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The U.S dollar advanced against most of its major rivals, including the euro since yesterday (23/8). The EURUSD pair is ticking down strongly from a high of 1.13654, as investors are paying close attention to the Federal Reserve Chair Janet Yellen’s comments for any hints of a rate hike.

eurusd h4

Fig. EURUSD H4 Technical Chart

Fundamental Analysis

According to the report from Markit on Tuesday (23/8), the flash purchasing manager index in U.S came in at 52.1 for August, lower than the analysts’ estimation of 52.7. This figure also represented a stumble from the July’s reading of 52.9. Although the statistics was still above 50.0, indicating industry expansion, it came as a disappointment after strong number the prior month. The pullback in orders for manufacturing companies and the weaker payroll growth raised some worries over the growth of manufacturing sector in August.

us pmi

Fig. US Flash Manufacturing PMI

The U.S manufacturing companies continued to flash a warning light after the report by Federal Reserve Bank of Richmond on the same day. The report implied that the manufacturing index for August fell steeply to negative 11, losing 21 points from previous month’s 10 reading. Analysts had expected an improving manufacturing condition with the index of 6.

On the other hand, U.S market received positive data from the Commerce Department. The U.S. new home sales in July unexpectedly rocketed to 654,000, the highest level in almost nine years. Analysts had expected the number would be 575,000 homes. This sharply rising number can be explained by higher demand amid low interest rates on mortgage and lower supply amid slipping inventory of existing homes.

In spite of the mixed data on Tuesday, the greenback strengthened against all of its major rivals. Traders betted a 28% probability of a U.S. interest-rate increase in September and a 54% chance of a December rate hike. Nevertheless, according to the data from the Commodity Futures Trading Commission, hedge funds and money managers’ wagers on bullish positions for the dollar outnumbered the bearish ones by 125,117 in the week to August 16th, lower than 144,268 for the week ending on August 9th .

Furthermore, the energy market saw some bright signals of the “supply cut” plan as a report from Reuters yesterday implied that there would be possibility that Iran would say “yes” to the output freeze agreement with other oil producers in the upcoming meeting in order to prop up the oil market. This news helped to solve the glut in the crude market and lift up the oil price in the future, which is an important factor for pushing U.S inflation towards the central bank’s 2% target.

The market’s focus lies squarely on Federal Reserve Chair Janet Yellen’s speech this week in the gathering of global central bankers later this week in Jackson Hole, Wyoming, for any hints on the upcoming Fed’s monetary policy.

Hawk_dove_cartoon_06.06.2016

Meanwhile, euro-area data for the services and manufacturing industries had the good performance in August. The Eurozone flash manufacturing purchasing managers index for August showed a slightly drop to 51.8, compared with the prior month’s 52.0. The flash services purchasing managers index rose fractionally to 53.1 in August from 52.9 in July. Even the French services sector received a boost – despite the terror attack in Nice and brutal killing of a priest in Normandy – with output reaching a ten-month high of 52.0. These statistics suggested  European Union economy was still on the recovery path in the third quarter with little effect from the U.K opting out after the Brexit vote on June 23.

The report from federal statistics office Destatis today (24/8) indicated that German’s gross domestic product (GDP) grew by 0.4% in the period between April and June, thanks to strong foreign trade and buoyant consumption. Yet, business investment in capital goods fell by 2.4% and in construction by 1.6%, suggesting that investors still poured a doubt over the country’s economy condition in the aftermath of Brexit. This information seemed to have muted impact on traders and investors, especially ahead of Fed’ Chair Janet Yellen’s speech.

Technical Analysis

eurusd h4

Fig. EURUSD H4 Technical Chart

After failing to surge up to pass over the resistance of 1.13654, EURUSD fell down significantly. And now the pair is forming a look-like double top pattern. ADX (14) points up to the reading of 24.8891, along with DI- is striving to get away from DI+. This indicates that the down-move is getting strengthening and further declines are awaited.

eurusd h1

Fig. EURUSD H1 Technical Chart

RSI (14) stays low under the oversold threshold. That gave the clear signal that the bear is overwhelming and taking the lead in the marker. PFM signal trend indicator has suggested shorts on EURUSD since yesterday via a red arrow hanging over the price chart. The price may consolidate for some time and thereeafter pulling back. The firm support of 1.12535 is likely to be reached.

Analyses of Group Fiinvesting

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