LEAP IN US GDP TO 3% SUPPORTS GREENBACK
US Gross Domestic Product showed the economy expanded by 3.0% in the third quarter of this year beating expectations of a 2.6% increase. The EUR/USD responded quickly and dropped following the data release as the chances of another round of monetary tightening in the US in December is looking more likely. The pair’s decline began yesterday after the publication of the ECB’s decision to leave the interest rates at the current level for an extended period and to reduce the amount of the asset purchasing program to 30 billion euro from January 2018. The stimulus program is slated to last until September of next year. The greenback is also supported by the expectation that the next Fed’s Chair will have more hawkish views on monetary policy.
The British pound continued falling due to the strengthening of the greenback and belief that the anticipated rate increase by the Bank of England may be delayed. This, along with a lack of confidence on the outcome of trade talks between the UK and European Union, will restrain the bulls from building up long positions.
The USD/JPY price demonstrated positive dynamics due to the strength of the US dollar and rising interest in risky assets. The Japanese yen is traditionally considered a safe haven asset, the demand for which rises as investors’ risk appetite wanes due to turmoil on the financial markets. Traders mostly ignored the inflation report in Japan as the core consumer price index remained at 0.7%.
The single currency was able to break through the strong support level at 1.1730, which has become a stimulus for further price drops to immediate targets at 1.1620 and 1.1550. At the same time, we do not exclude the price to rebound due to profit taking ahead of the weekend. In this case quotes may return to the 1.1700-1.1730 range, but this scenario is less likely.
The British pound price keeps falling within the limits of the descending trend and breaking of the 1.3050 may become a strong stimulus for the price to decline to 1.3000 and 1.2900. The MACD signal line of the 15-minute chart approached the zero level and its crossing indicates the possibility of an upward price correction to the 1.3120-1.3150 range.
The USD/JPY is trying to gain a foothold above the strong resistance line at 114.00. In case of success, we are likely to see a continuation of the positive dynamics with the closest targets at 114.70, 115.50 and above. A descending movement within the correction is likely to be restrained by the rising trend line and SMA100 on the 15 minute chart.