Federal Reserve Increases Interest Rates

The Federal Reserve increased interest rates by 25 basis points hitting a range ofrn5.25%-5.50%. This move on Wednesday gave rise to market volatility within the latter part of last week. 

US Q2 GDP Growth Exceeds Prediction, Increasing Profits and the Dollar

Last week, the US released the advanced second-quarter GDP, this data showed a positive growth rate of 2.4%, with substantial stable goods of 4.7%. The employment data also underlined the stability of the US labour market.  

EUR/USD Analysis

According to a recent report published by  Eurostat, the Euro economy has increased by 0.3% in the second quarter; analysts predicted a 0.2% increase. 

The ECB meeting last week propelled the central bank to increase rates by 25 basis points, however, this increase aligns with trades prediction. President Lagarde noted during the forum that there is a possibility of further rate hikes, however, the rate hike is highly dependent on the outcome of the next meeting on September 14th. This news of the rate remaining intact caused a bearish trend for Euro. EUR/USD hit a low price of 1.1000 on Thursday and is still pushing to bounce back.

Judging from the trader's net-long data which shows an increase of 9.88% from Thursday to Friday,  this only means the EUR/USD will continue to trade downwards.

Traders are looking forward to the EU cire inflation due for release on Monday after the slight increase noted in June. The ECB officials are expecting an encouraging inflation data report.  Especially now that the Euro growth is stagnant. Analysts predict to see a Q2 growth of 0.1%rnafter a 0% growth was recorded in Q1.

With the price closing lower and falling from 1.1274 to 1.0942, the forex pair is expected to fall further this coming week. If the price falls below 1.0942 the targeted support will be 1.0832 with a resistance of 1.1148. However, if the price hits above 1.1148, the downward trend will be completed, and a price reversal will occur.

Price action will choose a path following the EU inflation and the GDP data. However, the US economic performance might provide an opportunity for a pullback. If the data comes as predicted, EUR/USD would start this week under pressure.

Today's data release does not affect the Euro, however, with the upcoming holidays, price action will be limited. After EUR/USD hit a low of 1.0944 on Friday, the pair has pulled back, recording a price above 1.1000. With traders looking forward to the NFP report to be published this Friday, analysts predict a 200k headline figure and a good profit for average earnings.

AUD/USD Analysis

The Australian dollar has been on a steady decline the past week. The AUD/USD attained a weekly high above 0.6800, however, the pair reversed to 0.6700. This downward trend is a result of the US economic data. Meanwhile, the USD is still trading strong, starting a bullish trend that might continue for a while. 

The major catalyst is the US dollar. The US economic data release induced all the moves that FOMC couldn't. The report indicates that irrespective of the Fed's monetary policy the Australian economy is doing well.

During Q2, the US economy increased by a 2.4% yearly rate. This increase was higher than the estimated 1.8% and higher than the previous quarter which increased byrn2.0%. Reports also indicated that the unemployment rate decreased in the month. After these reports were published the US Treasury yields and the US Dollar surged higher.

Meanwhile, in Australia, the Producer Price Index (PPI) is due on Friday, and analysts predict a decrease from 5.2% to 3.9%. However, price action movement is controlled by the USD.

With AUD/USD currently trading at 0.6707 market analysts still predict a decline back to 0.6595.