USD/CAD Daily Forecast – Strong Oil Limits U.S. Dollar Upside

USD/CAD Video 03.08.20.

Resistance At The 20 EMA Stays Strong

USD/CAD tried to gain more upside momentum but faced resistance at the 20 EMA at 1.3450 as the U.S. dollar rebounded against a broad basket of currencies while WTI oil returned back above the key $40 level.

The U.S. Dollar Index continued its rebound and managed to settle above 93.5. However, it faced resistance at the 94 level and pulled back. In case the U.S. Dollar Index manages to get above 94, USD/CAD will have a good chance to develop more upside momentum.

While the rebound of the U.S. Dollar Index was bullish for USD/CAD, the oil price upside limited the American currency’s gains against the Canadian dollar.

For WTI oil, the key level is the resistance at $42.50. A move above this level will likely lead to increased upside momentum and provide significant support to commodity-related currencies including the Canadian dollar.

Today, the U.S. has reported Manufacturing PMI data for July. Manufacturing PMI increased from 49.8 in June to 50.9 in July while analysts expected that it would grow to 51.3. Numbers above 50 show expansion.

Canada is set to provide its Manufacturing PMI report tomorrow.

Technical Analysis

usd cad august 3 2020

USD to CAD did not manage to get above the nearest resistance at the 20 EMA at 1.3450 and declined closer to 1.3400. The nearest material support level for USD to CAD is located at 1.3330. This level has already been tested several times and proved its strength.

The resistance at the 20 EMA has the potential to become a significant obstacle on the way up. At this point, USD to CAD may find itself stuck in a trading range between the support at 1.3330 and the resistance at the 20 EMA.

In case USD to CAD manages to get above the 20 EMA, it will head towards the major resistance level at 1.3500. A move above this level will likely lead to increased upside momentum, and USD to CAD will head towards the next resistance level at the 50 EMA at 1.3550.

On the support side, a move below 1.3330 could trigger a sell-off, taking USD to CAD to the next support level at 1.3270.

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

The COVID-19 Stimulus Package and Manufacturing PMIs Put the Dollar and EUR in Focus

Earlier in the Day:

It’s was a busy start to the day on the economic calendar this morning.  The Japanese Yen and the Aussie Dollar were in action, with economic data from China also in focus.

Away from the economic calendar, COVID-19 and the U.S stimulus package continued to be an area of focus.

Looking at the latest coronavirus numbers

According to figures at the time of writing, the number of new coronavirus cases rose by 249,532 to 18,231,469 on Sunday. On Saturday, the number of new cases had risen by 250,087. The daily increase was lower than Saturday’s rise while up from 213,347 new cases from the previous Sunday.

Germany, Italy, and Spain reported 623 new cases on Sunday, which was down from 707 new cases on Saturday. On the previous Saturday, 663 new cases had been reported.

From the U.S, the total number of cases rose by 50,702 to 4,813,647 on Sunday. On Saturday, the total number of cases had increased by 60,171. On Sunday, 26th July, a total of 56,130 new cases had been reported.

For the Japanese Yen

Finalized GDP numbers for the 1st quarter remained unchanged from 2nd estimates. In the 1st quarter, the Japanese economy contracted by 0.6%, following a 1.9% contraction in the 4th quarter.

On an annualized basis, the economy contracted by 2.2%, which was also in line with 2nd estimates. In the 4th quarter, the economy had contracted by 7.3%.

The Japanese Yen moved from ¥105.858 to ¥105.844 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.07% to ¥105.90 against the U.S Dollar.

For the Aussie Dollar

The AIG Manufacturing Index rose from 51.5 to 53.5 in July.

According to the July Survey,

  • The sector expanded for a 2nd consecutive month, a first since October of last year.
  • The food & beverage and machinery & equipment sectors delivered much-needed support in the month.
  • In spite of the expansion, there was continued weakness across the other sectors.
  • Production, employment, supplier deliveries, and finished stocks expanded at a faster rate than in June, however.

The Aussie Dollar moved from $0.71412 to $0.71423 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.14% to $0.7133.

Out of China

In July, the Caixin Manufacturing PMI rose from 51.2 to 52.8. Economists had forecast a rise to 51.3.

According to the July survey,

  • New business from overseas fell at the slowest rate in 6-months, as new orders rose at the quickest pace since Jan-11.
  • Companies also reported the quickest expansion in output since January 2011.
  • Output expanded for a 5th consecutive month, driven by greater client demand as the economic recovery gathered pace.
  • Manufacturers ramped up their buying activity, the rate of expansion the most marked in seven-and-a-half years.
  • In spite of a rise in backlogs and new orders, firms cut staffing levels again in July.

