The Japanese yen was little changed as the market reacted to the first quarter GDP numbers from Japan. The data showed that the country sunk into a recession even before the state of emergency was announced. The country’s GDP contracted by 3.4% year on year and by 0.9 per cent quarter on quarter. These numbers were slightly better than the consensus estimates of 4.6% and 1.2% respectively. The external demand contracted by 0.2% while capital expenditure declined by 0.5%. Meanwhile, private consumption declined by 0.7% while the GDP price index rose by just 0.9%. This is the first recession since 2015.
The British pound declined as the market reacted to the Brexit news. The third round of Brexit talks ended without a deal last week as the two sides blamed one another. The European Union side blamed the UK for lack of flexibility while the UK accused the EU of disrespecting the Brexit vote. The UK has demanded a free trade agreement that gives it flexibility on trade. For example, it wants to set its own regulations and not be bound by those from the EU. The EU, on the other hand, has insisted on a “level playing field.” These disagreements raise the probability that the two sides will not reach an agreement before June 30.
The price of crude oil rose in morning hours as the market reacted to increased demand and low supplies. Media reports suggested that business activity was starting to increase in many countries. This is an indication that demand will rise in the coming days. Meanwhile, data from Baker Hughes showed that US producers were slashing production. The number of active oil rigs declined to 258 from the previous 292. Analysts were expecting the rigs to fall to 277. The US had more than 880 active rigs in December 2018. The total rig count declined from the previous 374 to 339.
The EUR/USD pair rose slightly in the Asian session and is trading at 1.0825. On the hourly chart, this price is along the 23.6% Fibonacci retracement level. The price is also slightly above the 25-day and 50-day exponential moving average while the RSI has moved slightly higher. The pair may continue moving upwards as the market attempts to retest the 38.2% retracement level at 1.0862.
The GBP/USD pair declined to an intraday low of 1.2070 following the Brexit discussions. On the four-hour chart, the price is slightly above the 38.2% retracement level and below the 14-day and 28-day exponential moving averages. The price is also below the neckline of the head and shoulders pattern that has been happening while the RSI has moved to the oversold level. The pair may continue falling as bears attempt to move the 1.2000 support.
The price of gold soared in morning trading, reaching a 7-year high of 1762. On the daily chart, the price moved above the bullish pennant pattern that was forming last week. The price is also along the 14-day and 28-day exponential moving average. Therefore, the pair may continue rallying as bulls attempt to test the all-time high of 1920.