US GDP Estimate Surpasses All Expectations

In anticipation of the latest German CPI on Wednesday afternoon, the EURUSD continued to withstand bearish pressure. Although the German CPI met expectations and refrained from further awaking the bears, the EURUSD fell to a new yearly low following the US 2nd quarter GDP estimate. Figures from the US Department of Commerce showed that the US economy expanded by an annualised 4% between April and June. The EURUSD fell as low as 1.3366 on the release, its lowest valuation since the 13th November 2013. The pair concluded trading at 1.3396.

Today, the EURUSD will likely continue to experience further pressure, with both the latest EU CPI and German employment report announced. In reference to the EU CPI release, many are expecting EU CPI to remain at 0.5% for the third successive month in July. The ECB appear prepared to offer their latest stimulus measures time before considering implementing QE and as long as EU CPI refrained from falling last month, this might provide the EURUSD with some breathing space.

The GBPUSD also fell on the news that the US GDP estimate surpassed all expectations, although the pairs losses were capped under 40 pips and the pair concluded the day at 1.6912.

Today, it is widely expected to be announced that UK house prices increased by at least 10% in the past year. Bearing in mind BoE Governor, Mark Carney had previously admitted that the UK housing sector posed one of the largest threats to the UK economy, i would expect bearish movement in the GBPUSD as a result. Upcoming GBPUSD support levels can be found at 1.6891 and 1.6872.

The USDJPY was a major mover following the US GDP release and appreciated by up to 90 pips throughout the day. The FOMC statement on Wednesday evening suggested that the Federal Reserve will leave interest rates unchanged until at least mid-2015 and this prevented further appreciation in the USDJPY. Still, the pair concluded the day at 102.781. Not only is this valuation the highest close since the 7th April, but the USD has now recorded 9 consecutive days of gains against the JPY.

Now that there are indications that consumer expenditure is declining in Japan following the sales tax imposed in April, now could be an opportune time to look at this pair in the longer term. In the short term, the pair will be susceptible to a few minor pullbacks with a few questions likely to remain regarding how consistent US economic releases will prove. However, the deteriorating Japanese expenditure data will open up the debate regarding whether the BoJ will need to add further stimulus to their economy. Possible upcoming support levels can be found at 102.778 and 102.647, with resistance levels located at 103.075 and 103.265.

Investors continued to take profit in the AUDUSD yesterday, after Australia’s latest Building Approvals release showed that Building Approvals contracted by 5% on a monthly basis. The Australian economy is under intense pressure to refrain from reliance on mining/exports and transition towards domestic consumption. Throughout yesterday, the AUDUSD declined by up to 80 pips, before concluding the trading at 0.9329.

The disappointing Building Approvals release will likely continue to weigh on the AUDUSD and i expect further bearish movement as a result. Upcoming AUDUSD support can be found at 0.9316 and 0.9302. If the pair extends below 0.93, this will open up the doors for downside moves towards 0.9284 and 0.9268. A move below 0.93 would also represent the lowest AUDUSD valuation since the 5th June.

Reserve Bank of New Zealand (RBNZ) Governor, Graeme Wheeler comments from last week that the valuation of the New Zealand Dollar was both unjustifiable and unsustainable continues to mount pressure on the NZDUSD. The pair declined by up to 50 pips yesterday, before concluding at 0.8489.

Wheeler strongly hinted that the RBNZ would now pause further monetary tightening (raising interest rates) and this will more than likely move the NZDUSD back towards pre-interest rate hike levels. Upcoming NZDUSD support levels can be found at 0.8461 and 0.8442.