EUR/USD regains some ground lost and re-targets 0.9800

• EUR/USD bounces off lows near the 0.9750 region.
• German 10-year bund yields surpass the 2.45% level.
• Weekly Claims, Philly Fed index, Fedspeak come next in the NA session.

The European currency regains a small smile and motivates EUR/USD to rebound from earlier lows in the mid-0.9700s on Thursday.

EUR/USD supported near 0.9750 so far

EUR/USD manages to regain some buying interest and recoup part of the ground lost following Wednesday’s strong decline, retargeting the 0.9800 region amidst the so far tepid downside momentum in the dollar.

Also underpinning the daily uptick in spot, the German 10-year benchmark bund yields rise past the 2.45% level for the first time since August 2011, in line with the uptrend observed in their US pees across the curve.

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EUR/USD Price Analysis: Scope for further losses near term

EUR/USD bounces off fresh cycle lows near 0.9550.

Extra downside could revisit the 0.9411 level near term.

EUR/USD keeps the bearish note well in place and drops to new 2-decade lows near 0.9550, where some initial contention seems to have emerged.

Rising prospects for extra weakness in the European currency remain well on the table for the time being. That said, the loss of the 2022 low at 0.9552 (September 26) should leave the pair vulnerable to a challenge to the round level at 0.9500 prior to the weekly low at 0.9411 (June 17 2002).

In the longer run, the pair’s bearish view is expected to prevail as long as it trades below the 200-day SMA at 1.0685.

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 USD/JPY: A move to 150 can not be ruled out – Rabobank

The pullback in the broad-based value of the USD in recent sessions has offered a reprieve to various stressed currency pairs, among them USD/JPY. Nonetheless, economists at Rabobank still believe that the pair could reach the 150 level.

Scope for USD/JPY to head higher in the coming months

“The dip back towards 142.00 this week will be welcomed by Japanese officials. That said, it is our view that USD strength will sustain for some months yet. It is also possible that the BoJ will maintain loose policy settings into next year. This suggests scope for USD/JPY to head higher in the coming months.”

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GBP/USD: Rebound remains capped below 1.1800 amid mixed UK PMIs, bear cross

GBP/USD whipsaws after UK services PMI improves but manufacturing PMI contracts.

The US dollar maintains the pullback amid cautious optimism, weaker Treasury yields.

Bear cross remains in play, as GBP bears eye a daily close below critical 1.1760 support line.

GBP/USD is struggling once again to extend the recovery while holding below the 1.1800 level, as bears remain unconvinced by the mixed UK Preliminary Business PMI surveys.

While activity in the services sector remained near July's 52.6, the manufacturing component tumbled to 46.0 in August from 52.1 in July, its lowest since May 2020.

Although a minor improvement in risk sentiment after an upside surprise delivered by the German Preliminary PMI eases fears over an imminent recession and lifts the European stocks. This helps the higher-yielding GBP to hold its ground against the US dollar.

The greenback pulls back from close to 19-year highs amid the retreat of the US Treasury yields across the curve. Investors also book profit on their USD longs after the recent relentless rise and ahead of a fresh batch of relevant US economic data. The US S&P Global Preliminary manufacturing and services PMIs will be reported in the NA session, followed by the New Home Sales release.

Despite the renewed upside, cable remains vulnerable, as the state of the UK economy remains dire amid surging inflation, the European gas crisis and political concerns.

As observed on cable’s daily chart, the price is clinging to the critical support line at 1.1760. A daily closing below the latter is required to cement the ongoing downtrend towards the falling trendline support at 1.1565.

Ahead of that, 1.1600 – the round figure will challenge the bullish commitments. The 14-day Relative Strength Index (RSI) has stalled its descent but sits just above the oversold territory, suggesting that the downside remains more compelling.

Further, the 21-Daily Moving Average (DMA) has cut the 50 DMA from above, representing a bear cross and adding credence to the bearish potential.

