The US President Donald Trump shifted gears as he hit out on the Federal Reserve Bank. His comments came on the back of various central banks including New Zealand that cut interest rates. Accusing the Fed of incompetence, Trump said that the Fed was refusing to admit its mistake of raising interest rates too quickly. Equity markets continued to come under stress.
Euro Unmoved by German Industrial Production Data
The euro currency maintained its bullish bias on Wednesday. Germany’s industrial production figures for July showed a 1.5% decline on the month. This led the industrial production to fall 5.2% on the year. The data spiked concerns that Europe’s leading economy could be slipping into a recession.
EURUSD Back to Range Trading
The currency pair, having cleared the 1.1185 handle is seen trading within the established range of 1.1250. We expect this to continue in the short term. A strong breakout from either level will establish further direction. The upside bias is more likely, as the resistance area of 1.1340 could be the next upside target.
Oil Drops on Crude Oil Inventory Buildup
Crude oil prices continued their decline on Wednesday. The Energy Information Administration reported a surprise build up in oil inventories. US Crude oil stockpiles rose 2.4 million barrels in the week ending August 2nd. This was in contrast to the expectations of a drawdown in inventory. The report came after the API showed a weekly decline in oil inventories of 3.4 million barrels.
Oil Breaks Below 51.70. Is 50 the Next Target?
The surprise build-up in the crude oil inventory sent oil prices slower by Wednesday’s close. Price fell below the 51.70 handle which was the initial downside target. However, with price now consolidating near this level, there is scope for oil prices to test the psychological level of 50 a barrel.
Gold Gains Amid Uncertainty
While there were signs of a recovery following the sell-off in the equity markets, gold prices were steady. The precious metal tested 1500 marking a fresh six-year high in the commodity. However, at the moment, the gains look to be overstretched. With the US and China trade war narrative currently fading, focus could once again shift to the economic data.
Gold Prices Could Pull Back off the 1500 Handle
The gains in the precious metal are likely to see a modest pullback in the near term. However, the bias remains to the upside. The support level is seen at 1445–1452 region which could be tested in the near term. Establishing support at this level will keep gold poised to make further gains. However, the 1500 handle could prove to be elusive to break past.