Fundamental Analysis

Pound Falls Despite Decline in British Unemployment

Typography

The EUR/USD turned negative as strong demand for the greenback grew, even on the back of positive employment data out of the Eurozone. Employment grew by 0.4% in the common region in the second quarter of this year, which is 0.1% better than the forecast. Industrial production in the euro zone also increased by 0.1% in July compared to the 0.6% decline in June. The market mostly shook off the producer price index report in the US which increased by 0.2% in August, 0.1% short of the forecasted figure. Investors are in no hurry to accumulate positions as they wait for tomorrow's release of consumer inflation data in the US, that may significantly impact the future plans of the Fed concerning the next interest rate hike.

A stronger US dollar also supported the USD/JPY bulls. Additional stimulus for the pair came from positive dynamics from the BSA manufacturing index in Japan that in the third quarter reached 9.4 against the forecasted 4.8. Tomorrow traders will be monitoring statics on Japanese industrial production in July that will be published at 04:30 GMT.

The British pound has been under pressure thanks to slower than expected wage growth in the country. In July the pace of wage growth remained at 2.1% compared to the average forecast of 2.3%. Even the decline in the unemployment rate to 4.3% was not enough to compensate for the weak data on wages and negative influence from the appreciation of the US dollar. Volatility is likely to remain high tomorrow as the Bank of England votes on interest rates.

EUR/USD

The EUR/USD price started to fall after some consolidation under the 1.2000 mark. Currently the quotes approached the inclined support line and in case of overcoming it and the local minimum near 1.1924 we may see a continued decline to 1.1825 and even 1.1750. Growth potential for the time being is likely to be limited by the multiyear high near 1.2100.

GBP/USD

The sterling rolled back after recently overcoming the 1.3300 mark. In case of growth resuming, the next target within the rising channel will be 1.3400, but on the other hand, breaking through the lower boundary of the channel may force traders to sell the pair and the closest objective in that case will be at 1.3150. The RSI on the 15-minute chart came close to the oversold zone, indicating a potential upward rebound.

USD/JPY

The USD/JPY demonstrated a confident rising dynamic and is now trying to overcome resistance at 110.30. Fixing above this level is likely to stimulate the bulls to push the quotes higher to 111.00. The MACD signal line just crossed the zero point which is an additional stimulus for bullish sentiment. In case of downward correction, the pair may return to the important 109.60-110.00 range.

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