GBP/USD Continues Uptrend and Breaks Above 1.34

The British pound rallied above the 1.3400 level against the dollar on Tuesday as the greenback is once again seen declining against all of its major counterparts.

PMI data from the UK today showed output rising at its fastest pace in more than six years. IHS Markit reported a rise in the index to 55.3 in August from 53.3 in the prior month. The index reached a low of 32.6 earlier this year following the virus outbreak.

Rob Dobson, Director at IHS Markit acknowledge the recent strength but also warned that the recovery is driven “by the restarting of manufacturers’ operations and reopening of clients as COVID-19 restrictions continue to be relaxed”, according to companies included in the report.

Similar data will be released from the US later today and forecasts suggest the manufacturing sector there has also improved in August.

Later in the week, the US will report jobs data for August. This will likely be the highlight this week in terms of market-moving data. Analysts expect the pace of new jobs to have moderated while the unemployment rate is expected to improve to 9.8%.

Technical Analysis

GBPUSD 1-Hour Chart

The British pound is the second strongest major currency in the early day and dips in the pair have generally been shallow since the pair crossed above the 1.3400 handle.

The same level is viewed as the first level of support for the pair. A rising trend channel is encompassing recent price action and the lower boundary of it currently carries confluence with the 1.3400 level.

A potential near-term upside target is seen at 1.3515 which marks the spike high from last December.

The US dollar index (DXY) was last seen testing its 100-month moving average, an indicator it has not tested since 2014. There is also support from the 76.4% Fibonnaci level measured from the low posted in 2018 to the high printed earlier this year.

Bottom Line

  • GBP/USD continues to gain as the dollar remains under steady pressure.
  • The US dollar index is testing a confluence of support that can be best seen on a monthly chart.

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

EUR/USD Rallies to Fresh 28-Month High as the Dollar Continues to Tumble

The greenback continues to face pressure and is seen declining against all of the major currencies in early trading on Tuesday. EUR/USD reached a high of 1.1997 in early day trading which is a level the pair has not traded at since April 2018.

PMI data from the eurozone continued to point to strength in the manufacturing sector in August. IHS Markit reported a rise in its PMI index to 51.7, a tick lower from the July report. The report indicated that confidence is at its highest level in over two years although rising unemployment remains a concern.

Chris Williamson, Chief Business Economist at IHS commented – “Manufacturing is currently being buoyed by a wave of pent up demand, but capacity is being scaled back. The next few months’ data will be all-important in assessing the sustainability of the upturn.”

Later today, the US will release the latest PMI figures for the manufacturing sector. Similar to Europe, analysts expect the report to show a continuation of strength.

Technical Analysis

EURUSD 4-Hour Chart

EUR/USD is on pace to post a third consecutive day of gains and is approaching the 1.2000 handle. The level can be seen as resistance as it carries psychological implications. Further resistance is found at 1.2035.

To the downside, the first level of support is seen at 1.1950 as the level previously held the exchange rate lower in late July and early August. Beyond that, further support is seen at 1.1878.

The US Dollar index (DXY) is seen testing its 100-month moving average, an indicator it has not tested in more than six years. Further, DXY is also testing the 76.4% Fibonacci retracement measured from the 2018 low to this year’s high.

Bottom Line

  • EUR/USD continues to be underpinned by a weaker dollar.
  • Economic data from the eurozone indicates the economy is still growing after a sharp earlier contraction.
  • The US dollar index is testing notable support.

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

GBP/USD Eases Lower From Eight-Month Highs

GBP/USD is attempting to close above an important resistance level at 1.3262 on a monthly basis. If it manages to do so, it will be the first time the pair has closed above it in more than two years.

Similar to most of the major currencies, Sterling has seen follow up gains in August after a notable rally in July. Last month, the pair gained about 6%. From the low in March, GBP/USD is up nearly 17%. These types of gains are rare in the currency markets and puts into question how much further the pair can go.

A speech from Fed Chair Powell last week confirmed that the Fed is changing the way it views inflation and how it relates to monetary policy. Put simply, the Fed will not raise rates if inflation rises in the near-term, signaling that low rates are here to stay for some time.

Interest rates are a big driver for currencies, and naturally, Powell’s speech is considered bearish for the dollar. However, an important consideration is that major economies around the world have all had the same struggles with inflation over the years that the US has had. Further, other countries have also eased monetary policy to combat the virus outbreak, the same way the US has.

Bank of England Governor Carney spoke along these lines on Friday. His emphasis was on easing further and letting the markets know that there are still measures the central bank can take even though the interest rate is already near the zero bound.