The Aussie Dollar moved from $0.71303 to $0.71366 upon release of the figures.

Elsewhere

At the time of writing, the Kiwi Dollar up by 0.02% to $0.6630.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Key stats include July manufacturing PMI figures for Spain and Italy.

Finalized manufacturing PMIs are also due out of France, Germany, and the Eurozone.

Barring a marked revision to Germany’s numbers, we would expect Italy and the Eurozone’s PMIs to have the greatest impact.

Following some quite dire 2nd quarter GDP numbers last week, a further pickup in manufacturing sector activity would be welcome.

At the time of writing, the EUR was down by 0.07% to $1.1770.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. July’s finalized manufacturing PMI is due out later this morning.

Barring any revisions, however, the PMI should have a muted impact on the Pound.

Chatter on Brexit and market risk sentiment will influence, as will updates on the latest COVID-19 outbreak.

At the time of writing, the Pound was up by 0.02% to $1.3088.

Across the Pond

It’s a relatively busy day ahead for the U.S Dollar. July’s ISM Manufacturing PMI and finalized Markit Manufacturing PMI figures are due out.

Expect the ISM figures to have the greatest impact on the day. The employment and new orders sub-indexes will likely garner plenty of interest.

Away from the calendar, the focus will remain on Capitol Hill and the progress of the COVID-19 stimulus package.

At the time of writing, the Dollar Spot Index was up by 0.16% to 93.499.

For the Loonie

It’s a quiet day ahead on the economic calendar, with no material stats due out to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of market risk sentiment and the PMI numbers on the day.

At the time of writing, the Loonie was up by 0.03% to C$1.3408 against the U.S Dollar.

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

The Week Ahead – COVID-19, Economic Data and US Politics in Focus

On the Macro

It’s a busier week ahead on the economic calendar, with 59 stats in focus in the week ending 7th August. In the week prior, just 57 stats had been in focus.

For the Dollar:

It’s another busy week ahead on the economic data front.

In the 1st half, the ISM’s July private sector PMIs, ADP nonfarm employment change figures, and June factory orders are in focus.

We would expect Wednesday’s ISM Non-Manufacturing PMI and ADP Nonfarm Employment Change to have the greatest impact.

The focus will then to Thursday’s initial jobless claims and Friday’s nonfarm payroll numbers and unemployment rate.

Following some disappointing weekly jobless claims figures and the rise in COVID-19 cases, the labor market figures will be key.

For the service sector, any contraction in July, following a jump in productivity in June, would also weigh on riskier assets.

The Dollar Spot Index ended the week down by 1.15% to 93.349.

For the EUR:

It’s also another busy week ahead on the economic data front.

On Monday and Wednesday, July’s manufacturing and services PMIs are due out of Italy and Spain.

Finalized PMIs are also due out of France, Germany, and the Eurozone.

With Spain seeing a spike in new COVID-19 cases, expect some attention to the PMIs. Ultimately, however, the Eurozone’s services and composite will likely have the greatest impact.

The focus will then shift German factory orders for June, due out on Thursday.

At the end of the week, Germany remains in focus, with June’s industrial production and trade figures due out.

Barring disappointing numbers, June retail sales figures for the Eurozone should have a muted impact on Thursday.

The EUR/USD ended the week up by 1.05% to $1.1778.

For the Pound:

It’s a relatively busy week ahead on the economic calendar. July’s finalized private sector PMIs are due out and will garner plenty of interest.

Expect any downward revision to the Services PMI on Wednesday to have the greatest impact.

On Thursday, the focus will then shift to the BoE. More action is expected and the Bank may consider an extension to the suspension of banks paying dividends and buybacks.

While the BoE is in action, we can also expect any further updates on Brexit to also influence in the week.

The GBP/USD ended the week up by 2.27% to $1.3085.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

On Wednesday, June’s trade figures are due out ahead of July employment numbers on Friday.

Expect the employment figures to have the greatest impact, however.

Barring dire numbers, the Ivey PMI for July should have a muted impact on the Loonie on Friday.

Away from the stats, COVID-19 and geopolitics will continue to influence crude oil prices and risk sentiment.

The Loonie ended the week up by 0.02% to C$1.3412 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively busy week ahead for the Aussie Dollar.

At the start of the week, the Manufacturing Index figures are due out ahead of a busy Tuesday.

We would expect manufacturing PMIs from China, the EU, and the U.S to have a greater impact, however, on Monday.

