Greenback extended its weakness as economic indicators and political developments pushed further lower. Gold run sharply higher due to the U.S. dollar weakness and British uncertainty, while British pound plunged widely from U.K. CPI first drop in 10-months.
U.S. Import Price Index Dropped Again & CPI Below Target
The U.S. dollar had a choppy session yesterday while USD/JPY resumed its downward rally. The main downward push is coming from Trump’s probable failure to pass his healthcare reform which raised doubts whether he will manage to convince Congress to vote for his tax and spending reforms. These three acts were key parts of his campaign. The U.S. import prices fell for the second straight month in June, 0.2% down month-over-month, following a downwardly revised 0.1% drop in May. The contraction came from the further decreases in petroleum production costs, which may keep the inflation rate lower. It is worth mentioning that the problem keeping back Fed from raising rates is the below target inflation rate, even though Fed Chair Janet Yellen said that the conditions for the inflation rate to move up are there.
USD/JPY – Technical Outlook
The U.S. dollar completed a negative day against the greenback and is creating the second bearish week in a row. The USD/JPY slipped lower and managed to challenge our recommended target at 111.70 (see technical analysis here: https://bit.ly/2tAv2kY) which overlaps with the 50-day SMA. The price fell 0.6% yesterday and is trading below the 200-SMA this week. Ahead of the Bank of Japan interest rate decision tonight, if the price plunges below 111.70, it will hit the 108.80 support barrier. On the other side, if the price pauses its correction, it would meet the 114.40 resistance handle. The RSI indicator declined below the 50 level whilst the MACD oscillator is dropping near its mid-level.
U.K. Inflation Rate Disappointed Hardly; Sterling Plunged
The British pound headed south against all the major currencies on Tuesday, pulled down by weak CPI report. The headline inflation rate surprised the markets with a drop to 2.6% year-over-year in June against expectations of 2.9% as the prior month. It is the first fall since October 2016 and is attributed to...
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