Technical Analysis

GBPUSD 4-Hour Chart

The trend in GBP/USD has been to the upside for five months and it’s hard to fight trends. But at the same time, during these five months, the pair has fluctuated well above what is typical for the entire year.

To provide some perspective, when the Brexit vote took place in July of 2016, the pair declined about 8%.

For this reason, the risk to reward does not appear favorable to be long GBP/USD at this stage. Unless the objective is short-term.

As mentioned, the 1.3262 level is significant for GBP/USD on a monthly chart. The pair is currently on pace to close above it on a monthly close basis. This level may act as a line in the sand for a near-term directional bias.

Bottom Line

  • GBP/USD shows signs of a bullish breakout after breaking above notable resistance at 1.3262 last week.
  • The current upside move might be stretched after a 17% rally from the March low.

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

EUR/USD Attempts to Close the Month on a Strong Note

EUR/USD is on pace to post a fourth straight month of gains. The pair has advanced 12% from its low in the middle of March. To provide some perspective, the measurement from high to low from all of 2019 measures 6%.

A weaker dollar has been one of the main drivers for the rally in EUR/USD since March. Prospects of low interest rates in the US, as well as a strong appetite for risk globally, has driven the greenback sharply lower.

Last week’s speech from Fed Chair Powell reinforced the concept that the US will keep rates low for an extended period. Powell indicated that the Fed will shift to an “inflation averaging” method which entails letting inflation overshoot above its 2% target.

Another driver for the currency pair had been the view that Europe has a better handle over the outbreak compared to the US. However, daily new cases have been rising in Europe during August while declining in the US.

Economic data that stands to impact EUR/USD this week is concentrated to the second half of the week. The highlight this week will likely be Friday’s US jobs report. Analysts are looking for the unemployment rate to decline for a fourth straight month but are expecting the number of new jobs in August to be slightly lower than the last report.

Technical Analysis

EURUSD 4-Hour Chart

EUR/USD traded in a narrow range for most of last week before breaking higher on Friday. The near-term momentum is to the upside and buyers are defending support at 1.1878 thus far.

While the weekly breakout is significant, the pair continues to trade in a broader range that has contained it for most of the month. Further, the 100-month moving average is in play. The indicator currently falls at 1.1870.

If EUR/USD is able to close August out above the moving average, it would signal a potential move above the August high of 1.1965. Perhaps to test resistance in the 1.2000 – 1.2035 area.

On a daily chart, EUR/USD shows some RSI divergence starting from the high in July. Bulls may want to be cautious playing rallies to the upside at this stage in the bullish cycle.

Bottom Line

  • EUR/USD remains firmly bid in early trading on Monday after breaking higher from a nearly week-long range on Friday.
  • The economic calendar is light today, although there could be some volatility in the currency markets as it is the last trading day of the Month.

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

GBP/USD Touches Fresh 8-Month High as Dollar Drops

After nearly a week-long of consolidation in most major currency pairs, volatility has emerged with the dollar dropping broadly.

GBP/USD fell just shy of testing the 1.3300 handle in early European trading to trade at a fresh 8-month high.

The currency pair saw volatility yesterday during Powell’s speech, but a rally attempt was not sustained as the dollar had a mixed reaction to the guidance provided by the Fed Chair.

Powell confirmed that the Fed will move to an average inflation targeting method. This means policymakers will let inflation run above 2% in the short-run to compensate for prolonged periods where inflation has run below targets.

The Fed will focus on achieving 2% inflation over the long-run along with maximum employment.

Later today, Bank of England Governor Andrew Bailey will share the latest outlook on monetary policy in the UK. Bailey has said earlier that the BoE will move interest rates into negative territory if need be but has not signaled any intention to do so anytime soon.

Japanese prime minister Shinzo Abe announced his resignation on Friday as he continues to suffer from poor health. The news has triggered a sharp decline in the Nikkei 225 and the Japanese yen has rallied against all of the major currencies as a result.

The news could trigger a bit of risk aversion into the North American open although the S&P 500 is essentially flat in the pre-market.

Technical Analysis

GBPUSD 4-Hour Chart

GBP/USD is trading above a notable level at 1.3262. The last time the pair closed above this level on a monthly chart was over two years ago.

If the pair sustains the current upward momentum into the month-end, and closes above 1.3262, it would signal a renewal of bullish momentum.

At this stage, it might be too early to call it a bullish breakout, especially as momentum is seen slowing a bit after the pair crossed above yesterday’s high.

The short-term momentum is to the upside, and buyers are likely to defend near-term dips. The first level of support falls at 1.3262 with further support seen at 1.3230.

Bottom Line

  • The dollar is broadly weaker against all of its major counterparts.
  • With only two days left of trading in August, there could be further volatility and possibly erratic swings in currencies.