The focus will then shift June trade and retail sales figures due out on Tuesday. Expect the retail sales figures to have the greatest impact. The RBA continues to rely on consumer spending to support the economy. Weak numbers will be a test for the Aussie Dollar.

For the week, however, the main event is the RBA monetary policy decision on Tuesday.

Following the spike in new COVID-19 cases, will the RBA remain optimistic about the economic recovery?\

Any dovish chatter and the Aussie Dollar could eye sub-$0.70 levels. At the end of the week, the RBA’s statement on monetary policy will also draw interest.

The Aussie Dollar ended the week up by 0.53% to $0.7143.

For the Kiwi Dollar:

It’s another quiet week ahead on the economic calendar.

2nd quarter employment figures are due out on Wednesday. The markets will likely be forgiving to an extent, with COVID-19 expected to have an impact on employment.

With economic data on the lighter side, private sector PMIs from China, the EU, and the U.S will influence.

Expect geopolitics and COVID-19 news to also have an impact in the week. Any signs of a slowdown in new cases globally and expect support to kick in.

The Kiwi Dollar ended the week down by 0.18% to $0.6629.

For the Japanese Yen:

It is a busy week ahead on the economic calendar.

Finalized 2nd quarter GDP and July’s manufacturing PMI numbers are due out on Monday.

The focus will then shift to July’s service PMI on Wednesday and June household spending figures on Friday.

While the stats will influence sentiment towards BoJ monetary policy, the Yen will remain at the mercy of COVID-19 and geopolitics.

The Japanese Yen ended the week up by 0.29% to ¥105.83 against the U.S Dollar.

Out of China

It’s a relatively busy week ahead on the economic data front.

July’s private sector PMIs are due out on Monday and Wednesday. Expect the figures to influence risk appetite in the week.

On Friday, July trade figures will also garner plenty of attention. While exports remain the main area of focus, any sizeable fall in imports would test risk appetite on the day.

Away from the economic calendar, any chatter from Beijing will also need monitoring.

The Chinese Yuan ended the week up 0.62% to CNY6.9752 against the U.S Dollar.

Geo-Politics

UK Politics:

Brexit will remain in focus. Talks are set to continue through August and September ahead of an EU Summit in October.

60 days may sound like a lot but when considering the lack of progress over 4-years…

A light economic calendar and Brexit chatter have provided the Pound with support. We may even see the markets brush off the chances of a hard Brexit.

Getting on with it seems to be the key desire now rather than dragging it out any longer. Either way, we’re not expecting Johnson and the team to give too much away…

U.S Politics:

Last week, the Republicans showed signs of fragmentation. As Presidential Election stress builds, we could see more fractures as Trump attempts to distract voters.

The immediate issue at hand, however, is the COVID-19 stimulus package. Any failure to deliver will weigh on the Dollar. Labor market conditions have not improved and the 2nd wave has shown little sign of slowing. A lack of benefits for the unemployed will raise more issues than a fall in household spending. We have already seen social unrest…

The Coronavirus:

It was yet another bad week, with the number of new COVID-19 cases continuing to rise at a marked pace.

From the market’s perspective, the 3 key considerations have been:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. No spikes in new cases as a result of the easing of lockdown measures.
  3. Governments continue to progress towards fully opening economies and borders.

Last week, we saw a number of countries including Hong Kong and the UK reintroduce containment measures. Hopes of progress towards a vaccine had limited the damage last week. In the week ahead, however, the numbers will need to ease off to avoid spooking the markets.

At the time of writing, the total number of coronavirus cases stood at 17,981,937. Monday to Saturday, the total number of new cases increased by 1,782,490. Over the same period in the previous week, the total number had risen by 1,531,149.

Monday through Saturday, the U.S reported 447,236 new cases to take the total to 4,762,945. This was up marginally from the previous week’s 417,070

For Germany, Italy, and Spain, there were 22,814 new cases Monday through Saturday. This took the total to 793,804. In the previous week, there had been 17,083 cases over the same period. Spain accounted for 16,101 of the total new cases in the week.

The Weekly Wrap – Economic Data, the FED, and Trump Sank the Dollar

The Stats

It was a busy week on the economic calendar, in the week ending 31st July.

A total of 56 stats were monitored, following the 41 stats from the week prior.

Of the 56 stats, 31 came in ahead forecasts, with 24 economic indicators coming up short of forecasts. Just 1 stat was in line with forecasts in the week.

Looking at the numbers, 19 of the stats reflected an upward trend from previous figures. Of the remaining 37, 35 stats reflected a deterioration from previous.

