On Friday, the dollar strengthened after data from the Department of Labor showed a tightening labor market and wage growth. In August, wages rose at an annualized rate of 2.9%, which was the highest growth rate in nine years. While this was positive news, it also brought worries that the Fed will continue hiking interest rates.
Pound sterling was a major market mover last week. On Wednesday, it jumped after Germany and the UK took steps towards a smoother Brexit deal. It jumped further on Friday after a transcript of a statement by Michael Bernier showed that the EU was ready to offer some concessions. Today, the sterling will likely be volatile as the ONS releases crucial data on the GDP, manufacturing, trade, and industrial production. Tomorrow, it will release the jobs numbers and on Thursday, the BOE will deliver its interest rates decision.
With regards to trading, the public hearings session on the proposed $267 billion worth of Chinese tariffs ended last week. On Friday, Trump indicated that the tariffs will go on, which led to a lengthy letter by Apple, decrying the proposed tariffs. The company said that the tariffs will be a tax to consumers, who will be forced to pay higher prices. There are indications that China will implement non-tariff-based retaliations such as halting the purchases of US treasuries.
The Japanese yen strengthened against the USD after Japan released GDP numbers for the second quarter. In the quarter, the economy expanded by 3.0%, which was higher than the expected 2.6%. This growth was attributed to the increased spending on capital expenditures by Japanese firms. The data provided some relief to Japanese policymakers but the recent soft data like the exports and factory outputs coupled by recent floods and earthquakes have lowered expectations for the third quarter.
Last week, the Nasdaq index reached an all-time high of $7688 and established a strong top position as shown below. On Friday, the index started falling as traders waited for a decision on tariffs. It ended the week at the $7325 level. The longer-term EMA (100) crossed the shorter-term EMA (50), which is a sign that the downward momentum could continue. Today, the index is likely to hit the important support of $7340 as the trade rhetoric escalates.
The USD/JPY pair fell to an intraday low of 110.734. It then rose to a high of 111.09 as trade war talks clouded the good economic data from Japan. The current price is between the 38.2% and 50% Fibonacci Retracement level. It is also slightly above the 50-day EMA and on the middle band of the Bollinger Bands. The pair could continue moving up to the upper band of 111.126 and then proceed to the important resistance level of 111.270. If it reverses, it could move to the 110.827 level.
On Friday, the EUR/USD pair moved below the important support level of 1.1573. The longer-term EMA also crossed the shorter-term EMA, which was a sign that the downward momentum could continue. Today, in the Asian session, the pair continued the slide and the pair reached an intraday low of 1.1546. If the pair continues moving lower, it will test the support of the 1.1527 level, which is also slightly above the 50% Fibonacci Retracement level.