Euro stalls after Europeans nominated Christine Lagarde to lead ECB
The euro was relatively unmoved after Europeans agreed to nominate IMF chief, Christine Lagarde to be the next head of the European Central Bank. Lagarde will be the first female ECB President and the first without a pedigree in central banking. As such, this raises the question about whether she will have the same credibility in the financial market that Draghi has. Her nomination comes at a time when global central banks have been in focus. In the US, the Fed is expected to slash rates in the July meeting while the ECB has extended the period it expects to raise interest rates to the first half of 2020. Yesterday, the RBA slashed rates for the second consecutive month. After the nomination, Lagarde will go through the formal approval process, which will take place in the next few months.
The USD was unchanged in the Asian session after Donald Trump announced his plan to nominate Judy Shelton and Christopher Waller to the Federal Reserve. The nominations came after his previous nominee – Herman Cain and Stephen Moore – stepped aside after receiving wide criticism. In a recent interview with CNBC, Judy said that if she were appointed to the Fed, she would lower interest rates to 0% within two years. In recent months, Trump has lambasted the Federal Reserve for the rate hikes it did in the past two years. The bank is now expected to slash interest rates in the July meeting.
The price of crude oil declined sharply in the US session even after OPEC+ agreed to a continuation of supply cuts. Members will now slash production by more than 1.2 million barrels every day for the next 9 months. Brent crude declined by 4.01% while US crude declined by 4.8%. This happened after the two benchmarks touched the highest levels in more than five weeks on Monday. While the supply cuts by OPEC were good for crude oil, investors were concerned that the cuts were not high enough. Investors were also concerned about the signs of the weakening of the global economy. Yesterday, API inventory data showed that crude stocks declined by more than 5 million barrels and later today, EIA is expected to show that inventories declined by more than 2.94 million barrels.
In the Asian session, investors received trade data from Australia. Data showed that exports and imports increased by 4% and 1%, leading to a higher trade surplus of more than $5.74 billion. In China, the Caixin services PMI declined to 52. Later on, investors will receive the CPI data from Turkey, rate decision by the Riksbank, PMI data from Germany, France, European Union and the UK. In the US, they will receive the Challenger Job Cuts data, the ADP nonfarm employment change data and the trade numbers. They will also receive the ISM non-manufacturing PMI data, Markit’s PMIs and factory orders.
The EUR/USD pair has been declining since June 25, when it reached a high of 1.1412. The pair is trading at the 1.1287 level, which is slightly above yesterday’s low of 1.1275. On the hourly chart, the price is between the middle line of the Bollinger Bands and is along the blue support shown below. It is also slightly below the 50% Fibonacci Retracement level. The pair will likely continue the downward trend to test the important support of 1.1235, which is also the 23.6% Fibonacci Retracement level.
The XBR/USD pair declined sharply to a low of 62.10. This was the lowest level since June 20 and was below all the short and medium-term moving averages on the hourly chart. The RSI moved to the oversold level of 30 and is currently at 32 while the price is along the lower line of the Bollinger Bands. The momentum indicator has continued to decline while the average directional index has reached 48. This means that the pair could continue declining to move below 60.
The USD/JPY pair continued moving lower after the G20 summit. After rising to a high of 108.53 on Monday, the pair declined to low of 107.52 in the Asian session. The pair is trading between the 50% and 38.2% Fibonacci Retracement level. The price is below the 28-day and 14-day moving averages. The RSI has remained below the oversold level of 30. The pair will likely reach a low of 107.20, which is also the 23.6% Fibonacci Retracement level.