For the Greenback, it was a 6th consecutive week in the red. In the week ending 31st July, the Dollar Spot Index fell by 1.15% to 93.349. In the week prior, the Dollar had fallen by 1.57%.

The continued slide through the month of July left the Dollar Spot Index down by 4.15% for the month.

Dire economic data, the continued spread of COVID-19, and a dovish FED delivered the loss. Adding to the Dollar angst in the week was Trump’s Presidential Election delay tweet on Thursday…

According to a Reuters report, U.S Dollar net shorts surged to the highest in 9-years, delivering the largest monthly loss Since Sept-2010.

Looking at the latest coronavirus numbers

At the time of writing, the total number of coronavirus cases stood at 17,731,750 for Friday, rising from last Friday’s 15,930,779 total cases. Week-on-week (Saturday thru Friday), the total number of cases was up by 1,801,071 on a global basis. This was higher than the previous week’s increase of 1,741,556 in new cases.

In the U.S, the total rose by 454,463 to 4,702,774. In the week prior, the total number of new cases had risen by 478,299.

Across Germany, Italy, and Spain combined, the total number of new cases increased by 22,753 to bring total infections to 793,804. In the previous week, the total number of new cases had risen by 17,404. Spain alone reported 16,101 new cases in the week.

Out of the U.S

It was a busy week on the economic data front.

Key stats included July consumer confidence, the weekly jobless claims, and 2nd quarter GDP figures.

The stats were skewed to the negative. Consumer confidence deteriorated in July, as a result of the 2nd wave of the pandemic. Initial jobless claims increased for a 2nd consecutive week, with the U.S economy contracting by 32.9% in the 2nd quarter.

At the end of the week, July consumer sentiment figures were also revised down.

There were some positives, however. Durable and core durable goods continued to rise in June.

Chicago’s PMI returned to expansion in July, with personal spending rising for a 2nd consecutive month in June. These were good enough to give the Dollar much-needed support at the end of the week.

In the equity markets, the NASDAQ and S&P500 rose by 3.69% and by 1.73% respectively. The Dow bucked the trend, however, falling by 0.16%.

Out of the UK

It was a particularly quiet week on the economic calendar, with no material stats to provide the Pound with direction.

A lack of economic data contributed to the upside in the Pound that benefitted from Dollar weakness. News of the government reintroducing lockdown measures in the North weighed at the end of the week, however.

In the week, the Pound rallied by 2.27% to $1.3085 in the week, following on from a 1.80% gain from the previous week. The FTSE100 ended the week down by 3.69%, following on from a 2.65% loss from the previous week.

Out of the Eurozone

It was a busy week on the economic data front.

In a quiet 1st half of the week, Germany’s IFO Business Climate Index figures for July provided support on Monday.

The focus then shifted to 2nd quarter GDP numbers. France, Germany, and the Eurozone reported particularly dire 2nd quarter numbers.

The German economy contracted by 10.1%, the French economy by 13.8%, and the Eurozone economy by 12.1%.

It wasn’t enough to send the EUR into the red, however, as the U.S delivered darker numbers.

For the week, the EUR rose by 1.05% to $1.1778, following a 2.00% rally from the previous week. A 0.58% pullback on Friday limited the upside for the week.

For the European major indexes, it was another bearish week. The DAX30 slid by 4.09%, with the CAC40 and EuroStoxx600 falling by 3.49% and by 2.98% respectively.

For the Loonie

It was a quiet week on the economic calendar.

Economic data included May GDP and June RMPI numbers at the end of the week.

The stats were positive, with the Canadian economy expanding by 4.5% in May, following April’s 11.7% contraction. In June, the RMPI rose by a further 7.5%, following a 16.4% jump in May.

While the other majors lost ground against the Greenback on Friday, the stats delivered support at the end of the week.

The Loonie rose by 0.02% to end the week at C$1.3412 against the Greenback. In the week prior, the Loonie had rallied by 1.22% to C$1.3415.

Elsewhere

It was a mixed week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 31st July, the Aussie Dollar rose by 0.53% to $0.7143, while the Kiwi Dollar fell by 0.18% to $0.6629. A 1.04% slide on Friday, left the Kiwi in the red for the week.

For the Aussie Dollar

It was a relatively quiet week for the Aussie Dollar.

Inflation and private sector credit figures delivered mixed results in the week.

In the 2nd quarter, consumer prices slid by 1.9%, with prices down by 0.30% year-on-year.

Final delivery numbers were not much better, with the Producer Price Index falling by 1.20% in the 2nd quarter. Year-on-year, the index fell by 0.40%.

The numbers were better than forecasts, which propped up the Aussie Dollar.

