GBP/USD Eases Back After a Strong Performance in July

The British pound was the best performer among the seven major currencies in July, gaining 5.5% against the greenback.

The dollar was under pressure throughout the month, weighed by optimism that central banks and governments would continue to support the global economy. The greenback is known as a safe-haven currency and often underperforms when the market’s appetite for risk is higher than usual.

In the UK, the economy took a firm step in a positive direction as lockdown restrictions were eased in July and businesses started to reopen.

The latest PMI report, released earlier today, showed the manufacturing sector growing for a second consecutive month. Data on Friday revealed a strong rebound in the services sector and a sharp push higher in UK house prices.

On the other hand, ongoing talks in reaching a trade deal with Europe have not been going so well. Last month, several media outlets reported that the UK government expects an agreement won’t be reached by the deadline. Further, the UK waived its right in June to extend the transition and negotiating period beyond December.

Later in the North American session, the US will release its latest PMI figures for the manufacturing sector.

Technical Analysis

GBPUSD Monthly Chart

GBP/USD trades about half a percent lower ahead of the North American open on Monday. The pair reached a high of 1.3170 last week, stopping short of testing major resistance at 1.3262 seen on a monthly chart.

Considering the recent upward momentum, buyers are likely to support the pair on near-term dips. But at the same time, the risk to reward does not appear all that favorable for buyers with a longer-term view since resistance at 1.3262 has held the pair lower for more than two years.

Friday’s daily candle suggests some exhaustion that could cap near-term rallies. Today’s daily close will be important. A close near Thursday’s open, around 1.3000 would result in the formation of a reversal candlestick pattern on a daily chart.

Bottom Line

  • GBP/USD has pushed slightly lower after an impressive gain in July.
  • The decline on Friday ended a 10 consecutive day bullish streak.
  • The pair is weighed by a dollar recovery as the greenback is seen advancing against its major counterparts after hitting a two-year low on Friday.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Daily Forecast – Dollar Rebound Holds Euro Below 1.1800

EUR/USD briefly traded above 1.1900 on Friday but has since eased back as the dollar is rebounding broadly against its major currency counterparts.

Considering that the exchange rate has risen at a much more rapid pace than the norm, it would not be unusual to see a consolidation at this point, or a slight correction lower.

Economic data from Europe was positive today. The latest manufacturing PMI report showed the industry returning to growth after a steep contraction in the second quarter.

The report confirms that the euro area is well on its way to a recovery as the easing of lockdown restrictions has boosted the economy compared to prior months. However, things are still in the early stages and this momentum will need to continue for the economy to eventually get back to the state it was before the virus shock.

The labor market is the biggest risk when it comes to factors that could derail the recovery. For this reason, the next employment report, scheduled for release next week, will be closely watched.

Later today, the US will release data that will provide an outlook on the US manufacturing sector. Similar to the euro area, analysts expect the manufacturing sector to show growth in July.

Technical Analysis

EURUSD 4-Hour Chart

The currency pair shows signs of slowing but there is risk in taking a counter-trend stance, especially in the case of EUR/USD where the recent upward trend has had a lot of momentum behind it.

It might take a further development in price action to determine if the dollar bounce will turn in anything meaningful.

For the session ahead, the 1.1735 level appears to be significant. The price point stems from a weekly chart where it has acted as both support and resistance in the past.

A sustained move below it could clear the path for a broader correction. Considering the trend, buyers may look to defend the level. It may take a move above 1.1850 for the upward momentum to return.

Bottom Line

  • Economic data from the euro area was positive although the exchange struggled to gain following the report.
  • The level to watch in the session ahead is 1.1735. It can act as a line in the sand for a directional bias for today’s session.
  • The US will release it’s latest manufacturing PMI data in early North American trading.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD On Pace to Post 11th Straight Day of Gains

The British pound is slightly outperforming the euro and is the strongest major currency in July. GBP/USD is set to post over a 6% gain for the month.

Sterling has rallied this month even though prospects of a trade deal between Europe and the UK have declined. Earlier in the month, media outlets reported that trade talks have stalled with both parties unable to come to a compromise.

For most of the month, GBP/USD has had an unusually high correlation with the equity markets. If this correlation holds true, the pair should hold a strong tone today as positive earnings reports from several big-name tech companies have led to a sharp rally in the pre-market.

GDP data from the US released yesterday revealed a staggering 32.9% contraction in growth, attributed to the virus breakout and the subsequent lockdown measures. Analysts had called for a contraction of 34.5%, and as such, the report was not surprising and did not have a major impact on the markets.

