INFLATION GROWTH IN THE US SUPPORTS THE GREENBACK
The US dollar rally continued today and we saw a sharp rise in volatility following the release of important macro data on inflation in America. The consumer price index for August increased by 0.4% versus the 0.3% expected and 0.1% in the previous period. Alongside the core consumer price index also grew by 0.2% which was in line with expectations and twice better than in July. Acceleration of inflation may force FOMC members to vote in favour of another interest rate hike in December and that will add further strength to the greenback. USD was under pressure over the past month due to internal political reasons with the current administration, the geopolitical confrontation with North Korea and the dovish mood of traders regarding a third rate increase by the Fed for 2017.
The pound ignored the positive trend of the USD due to hawkish rhetoric from the Bank of England. Despite leaving the key rate at 0.25%, officials of the central bank pointed to possible monetary tightening in the UK over the next months. At the same time, it was noted that in case of confident economic expansion the monetary policy may be tightened by more than what the market is expecting. These statements were met favourably by sterling bulls but their optimism may be hurt by negative news over Brexit talks or further US dollar strengthening.
The aussie kept losing ground despite the growth of employment by 54,200 in August compared to the 17,500 expected. The descending impulse is mostly explained by weak statistics from China, according to which industrial production slowed to 6.0 % growth in July which was 0.6% worse than expected. The Australian economy is particularly sensitive to changes in Chinese industrial data as the nation is the main importer of Australian commodities.
The EUR/USD quotes demonstrated high volatility levels after the price was able to fix below 1.1925. This may be a reason for continued declines to 1.1750 and 1.1620. The MACD signal line on the 15-minute chart just crossed the zero line which points to a possible negative trend continuation. In case of growth resuming, the closet resistance lines will be located at 1.1925 and 1.2000.
The bullish impulse on the GBP/USD chart resulted in the renewal of this year’s highs. The closest target within the positive trend is at 1.3400 and its overcoming may stimulate investors to push the price up to the 1.3500-1.3600 range. In case of profit taking we may see a rollback with the closet goals at 1.3250 and 1.3150.
The AUD/USD demonstrates a confident descending impulse after some consolidation near the 0.8000 level. The RSI on the 15-minute chart approached the oversold zone, that together with the price coming close to the angled support line, may result in an upward rebound soon with potential growth to 0.8000. The next target within the local descending trend will be at 0.7870.