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EUR/USD: Break below 1.01 open up the July 14 cycle low near 0.9950 – BBH

EUR/USD declines toward 1.0100. A drop under this level would set up a test of the July 14 cycle low near 0.9950, economists at BBH report.

German August ZEW consumer survey was weak

“A break below 1.0110 would set up a test of the July 14 cycle low near 0.9950.”

“Expectations came in at -55.3 vs. -52.7 expected and -53.8 in July, while current situation came in at -47.6 vs. -49.0 expected and -45.8 in July. ZEW noted that ‘The still high inflation rates and the expected additional costs for heating and energy lead to a decrease in profit expectations for the private consumption sector’.”

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When is the Canadian monthly jobs report and how could it affect USD/CAD?

 

Canadian employment details overview

Statistics Canada is scheduled to publish the monthly employment details for July later this Friday at 12:30 GMT. The Canadian economy is anticipated to have added 20K jobs during the reported month, up sharply from the 43.2K decline reported in June. Meanwhile, the unemployment rate is expected to edge higher to 5.0% in July from the 4.9% previous.

Analysts at TD Securities (TDS) are more optimistic about the report and explain: “We look for job growth of 38k in July, driven by a partial rebound for trade services and natural resources after their sharp decline in June. Full-time hiring should lead the increase, while stronger labour force participation should keep unemployment stable at 4.9%. We also expect to see wage growth firm to 6.0% y/y in July, although AHE (Average Hourly Earnings) should slow on a m/m basis.”

GBP/USD falls towards 1.2000 as USD crawls higher ahead of data

GBP/USD returns to the red as the US dollar sees resurgent demand.

Lack of UK political news and risk-off flows weigh on cable.

The pair recaptures 21 DMA but RSI still remains bearish.

GBP/USD is extending its pullback from three-week highs of 1.2091 in the European session, as risk-off flows dominate amid the worsening European gas crisis and an imminent recession in Germany.

Investors seek refuge in the traditional safe-haven asset, the US dollar, as the buck picks up fresh bids to recapture 106.50 against its major peers. The ongoing sell-off in the US Treasury yields fail to deter the dollar bulls. The greenback also finds demand, as investors turn cautious ahead of the Fed’s expected 75 bps rate hike announcement.

Meanwhile, various factors continue to limit the bullish attempts in the pound. A lack of any encouraging on the UK political front, with candidates Liz Truss and Rishi Sunak battling out the leadership race. Ahead of next week’s BOE rate decision, money markets suggest a bold 50 bps than a conservative 25 bps increase. However, economists are much less certain, with 25 out of 54 polled by Reuters expecting a half-point hike, according to the latest Reuters poll.

Friday’s CFTC data showed IMM speculators reduced their GBP exposure by 10% in the fortnight to July 19, with gross GBP longs cut by 7,675 contracts to 33,850, per Reuters. The pair now awaits the US Durable Goods Orders and New Home Sales data. The main event risk for this week, however, remains the FOMC decision due on Wednesday.

Looking at the cable’s daily chart, the pair closed Monday above the bearish 21-Daily Moving Average (DMA), then at 1.2006.

Although with the 14-day Relative Strength Index (RSI) lurking below the midline, sellers have returned and look to retest the 21 DMA resistance turned support, now at 1.1997.

A sustained break below the latter will expose Monday’s low of 1.1960, below which a test of the 1.1900 level will be inevitable.

On the flip side, if bulls manage to defend the 21 DMA, then a fresh advance towards the descending 50 DMA at 1.2238 cannot be ruled out.

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UK Preliminary Services PMI drops to 53.3 in July vs. 53.0 expected

UK Manufacturing PMI eases to 52.2 in July, beats estimates.

Services PMI in the UK comes in at 53.3 in July, better than forecasts. 

GBP/USD keeps the rebound intact at around 1.2050 on upbeat UK PMIs.

The seasonally adjusted S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) dropped to 52.2 in July versus 52.0 expected and 52.8 – June’s final reading.