House prices in the UK rebounded sharply in July with Nationwide reporting a seasonally adjusted increase of 1.7% following a decline of 1.6% in June. Nationwide attributed the sharp rise to pent up demand during the lockdown restrictions.

Technical Analysis

GBPUSD Monthly Chart

GBP/USD is attempting to close the month on a strong note. The pair trades at highs not seen since March 10.

A possible upside target for the pair falls at 1.3200. The level contained a spike high in March and has also acted as major resistance on a monthly chart since the second half of 2018.

While GBP/USD is nearing a major resistance level, the US dollar index (DXY) is also near a notable horizontal level.

The 92.50 price point in the dollar index served to hold it lower in 2006 and then higher between the middle of 2016 until the start of 2018.

The confluence of levels between these two assets could cause a pullback in GBP/USD next week. Or at the very least, offer a major hurdle over the near-term.

Bottom Line

  • GBP/USD is set to post over a 6% gain this month.
  • The 1.3200 level is seen as a major obstacle for the pair.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Daily Forecast – Euro Set to Post Largest Monthly Gain in Nearly a Decade

EUR/USD has rallied about 5.5% this month, which is the largest month over month gain since September 2010. The pair now faces resistance from its 100-month moving average, an indicator it has not tested since early 2018.

Both the British pound and the single currency show similar gains and are the top performers among the majors while the dollar has been the weakest.

Over the past 15 sessions, EUR/USD has rallied in 13 of them.

The pair was initially boosted by progress in a new European stimulus program. A persistently weaker dollar has also been a big driver. The greenback has been steadily offered through the month as risk appetite among investors has been strong.

Economic data from Europe was mixed today. The contraction in GDP for France and Italy was less than expected in the second quarter. The Spanish economy, on the other hand, contracted more than analysts were estimating.

GDP for the euro area as a whole was reported to contract 12.1% which is a tick more than the forecast. Annual inflation in the euro area rose to 0.4% from 0.3% and against the forecast for a rise of 0.3%.

Technical Analysis

EURUSD Monthly Chart

The 100-month average is considered a major hurdle for the currency pair and it may cap gains going into the monthly close.

Upward momentum remains prevalent although has slowed somewhat in the second half of the week.

In addition to the overhead resistance in the currency pair, The inversely correlated dollar index (DXY) is bouncing off a major support level.

DXY reached a low earlier today near a level that acted as resistance back in early 2006. This same area also provided support from the middle of 2015 until the start of 2018.

Considering that the movements in EUR/USD and the dollar in general are stretched by any measure, the technical area mentioned could trigger a dollar bounce.

Bottom Line

  • EUR/USD reached fresh 2-year highs above 1.1900 earlier in the day.
  • GDP data from the US released yesterday showed a contraction of 32.9% in the second quarter which was slightly better than expected.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Attacks 1.3000 Level Despite a Dollar Recovery

The dollar initially moved lower after yesterday’s Fed decision and press conference but has since recovered some of its losses. Despite the dollar strength seen in early day trading today, GBP/USD continues to show strength.

Fed Chair Powell was not as optimistic as the recent movements in the dollar and equity markets suggest. He pointed out that recent data might be signaling that the economic recovery is stalling and reiterated that policymakers and the governments need to continue providing support to the economy.

Powell emphasized containing the virus is crucial for the economy to recovery but acknowledged the sharp earlier rebound in the labor markets.

The dollar is down about 4% in July thus far on a trade-weighted basis as investors have shown a strong appetite for risk. Meanwhile, gold prices are up around 10% this month on the expectation that interest rates will remain low for some time.

The US will release GDP figures later today which is expected to show a nearly 35% contraction in growth during the first quarter. The data is likely to cause a volatile reaction in the markets, especially if the figure deviates from analyst expectations.

The UK announced an increase to the quarantine period for citizens showing signs of having contracted the Coronavirus. The self-isolation period has been increased from 7 to 10 days as new evidence shows that the risk of infecting others 7-9 days after being infected is higher than previously determined.

Technical Analysis

GBPUSD Daily Chart

While the dollar is bouncing broadly against most of its counterparts, Sterling is the only currency to hold near recent highs versus the greenback.

With the 1.3000 handle in play, the pair could pull back from current levels if the dollar is able to extend on its recovery.

Near-term support for the pair is seen at 1.2959 and considering the recent upward momentum, buyers are likely to defend this level. It may take some form of a catalyst for a change in trend, and so far, yesterday’s Fed meeting has not had a big impact on the exchange rate.

A potential medium-term target for GBP/USD is seen at 1.3200 as the level held the pair lower on several attempts early in the year.