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

EUR/USD Daily Forecast – Euro Pops Above 1.1900 on a Broadly Weaker Dollar

The US dollar has fallen notably against all of its major counterparts in early trading on Friday with the antipodean currencies gaining the most.

The EUR/USD pair has made a sustained break above resistance at 1.1844 which had previously capped rally attempts throughout the week.

Yesterday’s speech from Fed Chair Jerome Powell caused some volatility but did not trigger an immediate range breakout. As many had speculated, the Fed Chair signaled that policymakers are willing to let inflation run above the 2% target in the short-term to compensate for lengthy periods where inflation has run below targets.

However, the Fed will continue to focus on a longer run target of 2% and maintains it’s stance to aim for maximum employment, without specifically stating an unemployment rate target.

The bottom line is that the Fed won’t be raising rates anytime soon, which is not all that surprising considering that both monetary and fiscal policy are expected to remain accommodative for some time in light of the pandemic.

Technical Analysis

EURUSD 4-Hour Chart

The dollar is weaker today against all of its major counterparts, in line with the broader bearish trend that has been taken place since mid-March.

It could be argued that the dollar weakness seen today is a result of month-end flows rather than Powell. After all, EUR/USD briefly dipped to around 1.1760 during Powell’s speech, printing a fresh low for the week.

Nevertheless, the short-term trend in EUR/USD is clearly to the upside and buyers are likely to show interest in near-term dips.

The first level of support is seen at 1.1878. This same level acted as resistance in late July and early August, as seen on a 4-hour chart. In the event of a dip below the level, further support is found at 1.1844 which marks the upper bound of the range that took place for most of the week.

A potential upside target is seen at 1.1950. The same level held the pair lower around the middle of the month. Channel resistance is seen just above the level to create a bit of a confluence.

Bottom Line

  • The dollar had a mixed reaction to Powell’s speech yesterday but is showing renewed weakness today.
  • Month-end positioning and position squaring are likely to cause some volatility today and on Monday.

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

GBP/USD Breaks Above 1.3200 and Trades Near Range Highs

GBP/USD pushed higher on Wednesday on the back of a weak dollar but the upward momentum has subsided since then. The pair has been consolidating near the 1.3200 handle although volatility is expected to pick up later today as Fed Chair Powell is scheduled to speak.

Powell will speak at the Jackson Hole Symposium which will be held online. Bank of England Governor Andrew Bailey will speak on Friday although the market reaction is likely to be stronger from Powell’s words.

Powell will reveal how the Fed expects to conduct monetary policy moving forward. Investors will be especially paying attention to how a rise in inflation will be handled as the earlier easing measures should cause upward price pressure.

If Powell signals that the Fed is comfortable with inflation climbing above 2%, it would be bearish for the dollar as it indicates that rates will remain low for longer.

In such a scenario, there will likely be a continuation in the trends seen since mid-March – A rise in equities and precious metals, and a further decline in the dollar.

Technical Analysis

GBPUSD 4-Hour Chart

GBP/USD is near a notable resistance from a horizontal level at 1.3262. This same level held the pair lower in December and March last year.

On a monthly chart, the pair has not closed above it in over two years. Last week, sellers showed that they are ready to defend the level as two rally attempts were met with strong selling pressure once the price point was reached.

If sellers continue to block upward attempts, a potential first downside target falls at 1.3000 as the level has acted as support in the range that has played out since late July.

Yesterday’s break above 1.3160 resistance signals short-term bullish momentum. The same level is seen as support in the session ahead. A break below could shift the near-term momentum back to the downside.

Bottom Line

  • GBP/USD shot higher in the North American session yesterday but the upward momentum has since faded.
  • Powell will speak later today and a volatile reaction might be seen in GBP/USD.

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

EUR/USD Daily Forecast – Euro Range Expected to Break on Powell’s Speech

EUR/USD has traded in a range for most of the month and is seen trading in an even more narrow range in the week thus far. Fed Chair Powell will be speaking later today and his words could trigger a directional move in the currency pair.

Powell is expected to shed light on how the Fed will handle monetary policy and inflation moving forward. Considering the earlier easing measures to battle the Coronavirus, both fiscal and monetary, inflation is likely to rise.

If the Fed decides to let inflation overshoot for some time, it would be bearish for the dollar. Typically, as inflation rises, a rate hike is expected which strengthens the currency.

But because of a prolonged period where inflation has been running below targets, and as the economy is still recovering from the virus outbreak, monetary policy could remain accommodating for an extended period of time.

The situation in Europe differs if taking into account comments from an ECB member yesterday. Governing council member Peter Kazimir said on Wednesday that the European Central Bank is “not obliged to use the whole (PEPP) envelope”. In other words, policymakers may not use all of the funding already allocated for easing.

