Yesterday's data on the US economy did not harm the US dollar much, as the decline in production activity was offset by the growth of the leading indicators index and a good report on applications for unemployment benefits.
Today will be an important speech by the Fed Chairman. As expected, Jerome Powell will try to shed light on the further approach to the situation with interest rates. If we talk about the need for further reduction, the pressure on the US dollar may return, which will lead to a strengthening of EURUSD and GBPUSD. If Powell continues to stick to a wait-and-see position, which is more likely, the euro will continue its downward trend in the area of new monthly lows paired with the US dollar.
Yesterday, Fed spokesman Robert Kaplan said that the risks to the economy's prospects are shifted downwards, but US GDP growth in 2019 may remain at the level of 2%. Kaplan wanted to avoid another rate cut, but he didn't rule it out. In his opinion, it takes time to understand what to do with rates, since the Fed does not have many monetary policy instruments, and it is not right to chase other central banks that lower rates.
As mentioned above, macroeconomic statistics have not changed the balance of power in the market.
According to data, the number of Americans applying for unemployment benefits for the first time remained at a record low. The report of the US Department of Labor stated that the number of initial applications for unemployment benefits for the week from August 11 to 17 fell by 12,000 and amounted to 209,000. Economists had expected applications to drop to 217,000. The number of secondary applications declined by 54,000 and amounted to 1,674,000.
The growth of activity in the US private sector slowed in August. According to IHS Markit, the preliminary composite index of purchasing managers, which includes the manufacturing index and the index for services, fell to 50.9 points in August from 52.6 points in July. The main fall was due to the reduction of the manufacturing sector, where the index fell to 49.9 points from 50.4 points, falling below the level of 50 points. The decrease in new orders harmed the production sector.
As for the PMI for the service sector, it fell to 50.9 points in August from 53 points in July.
The indicator measuring trends in the US economy grew in July. According to the Conference Board, the index of leading indicators in July increased by 0.5% compared to June and amounted to 112.2 points. Economists had expected the index to rise by 0.3% in July.
As for the activity in the production sphere in the zone of responsibility of the Federal Reserve Bank of Kansas City, it decreased in August. According to the report of the Fed-Kansas City, the composite index fell to -6 points against -1 point in July.
As for the technical picture of the EURUSD pair, it has not changed at all. The next goal of the bears will be to update the lows of last week with the test of the support levels of 1.1060 and 1.1030. If the bulls attempt to build an upward correction in the pair, it is best to consider short positions in the trading instrument from the upper border of the side channel of 1.1130. A larger resistance level is the area of 1.1160.
GBPUSD
The pound slightly adjusted after yesterday's strong growth, which was set at the meeting of the French President and the British Prime Minister, as well as after the statements of German Chancellor Angela Merkel about the possibility of the UK and the EU deal on the Irish border until October 31. The UK has 30 days to find a solution to the Irish problem.
As for the technical picture of the GBPUSD pair, as noted in yesterday's review, the further upward movement of the pound will directly depend on the level of 1.2180. Its breakthrough can lead to the demolition of several stop orders and a larger correction, but the main problem for the bulls will still be the highs of 1.2265.