Bottom Line

  • GBP/USD is outperforming its major counterparts and is the only currency that hasn’t declined against the greenback in early trading on Thursday.
  • GDP figures from the US will be released later today. A volatile reaction in the markets appears likely.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Daily Forecast – Euro Pares Some Gains Following Fed Decision

The markets initially continued in line with their trends after yesterday’s Fed meeting but have since reversed course. Equities and precious metals have erased some of their recent gains while the dollar is seen bouncing against all of its major counterparts in early trading on Thursday.

Federal Reserve Chair Jerome Powell cautioned that the economic recovery hinges on the ability to contain the Coronavirus.

He expressed optimism regarding the recovery in the labor markets but also indicated that economic indicators are suggesting the economic recovery may have stalled.

Nevertheless, policymakers remain data-dependent and will continue to assess incoming economic reports and progress in containing the virus.

Powell commended the government after an announcement earlier in the week of a new potential fiscal stimulus package that is said to be worth around $1 trillion. The Fed Chair reiterated that ongoing fiscal and monetary support is needed to aid the economy in its recovery after an economic downturn he called “the most severe in our lifetime.”

Later in the North American session, the US will release GDP figures for the second quarter. Analysts expect the economy to have contracted a staggering 34.5%.

The unemployment rate in the euro area was reported to rise to a 15-month high of 7.8% in June. Ahead of the report, the jobless rate had held steady between 7.3%-7.4% for five straight readings.

Technical Analysis

EURUSD 4-Hour Chart

The 1.1800 handle has proven to be a major hurdle as EUR/USD has made two failed attempts at the level this week.

There is some potential for a retracement at this stage, especially considering that the exchange rate is quite oversold.

The antipodean currencies are the heaviest in early trading on Thursday, and technical developments in AUD/USD and NZD/USD may offer a leading signal for the dollar’s next move.

Near-term support for the pair is seen at 1.1700 while it will take a break above 1.1800 for the pair to regain upward momentum.

Bottom Line

  • The markets have reversed course in early trading today. The dollar is recovering and the Antipodean currencies are hit the hardest.
  • GDP data will be released later in the day. As it is the first reading, a volatile reaction may be seen in the markets.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Tests 50-Month Moving Average Ahead of Fed Decision

GBP/USD posted an eighth straight day of gains on Tuesday and is seen trading at resistance ahead of today’s Fed decision.

Investors have shrugged off concerns over the lack of progress in a trade deal between the UK and Europe. The pair has also diverged from its correlation with equities to extend higher while equities have moved sideways.

The Federal Reserve is not expected to act today, however, their view on the rise of Coronavirus cases will be important. The daily increase in virus cases reached a high above 75 thousand just over a week ago. By comparison, daily cases were around 17-20 thousand at the last Fed meeting.

A proposed fiscal stimulus package in the US takes the pressure off the Fed somewhat. Earlier in the week, the US announced plans of a stimulus package that is expected to be worth $1 trillion. The package includes another round of $1200 checks for US citizens although it entails a sharp cut to
emergency weekly unemployment benefits.

The UK housing market appears to be rebounding according to the latest report from the Bank of England. Data showed an increase of 40 thousand new mortgages approved for home purchases in June, ahead of the analyst estimate of 35 thousand.

Technical Analysis

GBPUSD Weekly Chart

A sharp decline in the dollar has been a major driver for all of the currency pairs as the trade-weighted dollar index touched fresh two-year lows earlier today.

GBP/USD has benefited from the weakness and is seen trading at its best level since March.

A confluence of resistance has come into play. On a daily chart, the 1.2959 price point was important in the last quarter of 2019. It held the exchange rate lower on several attempts during that time, leading to a lengthy consolidation.

Further, the 50-month moving average has come into play. While the overhead resistance is something to be mindful of, the pair has shown extremely strong upward momentum as of late, and near-term dips may still be quickly bought up.

Bottom Line

  • GBP/USD is nearing the 1.3000 handle ahead of today’s Fed meeting.
  • Major resistance is in play, although the pair has not shown signs of slowing momentum as of yet.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Daily Forecast – Euro Rally Slows Ahead of Fed Meeting

EUR/USD posted a small loss yesterday to end a seven consecutive day bullish streak. Nevertheless, the pair has posted gains in 11 out of the past 13 days.

It does not appear that the Fed will ease further today, despite a notable rise in Coronavirus cases since it last met. Rather, policymakers my reiterate that they stand ready to support the economy for as long as it’s needed.

The US economy could see further stimulus from the government as plans for a package worth about $1 trillion were released earlier in the week. The proposal includes another $1200 check for US citizens. However, the emergency unemployment benefit is expected to decline to $200 from its current $600 per week.

