(Brad Alexander – FX Large Limited)
Yesterday we promised to take a look at Gold from the technical side as we saw price action on XAUUSD rising due to the temporary weakness in the USD.
Here we see a Rising Wedge which is often a bearish signal.
If we move out to the daily chart we can see what could be the formation of a Double Bottom but the Stochastic Oscillator may have other ideas and this upper trend line might also be a point of reversal to the downside.
Yesterday, we asked the question about how low can the JPY go.
The weakness of the Japanese Yen is still a fundamental story but investors are looking forward to next year when the governor of the Bank of Japan leaves.
In the meantime, we see a symmetrical pennant on USDJPY but unless price action breaks this lower trend line we could see further JPY weakness.
EURUSD has risen above parity and we saw price action rise, touch the upper trend line, and then retreat to $1.01.
The Stochastic Oscillator is looking bearish as well but we need to monitor the situation before opening a short position if the USD gets stronger.
AUDCAD looks interesting to us as price action has been following a bearish channel for about a month now.
The Stochastic Oscillator is still looking bullish but price has reversed to the downside off this upper trend line.
If we add indicators like the Parabolic SAR and MACD, we still see bullish indications so we may want to wait on this one before selling short.
The UK economy slowdown has lowered the trade deficit
(Alexander Kuptsikevich – FxPro Financial Services Limited)
Monthly estimates showed that the UK economy added 2.5% over the three months to July vs the same period a year earlier. The negative surprise was a 0.3% decline in Industrial Production in July compared to expectations of a 0.4% gain after a 0.9% slip in June. Production added a modest 1.1% compared to July last year.
Construction and industrial production indices are back in the 2019 range after a quick dip and subsequent recovery due to the pandemic. And they are stagnating for some time around these levels. Manufacturing and construction are at the forefront of the economic cycle, and their message is not optimistic.
Foreign trade is much more dynamic. Import values have fallen for two months after ballooning during the year’s first five months, while exports have remained close to the highs. These local dynamics have reduced the foreign trade deficit to its lowest level since December 2021.
The narrowing of the foreign trade deficit is positive for Sterling as it reduces capital outflows from the country. On the other hand, if the weakness in imports is linked to stagnant domestic demand and production, it does not carry anything good in the medium term. GBPUSD seems to have pushed back from the bottom in the middle of last week, but this dynamic is more attributed to the USD profit-taking after the rally rather than investments in the pound.