USD Tumbles for Third Consecutive Day
Escalating trade tensions, fueled by weak economic data from the United States kept the greenback in check. The US dollar index fell for the third daily session, falling to a two-week low. Part of the declines also came as China’s yuan declined further. The yuan broke the psychological barrier of 7 yuan to the dollar. This prompted President Trump to comment that China was deliberately devaluing its currency. But Beijing hit back noting that it was in response to the US-led tariffs.
Euro Rises to a Two-Week High
The common currency gained ground on the back of a weak USD, pushing the currency pair to test a two-week high. Economic data for the eurozone was sparse. The final services PMI from Markit was almost in-line with the flash estimates. Eurozone’s services sector index rose to 53.2 against estimates of an increase to 53.3. The Sentix investor confidence was however weak, falling to -13.7 from -5.8 previously and was worse than the estimates of a decline to -6.9.
Can the EURUSD Rise Higher?
The currency pair broke past the minor resistance level of 1.1188 and was seen trading near the 1.1200 handle. In the near term, we could expect the declines to possibly stall near 1.1188. The declines, if severe, could see the euro easing to 1.1140 at worst. However, the downside could be limited for the moment, especially if the current narrative keeps up.
UK Services PMI and Weak USD Help GBP to Stabilize
The pound sterling was seen posting modest gains for a second day. The gains came with the UK’s services PMI coming out fairly better than expectations. Markit’s services PMI index was seen rising to 51.4 in July comparing to 50.2 in the month before. The data was also slightly better than the estimates of an increase to 50.4. The weaker USD also helped the currency pair to post the modest gains.
Will GBPUSD Maintain the Consolidation?
Price action in the cable suggests that there could be breakout soon, following the sideways range. We expect that there is a possibility for the GBPUSD to maintain a bottom near 1.2126 region in the near term. The consolidating descending wedge pattern could signal an upside breakout. This will push the GBPUSD to possibly test the main support level at 1.2400 that could be tested for resistance.
Gold Gains on Falling Risk Appetite
The precious metal was seen posting strong gains on Monday, as the bullish momentum picked up. The gains came largely due to falling risk appetite. U.S. equities fell sharply and continued their declines. Investors, as a result fled to safe haven assets. Gold posted intraday gains of 1469.59 at one point.
Can XAUUSD Maintain the Bullish Momentum?
The precious metal could be seen targeting the 1500 psychological level if the current momentum gains strength. However, the gains are likely to be dictated by the developing trade war narrative. It is likely now that the U.S. and China trade war could slip into currency wars. As a result, gold prices might be at risk of sudden volatility. To the downside, the main support level at 1428 will be tested in the near term.