USD Strengthens On Surprise Economic Reports

Equity markets rallied modestly on Thursday following reports that China and the United States will resume trade talks. The fresh round of talks is slated for October after China’s vice premier, Liu He and US officials spoke over the phone. Meanwhile, private payrolls grew by 195k in August. This beat the forecasts of a 140k increase. July’s numbers were revised lower by 14k to 142,000. The numbers come amid concerns of a slowdown in the economy.

Euro Retreats from a Five-Day High

The common currency tested a five-day high intraday, rising to 1.1083. The common currency gained largely due to the flows in the US dollar. Economic data was mixed with ADP payrolls released stronger than expected. But the services PMI from Markit came out lower than forecasts. However, this was overshadowed by the ISM’s non-manufacturing PMI. Activity in the non-manufacturing sectors rose to 56.4 in August.

EURUSD Retests Minor Resistance

The currency pair was seen rising to a weekly high as price action promptly gave up the gains. The retest of the previously breached support area at 1.1065 has been tested for resistance. This could mean that the euro currency could be looking to pare gains. The downside looks limited for the moment with the trend line coming in likely as dynamic support.

Pound Sterling Holds Up Amid UK Political Drama

The British pound was seen posting gains for the third consecutive day. This came after UK lawmakers rejected PM Boris Johnson’s request for general elections. The UK parliament is due to debate again, this coming Monday. The currency held up strongly despite rising uncertainty in UK politics ahead of the October 31st Brexit deadline.

GBPUSD Rises to a Two-Week High

The currency pair was seen posting gains, rising to a two-week high on Thursday. The lower price level of interest is seen at 1.2295. If support is established here, there is scope for further gains. However, given the current bullish momentum, we expect GBPUSD to continue rising higher. The next resistance level is seen in the 1.2428–1.2400 region.

Gold Drops on Upbeat US Data

The precious metal was seen falling over 2% on Thursday. This came following a string of better than expected economic reports from the US. Mostly, the ISM non-manufacturing PMI alongside ADP payrolls and US factory orders helped to strengthen the USD on the day. Positive news from US/China trade talks also helped investors’ risk appetite to improve.

Further XAUUSD Declines Ruled Out as Support Holds for Now

The precious metal was seen extending the declines to the initial support area. The support level of 1508 was briefly tested but prices were rejected promptly. We expect to see a firmer retest of this level in the near term. There is also scope for price to post a modest rebound in the near term. However, a lower high is likely to be formed.