Today’s Fed meeting stands to have an impact on EUR/USD which is stretched at this point by any measure. The pair is up about 4.5% on the month thus far. It hasn’t had a rally of this magnitude in over four years.

Aside from today’s Fed meeting, GDP data from both the US and Europe are scheduled for release this week. Both these reports are advanced readings, or in other words, the first estimate of GDP for the second quarter. As such, the readings typically accompany volatility.

Technical Analysis

EURUSD Weekly Chart

EUR/USD is currently facing resistance as it trades near a horizontal level that had held it lower during a lengthy consolidation that took place in 2018.

Even if the pair manages to scale above this resistance following the Fed meeting, the daily and weekly close relative to it will be important.

If the pair pulls back from here, notable support is seen at 1.1613 as the level offered support during periods in both 2017 and 2018.

To the upside, the 100-month moving average comes into play at 1.1883. This could turn out to be a strong ceiling were the pair to continue higher.

Bottom Line

  • Upside momentum has slowed in EUR/USD after it broke to a 22-month high earlier in the week.
  • The Fed will announce its latest monetary policy decision and hold a press conference during the North American session.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Consolidates Ahead of 1.2900 Handle

The pound to dollar exchange rate rallied to highs not seen since March as the US dollar continues to be strongly offered. The US dollar index (DXY) was last seen trading at a two-year low.

Senate Republicans proposed a new stimulus package on Monday that could result in another $1200 check for US citizens. The proposed package is expected to be worth around $1 trillion and includes a cut in emergency unemployment benefits from $600 to $200 per week.

While Sterling has had a strong correlation with the equity markets, it has been able to rise over the past few sessions even though the upward momentum in the global stock market has eased. The S&P 500 declined about 1.75% late last week to give up its weekly gains before bouncing three-quarters of a percent higher on Monday.

The Federal Reserve will start its two-day meeting today and is scheduled to announce its latest decision and hold a press conference tomorrow. It remains to be seen whether policymakers will react to the rise in Coronavirus cases in the US during July.

Later in the North American session today, the US will release its latest consumer confidence figures.

Technical Analysis

GBPUSD Daily Chart

GBP/USD has shown strong upward momentum as of late and is outperforming most of its major counterparts in the early week.

For this reason, buyers may be quick to step in on dips. Major support for the exchange rate is seen at 1.2750 as this level acted as both support and resistance in the past. However, buyers may look to step in sooner near the 1.2800 area if the pair were to dip, considering the upward momentum.

The next potential upside target falls at 1.2960. This level acted as major resistance in the fourth quarter of 2018.

The US dollar index (DXY) is seen attempting to bounce after hitting a fresh two-year low. There may be a slowing of volatility ahead of the Fed meeting which could lead to a range.

Bottom Line

  • GBP/USD trades near fresh 4-month highs.
  • The Federal Reserve meets tomorrow and there may be a slowing of volatility ahead of the meeting.
  • The US is considering a new stimulus package worth nearly $1 trillion.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Daily Forecast – Euro Eases Lower From 22-Month Highs

EUR/USD is attempting to post a sixth straight week of gains and has advanced in 11 out of the last 12 days. The pair is boosted by a weaker dollar and positive economic data from Europe.

An agreement reached earlier this month on a 750 billion euro stimulus plan offered a catalyst for the surge higher in the single currency and recent economic data has shown an improvement in the euro area economy.

PMI data from last week signaled that both the manufacturing and services sectors have pushed back into expansion after a steep contraction in the first few months of the second quarter.

The US is looking to follow suit with a proposal on Monday for a stimulus package worth about $1 trillion. As part of the package, Senate Republicans plan to issue another round of $1200 stimulus checks while cutting the emergency unemployment benefits from $600 to $200 per week.

Extreme volatility was seen earlier today in some markets as gold prices spiked to all-time highs around $1980 before paring back the over 2% gain. Volatility is also emerging in the cryptocurrency markets with an early day surge in Bitcoin to levels not seen since August last year.

Technical Analysis

EURUSD Weekly Chart

The volatility seen in the early day in other markets might be an early sign of a near-term top in EUR/USD, although considering the recent upward momentum, trying to pick a top in the pair is not a wise idea.

The level to watch in the session ahead is 1.1700 as it influenced the exchange rate in prior years. If buyers defend it, the pair could make another run at the 1.1800 level.

There could be a slowing of volatility as the Federal Reserve starts its two-day meeting.