Technical Analysis

EURUSD 4-Hour Chart

It’s only a matter of time that EUR/USD breaks out of its range and there should be some follow-through in whichever direction the pair heads, at least initially.

Whether the pair starts a new sustained directional move might depend entirely on what Powell says today.

If the markets perceive him to be less dovish than expected, there could still be an upside move but sellers might try and defend the 1.20 area. Effectively limiting gains.

The risk here is if Powell is a bit hawkish. It would be unexpected and would catch the markets off guard. In such a scenario, the dollar could rally notably.

Bottom Line

  • EUR/USD has held in a range between 1.1735 and 1.1947 for most of the month. This range could be broken later today after Powell’s speech.
  • Unemployment claims and a revised estimate of GDP figures for the US will be released in the early North American session.

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

GBP/USD Offers an Attractive Entry for Bears

The currency markets have been quiet in the week thus far and this may continue ahead of the two-day Jackson Hole Symposium which starts tomorrow.

Fed Chair Powell will discuss inflation and monetary policy on Thursday while Bank of England Governor Andrew Bailey will speak on Friday.

In the past, the market reaction towards events at the Jackson Hole Symposium has been inconsistent. There is some speculation that Fed Chair Powell will announce a change in the way the Fed views its inflation target which could move the markets.

Specifically, Powell may say that policymakers are willing to let inflation run above their 2% target after a lengthy period where it has run below targets.

If the Fed adopts this view, it would be considered dovish and bearish for the dollar. Similarly, BoE Governor is expected to be dovish as well.

There were talks a few months ago about negative rates, and this issue may be discussed on Friday. There are some concerns about the economic damage the unwinding of the Job Retention Scheme may have. This puts pressure on the BoE to keep monetary policy accommodative.

Technical Analysis

GBPUSD 4-Hour Chart

There are two reasons GBP/USD could move lower from here.

Investors may stay on the sidelines ahead of Powell and Bailey’s speech. With GBP/USD last seen trading at a notable resistance level, the odds don’t favor an upside break ahead of the upcoming speeches.

Therefore, there may be some potential for short-term bears for a move back towards recent range support at 1.3060.

From a broader perspective, GBP/USD failed to cross above important resistance at 1.3262 twice last week. Both times accompanied a sharp turn lower.

This level carries significance on a monthly chart where the pair has not closed above it in over two years.

Few traders will want to bet on a bearish outcome of Powell’s speech but with the current technical levels in play, the risk to reward certainly appears to be favorable in front-running a break below 1.3000 in the event he doesn’t deliver what the markets are expecting.

Bottom Line

  • Volatility has slowed in the early week as investors await the outcome of the Jackson Hole Symposium.
  • GBP/USD faces resistance at 1.3165 ahead of the North American open. The same level capped gains in the exchange rate in late July and early August.

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

EUR/USD Daily Forecast – Euro Holds Within Tight Range Near 1.1800

EUR/USD edged lower shortly after the European open and continues to hold within a range between around 1.1800 and 1.1840.

Investors may stay on the sidelines ahead of a speech from Fed Chair Jerome Powell on Thursday. The speech will reveal how the central bank plans to conduct monetary policy and handle inflation after earlier easing measures because of Covid-19.

There is speculation that the Fed may shift its stance and allow inflation to run above its 2% target. This is to accommodate a longer than usual period where inflation has been running below targets.

The implication is that if the Fed is willing to let inflation overshoot, then they are not thinking about tightening monetary policy anytime soon. This, in turn, has bearish implications for the US dollar.

The markets appear to be positioned for such a scenario when considering recent moves in real yields. If the Fed doesn’t adopt this new stance, which has been coined inflation averaging, it could throw some market participants off guard and lead to a sharp upswing in the dollar.

Technical Analysis

EURUSD 4-Hour Chart

EUR/USD has traded sideways for most of the month and the range has narrowed in the early week. As investors may not want to position before hearing from Powell, the session ahead is likely to be a quiet one.

Several media outlets are stating that volatility could be much higher than usual tomorrow because of Powell’s speech. This will largely depend on what is said and how significant any shifts in monetary policy may be.

Range support for EUR/USD is seen at 1.1735 while last week’s rally was met with resistance at 1.1947. These may be levels to be mindful of tomorrow.

For the session ahead, 1.1820 offers a small hurdle while more important resistance is found at 1.1843. To the downside, notable support is seen at 1.1781.

US Durable goods orders will be released later in the North American session. If the pair moves with momentum on the back of the release, in any direction, it may offer a short-term trading opportunity to play the range.

