stuck at a record low 1.9% - less than half the rate workers enjoyed a decade ago.
That, together with record high household debt at 190% of disposable income, is crimping consumer spending.
The RBA has also played down any chance of a cut in interest rates to curb the dollar, in large part for fear of inflating a debt-driven bubble in the housing market.
Data out today showed home prices surged in July as double-digit annual growth in Melbourne and Sydney belied efforts by regulators to tame the market.
Property consultant CoreLogic said its index of home prices for the combined capital cities climbed 1.5% in July, from June when they rose 0.8%. Annual growth in prices accelerated to 10.5%, from 9.6%, and back toward the peak of 12.9% reached early in the year. Melbourne led the pack with an outsized increase of 3.1% in July alone, which lifted annual price growth in the city to a blistering 15.9%. Sydney prices rose 1.4% in the month, and 12.4% for the year.
Interbank futures now show almost no chance of a hike in rates for the remainder of this year, but also no prospect of an easing either.
The Australian dollar took a brief knock on Tuesday after the country's central bank cautioned that its strength could harm the economy, though the impact was quickly offset by gains in commodity prices and weakness in the U.S. dollar.
Technical analysis: Recent dips towards the 10-day sma have been repelled and RSIs are biased up. Technical analysis suggests continuation of current bullish trend.
Short-term signal: Investors shrugged off RBA rhetoric against rising AUD and the AUD/USD rally is continued. We are coming back to long-term bullish view. Buy at 0.7950.
Long-term outlook: Bullish
Source: GrowthAces.com - your daily forex signals newsletter
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