Meanwhile, the Preliminary UK Services Business Activity Index for July arrived at 53.3 when compared to June’s final score of 54.3 and 53.0 expected.

Chris Williamson, Chief Business Economist at S&P Global, commented on the survey

“UK economic growth slowed to a crawl in July, registering the slowest expansion since the lockdowns of early-2021. Although not yet in decline, with pent-up demand for vehicles and consumer-oriented services such as travel and tourism helping to sustain growth in July, the PMI is now at a level consistent with just 0.2% GDP growth.“

“Forward-looking indicators suggest worse is to come. Manufacturing order books are now deteriorating for the first time in one and a half years as inflows of new work are insufficient to keep workforces busy, which is usually a precursor to output and jobs being cut in coming months."

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When is the European Central Bank (ECB) rate decision and how could it affect EURUSD?

ECB monetary policy decision – Overview

The European Central Bank (ECB) is scheduled to announce its monetary policy decision this Thursday at 12:15 GMT, which will be followed by the post-meeting press conference at 12:45 GMT. The ECB is all but certain to hike its benchmark interest rates for the first time since 2011. Markets, meanwhile, are split on whether the ECB policymakers would stick to the previously telegraphed 25 bps increase or raise rates by 50 bps to curb runaway inflation.

According to Dhwani Mehta, Senior Analyst at FXStreet: “The ECB will deliver a 50 bps lift-off this month, in the wake of rampant inflation, resumption of the Russian gas supply and the fact that the ECB is way behind the curve. It’s also worth noting that front-loading rates now may allow the central bank some room to pause or go slower on rate hikes when a recession hits.”

How could it affect EURUSD?

Given that the ECB has pre-committed to start the rate-hike cycle in July, a 25 bps increase is fully priced into the markets and might do little to provide a meaningful impetus to the shared currency. A bigger move, meanwhile, could trigger a sharp rise in the bond yields for highly indebted countries. The risk, however, could be mitigated if the ECB announces details of its new anti-fragmentation tool. Nevertheless, the event is likely to infuse some volatility around the euro cross and produce some meaningful trading opportunities around the EURUSD pair.

Eren Sengezer, European Session Lead Analyst at FXStreet, outlined important technical levels for the EURUSD pair: “On the downside, 1.0170 (Fibonacci 38.2% retracement of the latest downtrend) aligns as first support ahead of 1.0100 (psychological level, Fibonacci 23.6% retracement, 50-period SMA on the four-hour chart). In case the latter fails, the pair, once again, could test parity. Resistances are located at 1.0200 (psychological level), 1.0220 (Fibonacci 50% retracement, 100-period SMA) and 1.0270 (Fibonacci 61.8% retracement).”

About the ECB interest rate decision

ECB Interest Rate Decision is announced by the European Central Bank. Usually, if the ECB is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the EUR. Likewise, if the ECB has a dovish view on the European economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.

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 AUD/USD drops to fresh two-week low, back below 0.7100 on hotter-than-expected US CPI

AUD/USD turned lower for the third straight day in reaction to stronger US inflation figures.

The latest US CPI report reaffirmed hawkish Fed expectations and boosted the greenback.

The risk-off impulse further underpinned the buck and weighed on the risk-sensitive aussie.

The AUD/USD pair witnessed aggressive selling during the early North American session and turned lower for the third successive day in reaction to stronger US consumer inflation figures. The pair was last seen trading around the 0.7080-0.7075 region, or over a two-week low, down 0.25% for the day.

According to the data released this Friday, the headline US CPI rose to 1.0% MoM in May as against 0.7% expected and the yearly rate unexpectedly jumped to a fresh 40-year high level of 8.6%. Adding to this, core inflation, which excludes food and energy prices, came in at 0.6% MoM and 6.0% YoY rate versus consensus estimates for a reading of 0.5% and 5.9%, respectively.