Bottom Line

  • The range in EUR/USD is narrowing and this is likely to continue ahead of tomorrow’s Jackson Hole Symposium.
  • Market participants might be hesitant to bet against a dovish outlook from the Fed. For that reason, there is some risk of a sharp dollar rally if the Fed chair disappoints.

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

GBP/USD Bounces After Touching a 10-Day Low

After some unusual price swings last week, GBP/USD has had a slow start to the week thus far. Yesterday, the pair briefly pierced below last week’s lows to trade at levels not seen since the middle of the month. However, downside pressure was lacking and the pair is seen recovering on the back of some dollar weakness.

Last week’s Brexit talks ended in a stalemate once again. The EU is looking for the UK to give up control over British waters which the UK is not willing to concede. Talks are expected to resume next week. The prospects of a deal being reached anytime soon appear low as the same issue has caused a deadlock for a few months now.

The upward momentum in Sterling versus the dollar, similar to other major currencies, has slowed notably in August. This same trend may continue this week as we close out the month.

The economic calendar is relatively light this week. The Jackson Hole Symposium takes place on Thursday. This event has not always had a consistent impact on the markets and it remains to be seen if it will cause some volatility.

Technical Analysis

GBPUSD 4-Hour Chart

GBP/USD has spent most of the month between 1.3000 and 1.3200. This broader range is likely to stay intact in the absence of a fundamental catalyst.

The exchange rate was last seen testing minor resistance at 1.3120. A rally above it could lead to an extension higher to a more notable resistance level at 1.3170. The latter level held the pair lower in late July and early August.

To the downside, initial support comes from the lower bound of a rising trend channel. Stronger support is seen at a horizontal level at 1.3020 as this level has held several declines earlier in the month.

Bottom Line

  • GBP/USD has held in a narrow range for the past three weeks and looks set to continue the pattern.
  • Sellers may look to step in on rallies to 1.3170 while buyers are likely to be found at 1.3020.

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

EUR/USD Daily Forecast – Euro Continues to Consolidate Below 1.1850

Similar to yesterday, EUR/USD is showing upward momentum in the early day but the pair has been range bound for most of the month and this type of price action may continue in the week ahead.

One of the driving themes for EUR/USD last month was that Europe had a better handle on the Coronavirus outbreak compared to the US. Since then, cases have started to rise in Europe while declining in the United States.

Another development since last month is that the dollar’s inverse correlation with the equity markets appears to be weakening. Since mid-March, the dollar has been firmly offered while equities pushed higher.

Since last week, the downside momentum in the dollar has faded while the stock markets continue to show strength. The S&P 500 rallied to close at a fresh record high yesterday, and has advanced about 0.4% in the pre-market, shortly after the European open.

GDP growth in Germany during the previous quarter was revised up to show a decline of 9.7% from the initial estimate of a 10.1% contraction. Despite the slight improvement, the contraction remains significant. To provide a comparison, the GDP contraction inspired by the financial crises in the first quarter of 2019 was 4.7%. Later in the week, the US will release revised GDP figures for the second quarter.

Technical Analysis

EURUSD 4-Hour chart

EUR/USD has traded sideways since the start of the month. As it is the last week of the month, a break from this range appears unlikely, especially considering the light economic calendar.

Resistance for the pair over the near-term is found at 1.1850. The same level held EUR/USD lower yesterday. Beyond that, further resistance is seen at 1.1900.

To the downside, the 1.1735 price point has offered support to the range that has been playing out in the month thus far.

Several of the major currency pairs are trading at important technical areas. This highlights the potential for a broader decline. Although a break below 1.1735 will probably be needed to encourage bears.

Bottom Line

  • EUR/USD remains range bound and appears poised to hold this pattern into the end of the month.
  • The 1.1850 price point has been acting as resistance in the early week.

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

GBP/USD Upside Appears Limited with Major Resistance in Play

The dollar is under slight pressure to start the new week after attempting to recover last week. GBP/USD has gained about a quarter percent shortly after the European open after posting a daily loss of about 1% on Friday.

While the pair displayed somewhat volatile swings last week, it’s important to note that a range has been playing out for most of the month. This range type of trading could continue in the week ahead as there isn’t any economic data scheduled for release that stands to have a market impact.

Considering that there is an important technical resistance area in play for GBP/USD, the pair might be at risk of a pullback at this stage. This will largely depend on the dollar as it has been dominating fluctuations in all of the major currency pairs since around mid-March.

Technical Analysis

GBPUSD 4-Hour Chart

GBP/USD posted a very strong gain in July but is set to close August out mostly unchanged.

It’s not unusual to see a range develop after a strong move higher, but it’s also not unusual to see a range prior to a reversal.

With several of the major currency pairs testing important technical areas in a correlated effort, a reversal is certainly a possibility for GBP/USD.

