Two trades to watch: EUR/USD, Barclays
EUR/USD rises post-Fed, with German inflation, US GDP in focus
EUR/USD rose 0.9% in the previous session and is extending the move higher today.
The USD is trading under pressure following the Fed monetary policy announcement. The Fed, as expected, hiked rates by 75 basis points.
However, Fed Chair Jerome Powell said there were signs of weakness in the economy, particularly surrounding spending and production. While he didn’t rule out a further 75 bps point hike, he did say that the Fed would no longer be providing forward guidance.
The market has interpreted the meeting as dovish, pulling the USD lower. Fed Powell said that the US was not in a recession yet. With this in mind, attention will be on US GDP data which is expected to show a rebound to growth of 0.4% after contracting -1.6% in Q1.
In Europe, all eyes will be on German inflation data, which is expected to slip to 8.1% YoY in July, down from 8.2% in June, marking the third straight month of falling inflation.
Where next for EUR/USD?
After rebounding from the 2022 low of 0.9952 EUR/USD has so far struggled to move meaningfully above the 20 sma. Today the price is rising above the 20 sma, which, combined with the bullish MACD, keeps buyers hopeful of further upside.
Resistance can be seen at 1.0280, last week’s high, with a breakthrough here opening the door to 1.0340, the May low.
Failure to hold over the 20 sma could see the pair drop to 1.01, the weekly low. A break below here opens the door to 1.00 and 0.9952, the 2022 low.
Barclays falls after H1 profits fall
Barclays is falling after disappointing profits for the first six months of the year. The British bank reported a huge £1.9 billion hit for a conduct charge relating to the cost of having to buy back billions of dollars worth of securities, which it sold in error.
Profits before tax came in at £3.7 billion pounds, down from £4.9 billion in the same period the year before. This was also short of the 33.9 billion forecasts.
Despite the huge hit, the bank confirmed a 2.5p per share dividend and a £500 million share buyback programme, although this isn’t helping to stem the losses.
Elsewhere Barclays reported a strong performance in its investment banking business, with revenue from the trading division up 48%. Like its peer Goldman Sachs, Barclays is renowned for the quality of its trades, and today’s results highlight that. The Fixed income, FX, and commodities trading business reported a 51% jump in revenue.
Meanwhile, advisory fee income fell 31% as deal-making dried up amid uncertainty caused by the war in Ukraine.
Where next for Barclay’s share price?
After running into resistance at 162p the share price fell below the 50 sma and the falling trendline, which combined with te bearish crossover forming on the MACD suggests that more losses could be on the cards.
Sellers will need to break below the 20 sma at 153p to open the door to 145p the July low, with a break below here creating a lower low and brings 139p the 2022 low into target.
Should the 20 sma hold, buyers will look to rise above the 50 sma at 158p and 163p the July high. A rise above here brings the 173p May high into target.
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