Weekly View on Currencies

 Weekly changes: EURUSD -1.95%, GBPUSD -2.11%, USDJPY +0.56%, USDCAD +2.57%

The EURUSD pair traded flat with no volume from Monday till late Wednesday. However, it has continuously fallen, surpassing three psychologically 'imposing figures' (1.2100, 1.2000 and 1.1900) levels and finished the week at 1.18569. Such a sharp move was unusual for the currency pair in recent months. As far as the price fails to decline further, there is an understanding that the U.S. dollar's strength bounce can be temporary.

GBPUSD traded almost identically as EURUSD. The pair dropped to its lowest levels in six weeks and finished Friday at 1.37954. Therefore this was a big week for the U.K. data. And while some figures like CPI and GDP were positive, others, like retail sales, showed a decline of 1.4%. Since the country postponed its full re-opening after COVID restrictions, consumer demand fell 2%, the first drop in four months. The sterling may rebound this Thursday at the Bank of England's meeting results. The BoE was one of the first central banks to reduce asset purchases. Moreover, with the Fed expressing its confidence in the recovery by signalling the sooner steps, the British regulator should sound less dovish.

By midweek, USDJPY consolidated near the two-month tops, holding above 110.00. Thursday's upbeat U.S. data continued supporting the greenback. Nervousness ahead of NFP benefitted the safe-haven Japanese currency. However, the currency pair fell sharply after the release and lost 0.52% each day, stopping at 109.70 by Friday night.

KEY POINTS

The Forex market didn't expect a sizable move in the U.S.dollar last week. The Fed jumped one step ahead, and, as a result, the greenback is likely to remain well supported against the euro. Last week ECB's statement appeared dovish even before Powell's speech. After the Fed changed the situation, EURUSD might follow its decline if the ECB made no adjustments. ECB President Lagarde will speak on Monday, and she might refer to monetary policy. Also, this week's German PMI reports could be helpful. But if the numbers show no improvements, the contrast may push the pair lower. Moreover, when the initial impulse from the Fed meeting settles, the investors will realize that the correction has gone too far and EURUSD is in the oversold zone.

The 'simply oversold' term could be applied to the GBPUSD pair as well. Besides, as long as the PMI figures are published, the pair may rebound. At least, the index's preliminary forecast seems interesting. The Bank of England meeting may bring some surprises as well. The BoE was expected to wait until August before deciding on slowing down their bond purchasing. However, the speech will presumably be re-written at the very last moment.

USDJPY seems to be the only pair among the majors, which managed to return by Friday to its 'pre-Fed' levels of 110.2. Bank of Japan maintained its monetary policy, as was anticipated. Also, the Japanese Financial Minister stated that they expect the country's GDP growth to return to the pre-COVID levels in this fiscal year.

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