Market Analysis: Dollar Strengthens Amid Good Data

FXOpen

Data on business activity in the US for August was published. In general, indicators are recovering, but the pace is slowing down, and the beginning of a recession in the near future is seen as quite possible. Nevertheless, investors still hope that a recession in the US economy will be avoided. Weekly data from the American labour market were also published yesterday. Thus, the number of initial applications for unemployment benefits amounted to 216.0k, which turned out to be lower than both the forecast of 234.0k and the previous value of 229.0k. The total number of citizens receiving assistance from the state decreased from 1.719 million to 1.679 million, while experts estimated 1.715 million, confirming the stable state of the sector, which may contribute to a new increase in the US Fed interest rate.

EUR/USD

The euro fell on Thursday as Europe's economic outlook continued to deteriorate. Data showed German industrial production fell slightly more than expected in July. The Ifo Institute said Germany's economy would contract by 0.4% this year, confirming its previous forecasts published in June. Meanwhile, European statistics agency Eurostat revised down its estimate that eurozone GDP rose 0.1% in the second quarter from the previous three months. On an annualised basis, GDP increased by 0.5%, Eurostat said, revising its previous growth estimate of 0.6%. The immediate resistance can be seen at 1.0744; a breakout to the upside could trigger a rise towards 1.0788. On the downside, immediate support is seen at 1.0697, and a break below could take the pair towards 1.0672.

A new downward channel has formed at the lows of the week. Now, the price is in the middle of the channel and may continue to move towards the upper border.

GBP/USD

Sterling held at a three-month low against a stronger US dollar on Thursday as traders focused on dovish Bank of England signals and easing corporate inflation expectations. On Wednesday, Bank of England Governor Andrew Bailey said the bank is much closer to ending a series of interest rate hikes, but borrowing costs may still rise due to stubborn inflation pressures. Expectations for an interest rate rise were further tempered on Thursday after the BoE survey showed UK businesses are targeting the lowest price rises since February 2022 and expect prices to rise less next year than previously planned. The study will provide some reassurance to policymakers that inflation will soon return to target. The nearest resistance can be seen at 1.2546; a breakout to the upside could trigger a rise to 1.2588. On the downside, immediate support is seen at 1.2455, and a break below could take the pair towards 1.2426.

A new downward channel has formed at the lows of the week. Now, the price is approaching the upper limit, from where it can continue to decline.

USD/JPY

The US dollar was lower against the Japanese yen on Thursday as investors were cautious after interventions to support a weak yen, while the dollar strengthened on strong US data. In Japan, traders continued to monitor interventions as the yen struggled to make sustained progress against a firm US dollar, even as officials stepped up their warnings against further weakness in the Japanese currency. The US dollar earlier hit a new high of 147.875 yen, its highest since November 2022 and was last down 0.4% at 147.20. Strong resistance can be seen at 147.32. A break upward could trigger a rise to 147.65. On the upside, immediate support is seen at 146.62; a break below could take the pair towards 145.95.

A new ascending channel has formed at the highs of the week. Now, the price is at the lower border of the channel, and in the event of a strong breakout, it may continue to decline.

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