The major hurdle for the exchange rate falls at 1.3260, which blocked rally attempts twice last week. Both attempts at the level accompanied a sharp fall.

The importance of the 1.3260 level is best seen on a monthly chart. It blocked rallies in both February and December last year, and the pair has not closed above it, on a monthly basis, in over two years.

For the session ahead, resistance for the pair is seen at 1.3163 as the price point capped gains back in late July and earlier this month.

To the downside, the first level of support comes from a rising trend channel that has encompassed price action throughout August. Slightly below it, further support is seen from a horizontal level at 1.3015.

Bottom Line

  • The upward momentum in GBP/USD appears to have stalled out in August after the pair gained about 5.5% in July.
  • Major resistance is in play at 1.3262, the pair has not closed above this level on a monthly chart since May 2018.

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

EUR/USD Daily Forecast – Euro Gains But Holds Within Broader Range

EUR/USD was up about a third of a percent in early European trading on Monday, boosted by a weaker dollar.

The pair posted a loss last week to snap an eight consecutive week rally. The upward momentum is slowing ahead of the 1.2000 handle which is seen as a major upside hurdle.

The exchange rate has mostly moved sideways over the past few weeks, and this may continue considering the light economic calendar in the week ahead. GDP data will be released from Germany tomorrow and from the US later in the week. But as these figures are revised from earlier estimates, they are not likely to move the markets.

Equities are seeing a firm bid in the early day with the S&P 500 set to open just over half a percent higher. In currencies, however, the risk-on tone is lacking with little movements in pairs like USD/JPY and NZD/USD, which usually correlate well with stocks.

COVID-19 cases in the US have moved slightly higher since late last week but the broader trend remains to the downside after the number of daily cases peaked in late July.

Technical Analysis

EURUSD 4-Hour Chart

The dollar could be attempting to turn after a sharp fall last month and the price action in EUR/USD so far appears to support the view.

EUR/USD typically goes through a period of consolidation prior to reversing, rather than an abrupt turn.

The current range shows support around 1.1735 while resistance is found at 1.1947. On the shorter time frames, there is fairly strong resistance in around 1.1850.

Because of the earlier trend, the pair may continue to see a firm bid on near-term dips. However, sellers have been present on moves towards the 1.1900 area and therefore it may take a breach above the level to entice buyers.

Bottom line

  • EUR/USD has moved sideways for most of the month. This price behavior could continue in the week ahead considering the light economic calendar.
  • It may take a sustained break above 1.1900 to confirm that the prior uptrend remains intact. On the other hand, a drop below 1.1735 may signal that a broader reversal is taking place.

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

GBP/USD Rallies Above 1.3100 But Holds Within Broader Range

The US dollar has turned lower following a recovery inspired by Friday’s jobs report. Most of the major currencies are seen advancing against the greenback shortly into the European session with GBP/USD scaling above 1.3100.

Employment data from the UK today revealed the largest quarterly decline in employment in over a decade. The exchange rate, however, did not see much of an impact as the report was mostly in line with expectations.

The office for National Statistics reported that the decline in workers stems mainly from those above 65, the self-employed, and part-time employees.

The UK government implemented support programs for workers when the Coronavirus began to escalate earlier in the year. These programs are set to expire in October, giving the UK some time to further recover.

GBP/USD looks set to post a second consecutive day of gains but whether the pair continues on this momentum may depend on UK GDP data scheduled for release on Wednesday.

Quarterly GDP is expected to have contracted 20.5% last quarter while the monthly version of the report is forecast to show 8.1% growth in June.

GBP/USD is likely to react to this data and volatility is expected. Traders may pay closer attention to the monthly figure to determine the pace at which the economy is recovering.

Technical Analysis

GBPUSD 4-Hour Chart

GBP/USD is headed higher, in line with it’s trend in July. However, over the past few weeks, the pair has fallen into a sideways consolidation.

The near-term momentum is to the upside. Considering that the dollar is under pressure once again, buyers are likely to keep the pair bid on dips in the short run.

A potential upside target for the pair falls at 1.3150 which marks the upside of the current range.

To the downside, buyers have shown their presence on dips towards 1.3000. This level is seen as strong support for the week ahead.

Bottom Line

  • Sterling traders have brushed off today’s UK employment report in favor of trading a weaker dollar.
  • UK GDP data will be released tomorrow and is seen as the highlight in terms of data pertaining to the pair this week.

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

EUR/USD Daily Forecast – US Dollar Bears Sell Into Strength

After posting losses for two consecutive sessions, EUR/USD is catching a strong bid and has erased a bulk of yesterday’s loss shortly after the European open.

