The Dramatic Decline of the US Currency

The not-too-bad data on pending housing sales in the United States did not prop up the dollar. The US currency's fall only accelerated in afternoon trading. If the bulls manage to consolidate above 1.1730, then the next medium-term target might be 1.2165 (1.2170). The Eurozone’s GDP will be published tomorrow, and this might strengthen the bulls; on the other hand, the market has built in growth of 2.4%. If the data are disappointing, the bears will be able to try to get revenge. However, analysts agree that among the basic reasons for such a dramatic decline in the US currency are political factors and the decline in expectations that the Fed will tighten monetary policy. So, the FOMC’s mood is clearly dovish, which leaves dollar bulls with almost no hope.

The Dow Jones set out to attack 22,000. US stock markets are rising, but the bulls’ zeal may cool after Apple’s and Tesla’s corporate reports come out next week. The forecast for per-share profit is not very optimistic, and traders will have to try hard to drag Tesla above $330. Technically, we currently have a classic bearish inverted flag with the possibility of a continued decline. According to wave theory, a corrective C wave is forming, the end of which may be from 61.8% to 161.8% of the correction from the A wave, i.e., a correction is quite possible approximately up to $268.50 per share.

The industrial PMI for July will be published in the UK. Amid the bad news for the USD, the GBP/USD pair has also surged upward. Meanwhile, Prime Minister Theresa May has returned to her duties from a three-week vacation. On the political front, it is clear that May is taking a definite pause, which just might be related to the weakening of her position after the recent parliamentary elections.

Among interesting news today is the RBA’s release of its interest rate decision. Here, as during the FOMC meeting, it is not so much the decision as the commentary that follows that is interesting. Technically the situation with the aussie resembles that of the EUR/USD. The bulls’ target might be 0.8450, which is a 38.2% Fibo correction from the high of 1.1087.

Nikolay Dudchenko, Olymp Trade

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