For Wall Street traders, today was a different day, but the result was the same. US equity markets melted down again but in a less dramatic fashion. The Dow Jones Industrial Average lost 545.91 points and sank to 25,052.83. The S&P 500 lost 2.06%, and the Nasdaq only gave up 1.25%. The day started with the major indices in the red, but things started looking up after the highly-anticipated US inflation data didn’t live up to expectations. September CPI rose 2.3% (forecast 2.4%) while the more important Core CPI rose 2.2% instead of 2.3% which was expected. That was a relief for Wall Street, but the relief was only temporary. US Treasury yields retreated, oil prices sank, and sellers emerged. Like yesterday, President Trump blamed the Fed for the sell-off saying “The Fed is out of control. I think what they are doing is wrong.”
The US dollar reacted the same way as it did yesterday. The greenback opened in Asia with losses across the board compared to yesterday’s open. Once again, AUDUSD and NZDUSD were the biggest gainers, in part because they lost the month when traders focused on rising US interest rates.
GBPUSD traded in a 1.3184-1.3244 range and closed near the top. Prices jumped from 1.3200 to 1.3238 in late afternoon trading when headlines said “UK and EU close to Brexit deal.” UK Prime Minister May reportedly gave in to EU demands on the Irish border issue, but it could also mean the end of her coalition government because the Irish Democratic Unionist Party (DUP) are opposed to it. GBPUSD could rally substantially on news of an agreement which would also free the Bank of England to raise interest rates.
The intraday GBPUSD technical are bullish following the break of resistance in the 1.3200-10 area and are targeting 1.3320 and 1.3470. A move below 1.3200 would extend losses to 1.3120 but maintain the uptrend.
Chart GBPUSD 4 hour
Source: Mocaz charts
EURUSD is in a steep uptrend after bottoming out at 1.1445 on Tuesday. The single currency has rallied as sentiment shifted from an aggressive Fed rate hike posture to a tamer one, following the equity market sell-off and a drop in Treasury yields. Still, the rally is just a correction while prices are below 1.1605. It wouldn’t be unreasonable to expect a profit taking sell-off ahead of the weekend.
Chart EURUSD hourly
Source: Mocaz charts