The data reaffirmed market bets that the Fed would need to tighten its monetary policy at a faster pace to curb soaring inflation. This was reinforced by a fresh leg up in the US Treasury bond yields, which, along with a steep fall in the equity markets, pushed the safe-haven US dollar to a fresh three-week high and exerted heavy downward pressure on the AUD/USD pair.

Given the overnight break below the 0.7150 horizontal support, the emergence of fresh selling on Friday favours bearish traders and supports prospects for further losses. Hence, some follow-through weakness, towards testing the 0.7000 psychological mark, now looks like a distinct possibility. The downward trajectory could further get extended towards the 0.6945 support zone.

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EUR/USD consolidates in low 1.0700s as traders eye this week’s ECB meeting/US CPI

EUR/USD is trading in calm fashion in the low 1.0700s as traders eye this week’s ECB meeting and US CPI.

A hawkish ECB/easing of US price pressures combo could see the pair push above 1.0800.

EUR/USD is trading just north of flat in the 1.0725 area, in quiet trade ahead of what will ultimately be a busy week for the pair. The European Central Bank (ECB) announces policy in June and is expected to solidify expectations for interest rates going positive by the end of Q3, with traders set to scrutinise President Christine Lagarde’s tone on the prospect of further tightening as markets guage the outlook for 2023. Meanwhile, US Consumer Price Inflation data for May is set for release on Friday and could impact expectations for Fed policy.

But the first three days of the week are set to be much quieter in terms of central bank events and economic data, meaning EUR/USD is likely to take its cue more from things like risk sentiment/geopolitical developments etc. That would suggest that the pair may well remain stuck within recent low-1.0600s to upper-1.0700s ranges, with the 50-Day Moving Average likely to act as a magnet, as has more or less been the case over the past few days.

Some strategists think that the case for a push above 1.0800 and to its highest levels since mid-April is on the cards for EUR/USD later this week/next week, should the ECB come across as hawkish and US inflation show signs of easing. On the latter, growing momentum behind the peak US inflation narrative and, thus, peak Fed hawkishness, has been a major driver of the recent rebound from last month’s lows under 1.0400.

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AUD/USD keeps the red near 0.6900 mark, downside seems cushioned amid softer USD

Disappointing Chinese macro data prompted fresh selling around AUD/USD on Monday.

A softer risk tone was seen as another factor that undermined the perceived riskier aussie.

Sliding US bond yields kept the USD bulls on the defensive and helped limit deeper losses.

The AUD/USD pair remained on the defensive through the first half of the European session and was last seen trading with modest intraday losses, around the 0.6900 round-figure mark.

Following an early uptick to the 0.6960 area, the AUD/USD pair met with a fresh supply and touched an intraday low around the 0.6890 region in reaction to shockingly weaker Chinese macro releases. The data underscored the damage caused by COVID-19 lockdowns in the world's second-largest economy and weighed on the China-proxy Australian dollar.

Apart from China's zero-COVID-19 policy, the war in Ukraine has been fueling concerns about softening economic growth amid the prospects for a more aggressive policy tightening by the Fed. This, in turn, tempered investors' appetite for perceived riskier assets, which was evident from a softer tone around the equity markets and further undermined aussie.

The anti-risk flow dragged the yield on the benchmark 10-year US government bond further away from the recent peak of 3.20%. This, in turn, kept the US dollar bulls on the defensive and extended some support to the AUD/USD pair. Nevertheless, the fundamental backdrop supports prospects for an extension of the bearish trend witnessed over the past one month or so.

Market participants now look forward to the release of the US Empire State Manufacturing Index for a fresh impetus later during the early North American session. The data, along with the US bond yields, will influence the USD price dynamics. Traders will further take cues from the broader market risk sentiment for short-term opportunities around the AUD/USD pair.

The focus would then shift to the release of the Reserve Bank of Australia monetary policy meeting minutes on Tuesday. This will be followed by the US Retail Sales and Industrial Production figures. Apart from this, remarks by several FOMC officials, including the Fed Chair Jerome Powell, will be looked upon for clues about the possibility of a 75 bps rate hike move, which will drive the USD demand and determine the near-term trajectory for the AUD/USD pair.

