EURO HALTS ITS DESCENT AS TURKISH WORRIES SUBSIDE
The pound fell today even as data from the Office of National Statistics (ONS) showed that the unemployment rate was at a 43-year low at 4.0%. The decline was mostly because of deteriorating wage numbers. In June, wages (plus bonuses) rose by 2.4%, which was worse than the expected 2.5%. Without bonuses, wages fell to 2.7% from May’s 2.8%. In addition, the number of claimant count of 6.2K was higher than the expected 3.8K.
The euro was depressed today after mixed data from the European Union. In the morning, Germany released the second reading of the second quarter’s GDP. The economy grew at an annual rate of 2.3%, which was lower than the expected 2.5%. On the other hand, the EU’s statistics office revised the GDP numbers to reflect a growth of 0.4% in the second quarter. Previously, they had reported a 0.3% growth. On an annualized basis, the economy rose by 2.2% in the second quarter. The decline of the euro was partly because of the deteriorating industrial production which rose by 2.5%. This was lower than the expected 2.6%.
The Chinese markets fell today after the country released disappointing industrial production data. The numbers showed that the production in rose by an annualized rate of 6.0% in July which was lower than the expected 6.3%. In the same month, fixed asset investments rose by 5.5%, which was lower than the expected 6.0% while the retail sales rose by 8.8%, which was lower than the expected 9.2%. In Europe however, markets were slightly higher today as traders tried to move past the ongoing market crisis in Turkey. Earlier today, a defiant Erdogan held a speech calling for Turks to boycott American products like the iPhone.
The EUR/USD pair remained at low levels today following the recent slump. It reached an intraday low of 1.1360. This price is below the 50 and 25-day exponential moving average (EMA) and is in the consolidation phase. As the crisis in Turkey fades, there is a likelihood that the pair will test the resistance level of 1.1500, which is also close to the 50-day EMA level and the 23.6% Fibonacci Retracement level.
In the past few weeks, the EUR/GBP pair has created an interesting support and resistance pattern as shown below. Today, the pair tested the support of 0.8920 and moved slightly lower before recovering. It is now trading at 0.8927, which is slightly above the support level. There is a likelihood that the pair will continue moving higher, potentially to test the 0.8950 – the middle Bollinger Band – or even the 0.9000, which is an important resistance area.
Starting from June this year, the GBP/USD pair has been in a sharp decline falling from a YTD high of 1.4374. Today, it fell to an intraday low of 1.2721, which was the lowest level since June last year. This price is below the 50 and 25-day moving average, with the RSI currently at 24. The pair is likely to continue moving lower as it attempts to test the 1.2540 level, which is the 23.6% Fibonacci Retracement level.