The trade-weighted US dollar index declined to fresh two-year lows earlier in the day but is seen attempting to recover. At this stage, the recovery has not translated into anything meaningful. Considering the broader trend, sellers are likely to see the bounce as an opportunity to establish fresh positions.

Bottom Line

  • EUR/USD has eased back towards the 1.1700 level after touching a high of 1.1781 in the early day.
  • The US is working on a stimulus package expected to be worth around $1 trillion.
  • The Fed starts its two-day meeting and will announce its decision and hold a press conference tomorrow.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Rallies to 4-Month High as a Weaker Dollar Overshadows Brexit Concerns

GBP/USD traders brushed off concerns that a trade deal may not be reached between the UK and Europe, opting to push the pair higher as the dollar continues to weaken.

Last week, media outlets reported the UK government is ready to trade on WTO terms, signaling the unlikelihood of reaching a deal with EU leaders as trade talks are not progressing.

The news led to a pause in the GBP/USD rally near the same level that had held it lower in June. However, a persistently weaker greenback has underpinned the exchange rate for a move to new quarterly highs.

The greenback is in the red against all of the major currencies for the month thus far and the trade-weighted dollar index (DXY) has extended lower to levels not seen in 10 months.

Risk-on sentiment has been a major driver in the markets and cause for bearish pressure on the dollar. Also weighing on it is the expectation that real rates will be suppressed for some time, indicative by a further plunge in bond yields.

Later in the North American session, the US will release it’s latest durable goods orders figures. The highlight in terms of economic releases this week is likely to be Wednesday’s Fed decision.

Technical Analysis

GBPUSD Daily Chart

GBP/USD has made some notable bullish breaks as of late. It first cleared 1.2640 which was previously strong resistance in April. The pair then pushed above 1.2751 which acted as resistance in June and support at the start of March.

The 1.2751 level is now seen as strong support for any near-term dips. The next potential target to the upside comes at 1.2957 which was a major resistance level for the pair in the fourth quarter of 2019.

GBP/USD has had a strong correlation with the equity markets as of late and therefore traders may want to keep an eye on the major stock indices.

SPY printed an exhaustion candle last week, ending a three-week bullish streak. If this translates into bearish pressure later in the day, the pound to dollar exchange rate may react in a correlated fashion.

Bottom Line

  • Dollar weakness continues to underpin the major currencies, pushing GBP/USD to a fresh 4-month high.
  • Wednesday’s Fed meeting is likely to be the highlight for the week in terms of economic releases.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Daily Forecast – Euro Rallies to 22-Month High As Dollar Continues to Tumble

Market trends remain intact with equities and precious metals rallying while the dollar continues to remain under pressure.

Shortly after the European open, gold prices are seen trading at record highs, the S&P 500 has advanced nearly half a percent in pre-market trading, and the dollar index (DXY) is at a fresh 10-month low.

The single currency has benefited the most from the weaker dollar in July thus far compared to other major currencies. It has gained nearly 4% against the greenback.

Unlike last week, the week ahead has several economic events that stand to move the markets. The highlight will likely be Wednesday’s Fed meeting and press conference.

Last week, PMI figures from Europe showed both the manufacturing and services sectors moving into expansion, recovering from the sharp contraction in April. The same data for the US showed a similar trend although figures were short of the analyst estimate.

The jobless claims report last week rose for the first time since the April release. In early April, jobless claims hit a high of 6.6 million and proceeded to decline for 15 straight weeks.

Technical Analysis

EURUSD Weekly Chart

EUR/USD sliced through fairly notable resistance near 1.1600 despite having entered overbought territory on a daily chart.

The pair appears to be in a technical breakout after taking out the March highs last week. The upward momentum and last week’s candle point to strength. The only thing going against the pair is that it is overbought.

The next level to watch to the upside comes in at 1.1735. This is a level that was relevant on a weekly chart back in 2017 and 2018.

To the downside, 1.1605 offers strong support. If buyers fail to defend it on a dip, it might be signaling that a more meaningful correction is taking place.

The correlation with the equity markets and EUR/USD remains intact. Last week, SPY posted a candlestick that suggests exhaustion and ended a three-consecutive week rally.

Bottom Line

  • EUR/USD traded at fresh 22-month highs earlier today
  • The Fed meeting this week will be widely watched and stands to have an impact on the exchange rate.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Struggles to Gain Following UK PMI Beat

GBP/USD rallied sharply higher at the start of the week but has since then struggled to overcome the same resistance level that held it lower last month.

The lack of upward movement today comes despite a positive economic report from the UK. The latest survey data from purchasing managers showed the manufacturing sector expanding for a second straight month while the services sector has now also moved into an expansion.

