The U.S. dollar posted strong gains on the day as commodities such as gold and silver continued to extend the declines.
China announced that it was targeting a GDP growth rate of 6.0-6.5% for 2019. It raised the budget deficit to 2.8% from 2.6% last year, while announcing fiscal easing measures. These included planned tax cuts and infrastructure spending.
On the economic front, the eurozone services PMI rebounded sharply in February. Services activity rose to a four-month high to 52.8 in February. This surpassed the initial flash estimates of 52.3.
The gains came with Italian and French services PMI posting results that were stronger than expected. Retail sales also remained in line with expectations, rising 1.3% following a 1.4% decline previously.
In the UK, the services sector activity rose to 51.3 after falling to 50.3 in January.
The U.S. ISM non-manufacturing PMI came in at 59.7, beating estimates of 57.4. It marked a one-year high. Meanwhile, IHS Markit’s services PMI also rose to a seven-month high.
New home sales report for December showed a strong increase, rising 3.7% on the month to a seasonally adjusted 621,000. The median estimates called for a decline to 605,000. On a yearly basis, new home sales were down 2.4% compared to the same period the year before.
The European trading session is relatively quiet. The NY trading session starts off with Canada’s trade balance figures and labor productivity data.
The Central Banks
Following the RBA’s decision to leave interest rates unchanged yesterday, the quarterly GDP report was released this morning during the Asian trading session. The fourth quarter GDP in Australia rose by 0.2%. Economists forecast that GDP would increase by 0.5% during the quarter, up from 0.3% from the previous quarter.
The BoC will be holding its monetary policy meeting later in the day. We can expect no changes, as the BoC will keep interest rates held at 1.75%. Canada’s Ivey PMI report is due following the BoC meeting.
Fed members, Williams and Saunders, are due to speak later in the evening. The speeches come ahead of the Fed meeting due later in the month.
EURUSD Intraday Analysis
EURUSD (1.1297): The EURUSD currency pair was seen extending the declines on Tuesday. Price action closed below the support area of 1.1327 – 1.1309 before modestly pulling back. The bearish close below the support suggests further declines in store. The lower support at 1.1256 will be the most likely target to the downside. This would keep the common currency range bound within the longer term, while the decline to 1.1256 will see prices retesting the lows from mid-February this year.
USDJPY Intraday Analysis
USDJPY (111.75): The USDJPY price action is suggesting some exhaustion to the rally. Price action has stalled its upside momentum near the highs of 111.89. If price starts to correct, then we expect USDJPY to slip briefly to the 111.21 level where support could be reestablished. This would eventually open the way for the USDJPY to post further gains in an attempt to target the next main resistance at 12.50.
XAUUSD Intraday Analysis
XAUUSD (1287.42): Gold prices closed with some modest gains on the day although price action remained bearish. This comes after prices declined for four consecutive sessions daily. The technical pattern indicates a near term correction that could take place if there is a bullish follow through to the upside today. However, there is a risk of gold prices testing the support at 1280 more firmly. To the upside, we expect the price level of 1304 – 1305 to be tested for resistance with the potential for a move higher toward the 1320 – 1321 level.