AUSSIE FALLS FOLLOWING WEAK HOUSING NUMBERS
The Australian dollar fell sharply today after disappointing economic numbers. The country’s statistics office numbers showed that building approvals in July fell by 5.2%. This was worse than the expected decline of 2.5% and June’s gain of 6.8%. The building capital expenditure for the second quarter declined by 3.9%, which was worse than the 0.5% gain expected. Similarly, the plant and machinery capital expenditure declined by 0.9%, which was sharper than the expected gain of 1.0%. The private new capital expenditure for the quarter fell by 2.5%, which was lower than the expected gain of 0.6%. In the past few months, the RBA has raised concerns about the strength of the economy, mainly because of the prolonged drought and the softening housing market.
The euro was little moved today after disappointing confidence numbers. The Business and Consumer Survey for July was at 111.6, which was lower than the expected 111.9. The confidence level has been falling after peaking in December last year. Consumer confidence for August declined by minus 1.9, which was in line with expectations. Confidence has been waning as people fear about the unemployment as the world trading environment deteriorates. The services sentiment rose by 14.7, which was lower than the expected 15.1 while the industrial sentiment rose by 5.5, which was lower than July’s 5.8.
Sterling jumped sharply after positive comments from Michel Barnier, who is the EU chief Brexit negotiator. In a statement, Michel signalled a likely breakthrough in the negotiations, raising the chances that the negative bets on the pound could snap. He said that the EU was prepared to have a major partnership with the UK. The pound was weighed down by weaker consumer lending data. The BoE consumer credit for July was at £0.817 billion, which was lower than the expected £1.5 billion. Mortgage approvals in July were at 64.77K, which was lower than the expected 65K while mortgage lending of £3.20 billion was lower than the expected £3.9 billion. The net lending to individuals of £4 billion was lower than the expected £5.5 billion. The data came as Wonga – the biggest payday lenders – in the country announced that it would halt giving out new loans.
The US dollar was little moved after positive economic data. Initial jobless claims fell to 213K, which was better than the expected 214K. The continuing jobless claims of 1.708K were lower than the expected 1.725K. On the other hand, personal income, personal spending, and personal consumption of 0.3%, 0.4%, and 0.2% were in line with expectations. These numbers continue to make the case for the continuing pace of gradual tightening by the Federal Reserve.
The AUD/USD pair fell today and reached an intraday low of 0.7274. It has now recovered slightly and is trading at 0.7300, which is lower than the 25 and 50-day moving average. It is now climbing to the 0.7315 level, which is the 61.8% Fibonacci Retracement level, which is also the 100-day moving average level. In the short term, the pair could test this support level, but in the medium-term, the pair will likely continue the decline.
Yesterday, the GBP/USD pair crossed the important resistance level of 1.2845. Today, it jumped to an intraday high of 1.3040 after indications that the UK and the EU will likely reach a Brexit deal. It is finding resistance at the 1.3020 level, which is in line with the 61.8% Fibonacci Retracement level. As the month comes to an end, it is likely that the pair will fall, potentially to the 1.2935 level, which provides an important support.
The EUR/USD pair was little moved today but remained at elevated levels. It is now trading at 1.1690, which is slightly lower than yesterday’s high of 1.1732. As shown below, the pair has found strong resistance near the monthly highs. The RSI is at the 45 level with the MACD moving lower, which is a signal that the pair could continue moving lower.