The combined index rose to 57.1, which reflects a 61-month high, after briefly dipping below 10 in April. The surge in business activity is attributed to the easing of lockdown restrictions.

While the data was positive, Chris Williamson from IHS Markit warned that there is still “a long way to go before the output lost to the pandemic is regained.” Williamson pointed out that new orders only rose marginally in July and that employment fell sharply.

The US will release similar data later in the day. A further recovery is expected for both the services and manufacturing sector.

Technical Analysis

GBPUSD Daily Chart

The 1.2750 level in GBP/USD served to hold the pair lower in June and has once again proven to be a major hurdle in the week thus far.

The exchange rate tested the level on Tuesday and has failed to overcome it despite several attempts since then.

Support from the 200-day moving average is being respected even though the pair has dipped below it on an intraday basis over the past few days.

With a range playing out once again for GBP/USD, technical traders will be paying close attention to a range break to assess the near-term directional view.

While GBP/USD has had a somewhat unusually strong correlation with equities as of late, it was undeterred by a fall in the S&P 500 yesterday. Nevertheless, there is some downside risk for the pair if the US equity index continues the move lower following the opening bell.

The US dollar index (DXY) is seen testing support from its March low. This area could trigger a dollar bounce although the momentum is clearly to the downside for the greenback at the moment.

Bottom Line

  • GBP/USD failed to rally despite a positive PMI report from the UK today.
  • With major resistance in play for GBP/USD, and the dollar index trading at support, there is some potential for a pullback in the exchange rate.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Daily Forecast – Euro Extends Gains to Highs Not Seen Since 2018

The rally in EUR/USD remains strong as the pair has posted gains in nine out of the past ten sessions and trades at a 21-month high. However, major resistance is in play and the exchange rate is overbought at this stage.

Economic data from Europe today was positive with survey data for both the manufacturing and services industry showing an expansion. The index for the services sector printed at 55.1, ahead of the analyst estimate of 51.0, and after reaching a low of 11.7 in April.

Similarly, the manufacturing index climbed to 51.1 against an estimate of 50. A figure above 50 indicates the economy is expanding.

Although the data shows that the economy is recovering well from the virus shock, Chris Williamson from IHS Markit warned of downside risks. The main concern is that employers are still laying off workers and are uncertain if there will be enough demand moving forward to sustain the recovery.

Later in the North American session, the US will release PMI figures which are also expected to have also moved into expansionary territory.

Technical Analysis

EURUSD Monthly Chart

The momentum in EUR/USD remains to the upside although there are slight signs of exhaustion as the pair failed to move much on the earlier PMI beat.

Further, important resistance has come into play near the 1.1600 handle. This is an area that acted as resistance in 2016 and then provided support in 2017 and 2018.

In addition to the horizontal resistance, technical indicators show the pair overbought on both a daily and weekly chart which could trigger a near-term pullback.

The inversely correlated dollar index (DXY) is nearing support from its March low which is something EUR/USD traders might want to be mindful of.

Lastly, the equity markets have come under some pressure. Considering EUR/USD has had a relatively strong correlation with stocks as of late, this could cause a pullback, or at least halt the uptrend.

Bottom Line

  • Data from Europe points to a strong economic recovery although there are some concerns whether the momentum can be sustained.
  • EUR/USD faces notable resistance near the 1.1600 handle.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Holds Steady Near June Top

GBP/USD started the week out strong but came under pressure after media outlets reported that the prospect of the UK reaching a trade deal with the EU is slim.

Earlier in the week, the Telegraph reported that UK government is under the assumption that trade with the EU will be conducted on WTO terms. Essentially, these are default terms if a deal cannot be reached.

The cause for concern comes as the EU and the UK aren’t able to come to an agreement on various issues and appear to be deadlocked.

But a persistently weaker dollar is helping to underpin the exchange rate which is on the verge of breaking to a four-month high. The trade-weighted dollar index is down 2.6% on the month thus far.

Sterling bulls are also confident that the UK economy will bounce back after an easing of lockdown restrictions earlier in the month. The Office for National Statistics (ONS) reported that online job ads increased in the week to July 17 although remain at about 50% of where they were a year ago.

Later today, the US will report its weekly jobless claims which is expected to show 1.3 million new people filing for benefits. Tomorrow, the UK will release retail sales figures for June as well as PMI numbers for both the manufacturing and services sectors. As a result, it could be a volatile day.

Technical Analysis

GBPUSD Daily Chart

GBP/USD fells sharply in early trading yesterday but buyers promptly lifted the pair higher from support at 1.2650. This is a long term level that has acted as strong resistance in the past and is now seen as major support.