The dollar had been recovering broadly against its major counterparts after Friday’s US jobs report came in better than expected. However, considering the sharp decline in the greenback in recent months, traders have viewed the dollar recovery as an opportunity to load up on fresh short positions.

There has been a notable out performance in European economic data versus the US as of late, and this has been one of the driving themes for EUR/USD. The view is that Europe has a better handle on the Coronavirus compared to the US.

But Friday’s jobs data provided a glimpse of strength in the US economy, and recent Coronavirus statistics point to the same.

The most recent data from the CDC shows the number of new daily cases falling back below 50 thousand after a spike higher in cases over the weekend. The trend in new daily cases peaked in late July and the 7-day average has been moving lower since.

If the US can sustain the momentum in the declining new daily cases, and the labor market recovery, the dollar may find support.

Technical Analysis

EURUSD 4-Hour Chart

EUR/USD is likely to remain bid over the short-term, but the improvement in the US suggests that the pair will struggle to regain the type of momentum seen in July.

This could translate into a range for EUR/USD, with notable overhead resistance near 1.1875 while buyers have been supporting the pair on dips towards the 1.1700 level.

Resistance for the session ahead is seen at 1.1800.

In terms of correlations, EUR/USD traders may want to keep an eye out on equities as the currency pair has had a fairly strong correlation with equities since mid-March.

The S&P 500 continues to show strength but tech stocks have been under pressure. Yesterday, the Nasdaq briefly dipped to levels not seen since early August. The tech index has recovered since then, but price action after the US open will reveal if it can sustain the upward move.

Bottom Line

  • EUR/USD is supported by a renewal of US dollar weakness.
  • Recent stats from the US point to improvement, this may limit the upside potential in EUR/USD from a broader viewpoint.

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

GBP/USD Falls Back From 1.3150 Resistance as the US Dollar Recovers

GBP/USD has eased lower after a couple of attempts to scale above 1.3150 resistance last week. The bearish move followed a better than expected jobs report from the US on Friday.

The Non-Farm payroll data, weekly unemployment claims, and the ADP report all had positive elements to it which appears to have halted the dollar decline, at least for now.

At this stage, it would not be surprising to see GBP/USD fall into a range, especially considering the outsized bullish move in July.

The pair will likely be influenced by GDP data that will be released later in the week. Analysts expect GDP contracted 20.5% in the second quarter. On a month over month basis, June is expected to show a recovery with growth of 8.1% following 1.8% growth in May and a notable 20.4% contraction in April.

Aside from UK data, traders will also be paying attention to the latest CPI and retail sales figures from the US, scheduled for release on Wednesday and Friday.

GBP/USD has had a strong correlation with the equity markets since March and this is something to be mindful of. The S&P 500 rallied last week to close the gap from back in February. The index is at notable resistance, if it pulls back, GBP/USD might follow it lower.

Technical Analysis

GBPUSD 4-Hour Chart

From a broader perspective, GBP/USD has important resistance at 1.3150 and 1.3200, both stemming from the larger time frames.

While these hurdles could cap near-term gains, the momentum-driven bullish trend since last month stands to keep the pair bid on dips. The end results might be a range for the currency pair.

The US dollar is attempting to extend on Friday’s gain but the upward momentum has slowed with the trade-weighted index showing only a marginal gain in the early day.

If GBP/USD continues to head lower, further support is found at 1.2959. It might take a break of either this level or 1.3150, to get a clearer view of the near-term trend.

Bottom Line

  • The US dollar has gained some recovery momentum following better than expected jobs data last week.
  • While GBP/USD is likely to remain bid on dips as a result of the firm move higher in July, upside momentum may slow with major overhead resistance coming into play.

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

EUR/USD Daily Forecast – Euro Lingers Near Support to Start New Week

One of the driving themes for EUR/USD has been that Europe seems to be managing the Coronavirus better than the US, leading the single currency to advance against the greenback.

But last week’s data suggested that things in the US are improving, or at least better than expected.

In terms of Coronavirus cases, the number of new daily cases has been declining after peaking in late July. It might be too soon to make an overall judgment, especially with a spike over the weekend, but things are looking better than they did in July.

Economic data from the US was also positive with Friday’s Non-Farm payrolls report showing an additional 1.76 million new jobs during July while analysts had predicted an increase of 1.53 million workers.

Data earlier in the week pointed to the same thing. The weekly jobless claims report was well ahead of expectations after the prior two reports suggested that the recovery in the labor markets had stagnated. The ADP jobs report earlier in the week was a bit weaker than expected, but job gains for June were revised up to show nearly double the rise in workers compared to what was originally reported.