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📕 Comment on Gold on May 9, 2022:

 

📕 Comment on Gold on May 9, 2022:

 - On Friday, the US released Nonfarm payrolls data, this data was better than market expectations but only caused Gold to decline slightly to 1875. Gold then bounced up to close the daily candle equal to 1875.  The bullish candle is around 1882. This also makes the last candle close with a bearish candle, but retreated quite long.

 - My personal view at the beginning of this week's trading session is that Gold will continue to gain momentum.  The closest support area for this precious metal is around 1873-1877.  Here we can establish a long position with a safe target around 1883 -1888.

 EUR/JPY Price Analysis: Correction lower could extend to 134.30

• EUR/JPY comes under pressure and approaches 137.00.
• The April lows around 134.30 emerge as the next support of note.

EUR/JPY adds to Friday’s retracement and revisits the vicinity of the 137.00 mark at the beginning of the week.

Further weakness should not be ruled out in the very near term. That said, the corrective move in the cross could extend further and retest the monthly lows around 134.30.

In the meantime, while above the 200-day SMA at 130.56, the outlook for the cross is expected to remain constructive.

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Gold Price Forecast: XAUUSD to see a fresh bull trend only above the $2,070/75 highs – Credit Suisse

 

Gold maintains a slight upward bias in its broader sideways range. A break past the $2,070/75 highs would resolve the range higher for a fresh bull trend, strategists at Credit Suisse report.

Break below $1,877 to reassert the broad sideways range

“Gold above $1,877 can maintain an immediate upward bias in the broader sideways range.”

“Only above the $2,070/75 highs though would be seen to resolve the range higher for a fresh bull trend, with resistance then seen at $2,280/2,300.”

“A break below $1,877 can further reassert the broad sideways range with support then seen next at $1,845/31.”

USD/CAD holds comfortably above 1.2600 mark amid broad-based USD strength

• USD/CAD gained some positive traction on Monday, though lacked follow-through buying.
• Retreating crude oil prices undermined the loonie and extended support amid a stronger USD.
• The Fed’s hawkish outlook, elevated US bond yields, the risk-off mood all benefitted the buck.

The USD/CAD pair maintained its bid tone heading into the North American session and was last seen trading just a few pips below the daily high, around the 1.2630-1.2625 region.

A combination of factors assisted the USD/CAD pair to build on last week's goodish rebound from the 1.2520 area and gain traction for the third successive day on Monday. A modest pullback in crude oil prices weighed on the commodity-linked loonie and extended support to spot prices amid sustained US dollar buying interest.

Crude oil pulled back from the three-week high after data out of China pointed to economic weakness and fueled worries over slowing demand amid COVID-19 curbs. That said, concerns over tight global supply and a potential European Union (EU) embargo on Russian gas, helped limit the downside for the black liquid, at least for now.

On the other hand, the USD stood tall near the two-year high and continued drawing support from expectations for a more aggressive policy tightening by the Fed. Investors seem convinced that the Fed would hike rates at a faster pace to curb soaring inflation. This, along with elevated US Treasury bond yields, underpinned the buck.

Against the backdrop of the Fed's hawkish outlook, concerns that the worsening Ukraine crisis would put upward pressure on already high inflation pushed the US bond yields to a fresh multi-year peak. Apart from this, the risk-off mood - as depicted by a weaker tone around the equity markets - further benefitted the safe-haven greenback.

That said, relatively thin liquidity conditions on the back of a holiday in Europe held back bulls from placing aggressive bets. The USD/CAD pair, so far, has been struggling to find acceptance above the very important 200-day SMA, which, in turn, warrants some caution before positioning for any further near-term appreciating move.

There isn't any major market-moving economic data due for release on Monday, either from the US or Canada. Hence, the US bond yields, along with the broader market risk sentiment, will play a key role in influencing the USD demand. Traders will further take cues from oil price dynamics to grab some short-term opportunities.

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