The hurdle to the upside falls at 1.2740. Once again, this is a level that has acted as both support and resistance and has triggered meaningful moves in the past.

While below it, the pair remains at risk of a pullback, although the upward momentum since yesterday hints that the pair may attempt to make a bullish break.

Bottom Line

  • GBP/USD has bounced back firmly from yesterday’s dip and is threatening a major resistance level.
  • Friday could be a volatile day for GBP/USD with several important data releases from both the UK and the US.

For a look at all of today’s economic events, check out our economic calendar

EUR/USD Daily Forecast – Euro Attempts to Post a Fifth Straight Day of Gains

The trends in the broader markets remain intact as a risk appetite continues to drive the equity markets and precious metals higher while the dollar has been under steady pressure.

In the month thus far, the trade-weighted dollar index (DXY) is down about 2.6% while the S&P 500 is trading at levels not seen in nearly five months. The price of gold has rallied to levels not seen since 2011 and is not all that far away from all-time highs.

Hopes of vaccine and support from the governments and central banks have been driving the appetite for risk, causing investors to turn a blind eye to rising virus cases and tensions between the US and China.

An improvement in the economy has also been a major factor. Tomorrow, the latest PMI data will be released from the US and from Europe. The data is expected to show that both the services and manufacturing sectors in both countries have pushed into expansion after the earlier steep contraction.

Later during the North American session today, the US will report its weekly jobless claims. After declining for 15 straight weeks, analysts expect the report to show 1.3 million new claims, unchanged from the prior week.

Technical Analysis

EURUSD Monthly Chart

EUR/USD appears poised to make a run at the 1.1600 level. This level is considered important as it acted as support in both 2017 and 2018. It also acted as resistance in 2016.

Considering how strong correlations have been as of late across the markets, it is worthwhile keeping an eye on other assets that appear to be running into resistance.

Gold for example faces resistance from prior highs in 2011. The S&P 500 might see some sellers as it also nearing all-time highs. SPY is currently trading above $323.50, this level reflects the highest monthly close for the index, a drop back below it could trigger a more meaningful pullback.

Bottom Line

  • A strong appetite for risk is driving the equity market higher and the dollar lower.
  • The 1.1600 level in EUR/USD could prove to be a major hurdle as other correlated assets are also approaching notable resistance.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Reverses Lower on Diminishing Trade Deal Prospects

Sterling has come under pressure and is the weakest major currency in early trading on Wednesday. The British pound is weighed by concerns that the UK will not be able to reach a trade deal with the EU.

The Telegraph reported that the UK government is working on the assumption that trade with Europe will be conducted on World Trade Organisation terms.

WTO terms are essentially default terms when an agreement cannot be reached.

The current round of trade talks will end on Thursday and there is little expectation for progress with disagreements on various issues.

The UK has until December 31 to reach an agreement with the EU before the default WTO terms kick in.

Tensions between the US and China have been rising with China threatening to retaliate after the US ordered it to close a Chinese consulate in Houston over security concerns.

The equity markets have eased back as a result, weighing on the GBP/USD exchange rate which has had a strong correlation with equities as of late.

New coronavirus cases in the US appear to be slowing. The CDC reported a peak of nearly 75 thousand cases on Friday. New cases have declined since then to fall below the 7-Day average.

Technical Analysis

GBPUSD Daily Chart

GBP/USD turned lower at 1.2750 resistance which had served to cap the exchange rate back in June. However, the pair took out some major technical areas in the past week.

On Monday, GBP/USD rallied above 1.2643 to break out of a range. On Tuesday, the pair cleared above its 200-day moving average.

Today’s daily close will provide an indication of whether the early week momentum had any substance behind it. A close near current levels would result in a bearish candlestick formation on a daily chart that could accompany a stronger pullback.

The level to watch is 1.2697 as it marks the 200-day moving average.

Bottom Line

  • Trade talks with the EU are not going well which have weighed on GBP/USD.
  • Equity markets have eased back on US-China tensions which has impacted GBP/USD by correlation.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Daily Forecast – Euro Clears Above March Top To an 18-Month High

EUR/USD broke to fresh highs not seen since the start of last year on Tuesday and has held near highs despite a slight pullback in the equity markets.

The currency markets have had a strong correlation with the equity markets over the past few months which has led to a notable decline in the dollar. The trade-weighted dollar index (DXY) was last seen trading near lows not seen since early March.

The antipodean currencies are the strongest, as they often gain during times of risk appetite, while the single currency is the third strongest major currency on the week thus far.

