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Wednesday, August 23rd
The EUR/USD pair came out of its bearish consolidation phase in European morning and refreshed its daily highs at 1.1794, following positive preliminary German Manufacturing PMI report and slightly hawkish speech of ECB President M.Draghi. Adding to this, prevailing risk-off trend, triggered by US President D.Trump’s speech, during which he threatened to close down the government in order to get funding to build a barrier along US southern border, also supports the major currency pair this Wednesday. On the other hand, further upside of the pair looks limited, as investors refrain of placing any important directional bets ahead of Jackson Hole Symposium, which will take place this Thursday. The market is expecting that both heads of regulators will offer some hawkish signs on monetary policies, which will boost speculations over the divergence between the Fed and ECB. In the day ahead, market participants will focus their attention on the data from the US housing market, while broad market trend will continue to lead the pair throughout this Wednesday.
The USD/JPY pair came under strong selling pressure in Asia, after risk sentiments made a sharp turn around, forcing the pair to wipe part of its yesterday’s gains. The pair received strong bearish impetus ahead of the key psychological mark of 110.00 and fell for about 50 points after US President Donald Trump threatened to close down the government to obtain approval for financing the construction of the wall on the border with Mexico. This statement provoked a solid wave of risk aversions, thereby supporting Japanese currency. Moreover, the yen received additional support in Asian on the back Japanese preliminary manufacturing PMI, which came out above market’s expectations. However, retreat of the pair may appear limited, as investors will continue to keep cautious stance ahead of Jackson Hole Symposium, refraining from opening important directional bets. Today the US will release important data from the housing market in the NA session, while broad risk-off trend will continue to remain as a key navigator for the pair on Wednesday.
The GBP/USD pair remains under pressure on Wednesday, trying hard to correct after yesterday’s sharp drawdown. Currently the pair is trading within striking distance of its 2-month lows, located at 1.2807 level, as strong risk-off sentiments, backed by recent US President D.Trump warning to shut down the US government in order to build wall with Mexico, keep the pair under pressure lately. However, it is expected that today we won’t see any sharp moves of the pair, as markets prefer to stay away of making any important decisions ahead of the key event of this week - Jackson Hole Symposium, which can trigger massive volatility across the market on the back of Fed Chair J.Yellen comments. Meanwhile, investors’ attention shifts towards the US flash PMI report, which will be able to bring fresh impetus to the pair in the NA session, while the UK docket will keep silence today, leaving the pair at the mercy of global market trend.
The NZD/USD pair remains one of the weakest assets of this Wednesday, having refreshed its 6-week lows at 0.7220 mark. The Kiwi came under strong selling pressure in Asia, after NZ Treasury lowered GDP forecasts in its New Zealand pre-election Economic and Fiscal update [PREFU]. Adding to this, strong wave of risk aversions, triggered by US President D.Trump’s overnight comments, has also negatively affected higher-yielding NZ dollar. Looking ahead, today investors will focus their attention on the US New Home Sales report and Crude Oil Inventories from EIA, which will bring some fresh trading opportunities in the NA session, however, continuing risk-off trend will keep the pair under pressure in the middle of this week.
The main events of the day:
US New Home Sales – 17.00 (GMT +3)
US Crude Oil Inventories – 17.30 (GMT +3)
Support and resistance levels for the major currency pairs:
EURUSD S. 1.1696 R. 1.1856
USDJPY S. 108.54 R. 110.16
GBPUSD S. 1.2749 R. 1.2945
USDCHF S. 0.9578 R. 0.9740
AUDUSD S. 0.7866 R. 0.7972
NZDUSD S. 0.7234 R. 0.7356
USDCAD S. 1.2491 R. 1.2629
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