The US dollar continued to strengthen its position against the euro and the pound amid the lack of important fundamental statistics. Speeches by representatives of the Federal Reserve System on the state of the economy and interest rates also helped the dollar maintain its position against several world currencies.
EURUSD
Yesterday's report on the pace of new home purchases in the US provided only minor support to the dollar. According to the US Department of Commerce, sales in the primary housing market in August 2019 increased by 7.1% and amounted to 713,000. Economists predicted sales amounted to 660,000 in August. The average price of a new home in August was $328,000. July data has been revised. According to the clarification, sales amounted to 666,000 homes, rather than 635,000 homes, as previously reported.
Yesterday, it also became known that the US and Japan signed an expanded trade agreement. According to the US leader, the new agreement will reduce the chronic trade deficit, as Japan will open new markets for agricultural goods worth about $7 billion. Trump also expects a more comprehensive treaty to be signed in the future. Japan is expected to reduce or eliminate duties on beef, pork, wheat, cheese, corn, and wine.
As noted above, yesterday's speeches of the Fed representatives supported the US dollar, as some of them do not see the need for further reduction of interest rates, expecting good economic growth and inflation by the end of the year.
In an interview with the President of the Federal Reserve Bank of Chicago, Charles Evans said that he no longer expects interest rate cuts this year, but is prepared for the possibility of such a possibility. In his opinion, the economy is in a good position to reach a target inflation rate of 2%.
His colleague Robert Kaplan also noted that the probability of a recession in the next 12 months is relatively small. In his opinion, a recession in the short term is unlikely due to the high level of consumer spending, but the questions are the slowdown of the world economy and weak indicators of industrial activity. Kaplan also believes that the current level of interest rates does not need to change, and there is no further need to reduce rates.
As for the technical picture of the EURUSD pair, the further decline will be limited by a large support in the area of 1.0930 and its breakthrough will be the envy of what the data on US GDP growth for the 2nd quarter of 2019 will turn out to be today. Also in the afternoon, the President of the European Central Bank will speak, which may make hints at further easing of monetary policy, which will further weaken the position of risky assets. The breakout of the low of 1.0930 opens a direct path to the trading instrument in the area of the lows of 1.0870 and 1.0805. If the data diverge from the forecasts of economists, buyers of risky assets can make an active attempt to return to the resistance level of 1.0985, which will lead the trading instrument to yesterday's maximum in the area of 1.1025.
GBPUSD
The British pound continued to decline against the US dollar after the political situation only worsened after the return of the UK Parliament to its work. During a speech in Parliament, British Prime Minister Boris Johnson did not rule out a second attempt to suspend his work. Let me remind you that earlier this month, with the sanction of the queen, Johnson suspended the work of the legislative body, however, on September 24, the country's supreme court declared this decision unlawful, and the parliament returned to work.
Also, Boris Johnson yesterday once again invited the opposition to propose a vote of confidence in the government, making it clear that he is not afraid of his resignation.
As for the technical picture of the pair, the bears will be aimed at breaking the support of 1.2330 today, but it will be possible to do this only under the scenario of good data on the US economy. The breakout of the low of 1.2330 will return the trading instrument to a large monthly support in the area of 1.2280.