- October 19, 2020
- Posted by: Analysis Team
- Category: FOREX, Weekly Analysis
The Australian dollar is up today as the market reacts to impressive Chinese growth. According to the statistics bureau, the country expanded by 4.9% in the third quarter after rising by 3.2% in the second quarter. That makes it the only major country to recover for two straight quarters. The impressive growth was spread across all sectors, with fixed asset investments rising by 0.8% and industrial production rising by 6.9%. Exports also continued to rise as demand from foreign companies increased. Therefore, the Aussie rose because of the important role that China plays in the economy as its biggest consumer.
The euro weakened slightly against key currencies as investors reacted to rising Covid-19 cases and the fear that Europe was heading towards a double recession. That is because some of the biggest economies in the region have already announced measures to prevent a second outbreak. For example, yesterday, Belgium announced the closure of all bars and cafes for four weeks while Paris has announced a curfew for four weeks. More countries like the United Kingdom and Spain have also announced similar measures. Later today, the euro will react to a speech by Christine Lagarde.
The Japanese yen was little changed today as the market reacted to the September trade numbers. The data showed that the country’s exports declined by 4.9%, which was better than the previous month’s contraction of 14.8%. This decline was worse than the expected 2.4%. At the same time, imports fell by 17.2%, a better performance than the previous month’s decline of 20.8%. As a result, the trade surplus expanded to ¥675 billion from the previous ¥248 billion. The median forecast by a Reuters survey was for the surplus to rise to ¥989 billion.
The EUR/USD price is down by a few pips as traders react to second-wave fears. The pair is trading at 1.1711, which is lower than Friday’s high of 1.1725. On the four-hour chart, the price is between the 25-day and 50-day exponential moving averages. The average true range (ATR), which is an important measure of volatility continued to fall. While the pair is likely to remain in the current range today, a downward breakout is possible because of the bearish flag that is forming.
The AUD/USD rose slightly as traders reacted to the impressive China growth numbers. It is trading at 0.7092. It is slightly below the 14-day and 28-day exponential moving averages while the RSI has started rising. The signal line of the MACD has also made a bullish crossover. It is also slightly below the 23.6% Fibonacci retracement. Therefore, the pair will remain in the current range today. As the EUR/USD, the pair is likely to break-out lower because of the bearish flag pattern.
The GBP/USD price is in consolidation mode as investors wait for more progress on Brexit. On the four-hour chart, the price is below the ascending channel shown in pink. It is also slightly above the 25-day exponential moving average while the RSI has moved up to 53. The price is above the important support at 1.2863. Therefore, the pair is likely to continue consolidating today.