Economic data releases have been light in the early week although there are a few releases that could move the markets in the second half of the week.

On Thursday, the US will release its weekly unemployment claims report. This report rarely moves the markets but is considered important as it offers a nearly real-time view of the US labor market.

PMI data will be released on Friday from both Europe and the US. Both the services and manufacturing sectors for the US and Europe have recovered sharply in the last two readings. Analysts expect Friday’s report will show that these sectors have moved into expansion after a sharp contraction earlier in the year as a result of the Coronavirus.

Technical Analysis

EURUSD Daily Chart

The technical breakout in EUR/USD provides confirmation that bulls remain in control. The next possible target for the pair could be at 1.1605 which is a level that was influential on the exchange rate back in 2017 and 2018.

Downside support is now seen at the March top of 1.1495.

The US dollar index (DXY) is approaching its March lows which could offer some near-term support for the dollar. But aside from reaching oversold levels on the larger time frames, the index has not shown any technical signs of reversal at this point.

Bottom Line

  • The bullish trend in EUR/USD remains intact and the pair broke above the March high on Tuesday.
  • More meaningful economic data will be released in the second half of this week. Friday’s PMI data is seen as the highlight for the week.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Breaks to 5-Week High and Tests 200-Day Moving Average

Optimism is dominating the markets and has led to a correlated move higher in GBP/USD to levels not seen since early June.

In the United States, investors are brushing off concerns over rising cases in favor of the view that progress is being made towards a vaccine for the Coronavirus.

In Europe, equity markets have been rallying as EU leaders have reached an agreement on a 750 billion euro stimulus package to aid EU member states hit hard by the virus.

Optimism from the UK stems from hopes that the economy will recover as lockdown restrictions have eased over the past few weeks, leading businesses to reopen and consumers to return to the market place.

The equity markets have rallied in the early week and GBP/USD, which has had a strong correlation with risk assets as of late has followed.

The currency pair briefly traded above the 1.2700 handle earlier today and is set to post a third consecutive day of gains. Sterling is the strongest currency among the majors in the week thus far.

Technical Analysis

GBPUSD Daily Chart

GBP/USD has taken out a major resistance level at 1.2643. This same level had held the pair lower in April on two tests. The first one led to about a 2% pullback while the second one initiated a 3.7% decline.

The bullish break sets a firm tone for the currency pair although the 200-day moving average has come into play which could cap gains for the session ahead.

Currently, the indicator is found at 1.2697 and where the pair closes the day relative to it should give an indication as to the strength of the recent breakout.

The economic calendar is relatively light until Friday when the UK and US release their latest PMI figures. Until then, the pound to dollar exchange rate is likely to continue taking its direction from the equity markets.

Bottom Line

  • GBP/USD has broken above major resistance at 1.2643 after trading in a range since July 8.
  • The 200-day moving average offers resistance near 1.2700.
  • PMI data from the UK and US will be released on Friday.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Daily Forecast – Euro Holds Close to 4-Month Highs Near 1.1450

EUR/USD has gained in the early week as EU leaders have come to an agreement regarding the EU recovery fund after five intense days of negotiation.

The fund will provide 750 billion euros to member states whose economy have been hit hard by the Coronavirus outbreak.

The agreement still needs to pass through the European Parliament and be ratified by all EU member states. It could take a year before those who are in need of the funds will receive it.

A major reason for disagreement was that the original proposal included 500 billion euros worth of grants, or in other words, money that does not need to be paid back. This was a sticking point for members with strong economies that have not been hit as hard by the virus.

The final agreement shows 390 billion euros worth of grants while the rest will be disbursed as loans with a low-interest rate.

EUR/USD has rallied along with European equity markets on anticipation of this deal with the single currency touching levels not seen since March earlier this week. However, since the announcement of the deal, late last night, the pair has lost some of its upward momentum.

Technical Analysis

EURUSD Daily Chart

This could be a “buy the rumor, sell the news” type of scenario and there is some risk of the pair pulling back now that an agreement has been reached regarding the recovery fund.

However, the dollar has been persistently weak which should underpin the exchange rate. The US dollar index (DXY) traded at fresh four-month lows earlier today after finally breaking below the June bottom.

The technical outlook points to strength in the currency pair although overbought levels have been reached on the higher time frames and the risk to reward does not appear to be favorable for fresh longs at this point.

Support for the pair is found at 1.1371 while near-term resistance is seen at the March top of 1.1495.

Bottom Line

  • The rally in EUR/USD is showing signs of exhaustion
  • EU leaders have reached an agreement on new stimulus measures.

For a look at all of today’s economic events, check out our economic calendar.