Technical Analysis

EURUSD 4-Hour Chart

The dollar has some short-term momentum, and Friday’s decline in EUR/USD has resulted in a reversal candlestick pattern that hints of a potential reversal.

At the same time, EUR/USD has shown stronger than usual momentum over the past couple of months which stands to keep the pair supported on dips.

The pair currently trades at a horizontal level at 1.1760. This same level has recently acted as both support and resistance.

If EUR/USD declines from here, it could lead to an extension down towards the August low of 1.1695. While above the level, major resistance to the upside remains at 1.1900.

Bottom Line

  • Data from the US on Friday revealed that the labor market is doing better than analysts had expected. The dollar gained as a result and is still showing strength in early trading on Monday.
  • The trend over the past few months has been to the upside for EUR/USD and there has been a lot of momentum behind the move. This should keep the pair well bid.

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

GBP/USD Eases Back Ahead of US Jobs Report

The markets have pretty much headed in one direction since March. The dollar has declined notably while stocks and precious metals have both rallied. The moves have been significant, the S&P 500 and gold both posted the highest monthly close on record in July. Meanwhile, the trade-weighted dollar index hit a fresh two-year low earlier this week.

GBP/USD has been boosted by this broad-based dollar weakness and rallied to a 5-month high yesterday. While the recent gains in the exchange rate are mostly attributed to a weaker dollar, it should be noted that Sterling outperformed its major currency counterparts last month.

The uncertainty when it comes to the UK lies in Brexit. Earlier today, British finance minister Rishi Sunak confidently said that a trade deal is possible in September. Last month, several media outlets reported that the UK government is assuming a trade deal won’t be reached by the end of the year.

Things are improving somewhat when it comes to COVID-19 in the US. The rise in new daily cases peaked in the third week of July and has declined notably since then. Today’s NFP report will shed some light on how the labor market did in July.

Reports from earlier in the week point to a mixed outlook for the jobs market. The ADP reported much fewer new jobs in July, although they revised their report for June to show an additional 4.31 million jobs against the earlier reported 2.37 million.

Unemployment claims data signals that the labor market may have stagnated somewhat around the middle of July, but yesterday’s report showed a drop in the number of new claims filed, suggesting the recovery momentum has picked up.

Technical Analysis

GBPUSD 4-Hour Chart

GBP/USD is near an important resistance area. On a monthly chart, the 1.3260 area as held the pair lower for a few years. Ahead of that, resistance is seen at both 1.3200 and 1.3150.

For the session ahead, dips might be bought considering the broader upward trend. Although rallies may be short-lived unless there is a significant deviation from expectations in the jobs report.

Support for the session ahead is seen at Wednesday’s spike low of 1.3057.

Bottom Line

  • GBP/USD has given up a bulk of its weekly gain and is set to close the week unchanged.
  • US jobs numbers will be released in the North American session, a volatile reaction is expected.

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

EUR/USD Daily Forecast – Euro Pulls Back After Second Failed Attempt to Scale 1.1900

EUR/USD has wiped a bulk of its weekly gain as it heads lower with the 1.1900 level once again proving to be a major hurdle. The exchange rate has mostly traded sideways for about a week now.

The trade-weighted dollar found buyers last Friday after hitting a fresh two week low. Traders made another attempt to push the greenback lower in the early week but this area in the dollar index is well supported, at least for now.

US jobless claims came in better than expected yesterday. This report had shown a decline in claims for 15 weeks in a row up until last week. The analyst estimate for yesterday’s report had suggested the improvement in the labor market may stagnate at this point, however, the positive report points a continued recovery in the US labor market.

Figures released earlier in the week painted a different picture. The ADP reported an additional 167 thousand new jobs in July, well below the analyst estimate for 1.2 million new jobs. However, the figures for June were adjusted up to show 4.31 million new jobs versus the originally reported 2.37 million.

Later today, the Bureau of Labor Statistics will release their version of employment change data. This is the most widely watched report when it comes to the US labor market and a volatile reaction is expected. Analysts are looking for a gain of 1.5 million jobs in July following a rise of 4.8 million jobs in June.

Technical Analysis

EURUSD 4-Hour Chart

The level to watch, if EUR/USD continues lower, falls at 1.1767. This level has acted as both support and resistance on a 4-hour chart since late August.

Considering the broader trend, buyers are likely to defend this level. The exception might be if the jobs data deviates significantly from the analyst estimate.

While the 1.1900 level has been an obstacle, there has not been any indication of a reversal of trend at this stage. It might take a break below 1.1700 to suggest the near-term trend has changed.

Bottom Line

  • EUR/USD has moved sideways after a second unsuccessful attempt to break above 1.1900.
  • The US non-farm payrolls report will be released later today, a volatile reaction in the markets is expected.

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