Private sector credit disappointed, however, falling by 0.3% in June.

While the Aussie Dollar found support against the Greenback, the latest COVID-19 outbreak pinned back the Aussie.

For the Kiwi Dollar

It was another relatively quiet week on the economic data front.

While stats included building consent and business confidence figures, the focus was on the business confidence figures.

A marginal improvement in business confidence did little to support the Kiwi, however.

In July, the ANZ Business Confidence Index rose from -34.4 to -31.8.

According to the latest ANZ Report,

  • A net 9% of firms expect weaker economic activity in their own business, rising from -26% in June.
  • The retail sector drove the recovery, while the agriculture sector was the most negative.
  • 31% of firms say they intend to lay off staff, and 24% say they have less staff than a year ago.

For the Japanese Yen

It was a relatively quiet week on the economic calendar.

Retail sales continued to fall in June. Following a 12.5% slump in May, retail sales fell by 1.20%.

Industrial production delivered hope, however, rising by 2.7% in June, according to prelim figures. In May, production had tumbled by 8.9%.

A weakening U.S Dollar stemming from particularly dire economic data and a dovish FED supported the Yen.

The Japanese Yen rose by 0.29% to end the week at ¥105.83 against the Greenback. A 1.05% slide on Friday, cut the gains from earlier in the week. In the week prior, the Yen had risen by 0.82%.

Out of China

It was a quiet week on the economic data front.

July’s NBS private sector PMI figures delivered mixed results on Friday.

While the Non-Manufacturing PMI slipped from 54.4 to 54.2, the Manufacturing PMI rose from 50.9 to 51.1.

With Beijing and Washington silent, following the previous week’s diplomatic spat, the Yuan recovered to sub-CNY7 levels.

In the week ending 24th July, the Chinese Yuan rose by 0.62% to CNY6.9752 against the Dollar. In the week prior, the Yuan had fallen by 0.37%.

The CSI300 rallied by 4.20%, while the Hang Seng falling 0.45%, as a 2nd wave of the pandemic hit HK.

USD/CAD Daily Forecast – Resistance At The 20 EMA At 1.3460 Stays Strong

USD/CAD Video 31.07.20.

U.S. Dollar Fails To Gain More Momentum Against The Canadian Dollar

USD/CAD failed to settle above the 20 EMA at 1.3460 and pulled back closer to 1.3400.

Interestingly, the U.S. dollar is gaining ground against a broad basket of currencies today while WTI oil is making another attempt to settle below the $40 level but these catalysts fail to provide support to USD/CAD.

The U.S. Dollar Index has found support near 92.5 and managed to rebound above the 93 level.

The U.S. Dollar Index is seriously oversold so the current rebound may continue in case the right catalysts emerge. Such scenario will be bullish for USD/CAD.

The main worry for U.S. dollar bulls right now is the continued delay of the new U.S. coronavirus aid package due to disagreements between Republicans and Democrats.

The special unemployment benefits of $600 per week are set to expire, and U.S. consumers clearly need additional support.

As shown by today’s U.S. Personal Income and Personal Spending reports, the current measures were working well to support consumer activity.

While Personal Income declined by 1.1% in June after falling by 4.4% in May, Personal Spending increased by 5.6%. This would have not been possible without material government aid.

Meanwhile, Canada reported that its GDP increased by 4.5% month-over-month in May after falling by 11.7% in April. Unfortunately, Canada reports GDP data with a significant time lag so the current report will have no material impact on USD/CAD trading dynamics.

Technical Analysis

usd cad july 31 2020

USD to CAD is currently trading in a range between the support level at 1.3330 and the resistance level at the 20 EMA at 1.3460.

At this point, it looks like USD to CAD will need material catalysts to get out of this range.

In case USD to CAD manages to settle below the low end of the current trading range at 1.3330, it will head towards the next support level at 1.3270.

On the upside, a move above the 20 EMA will signal that USD to CAD is ready for an upside move.

However, USD to CAD will have to get above the major resistance at 1.3500 before it may gain significant upside momentum.

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

The U.S Dollar Slide Continues on a Busy Day of Stats and Updates from Capitol Hill

Earlier in the Day:

It’s was another busy start to the day on the economic calendar this morning. The Japanese Yen and the Aussie Dollar were in action, with economic data from China also of influence.

Away from the economic calendar, COVID-19 and the U.S stimulus package remained in focus ahead current unemployment benefits expiring today.

The markets were also able to react to particularly dire GDP numbers from Germany and the U.S and Trump’s tweet.

Looking at the latest coronavirus numbers

According to figures at the time of writing, the number of new coronavirus cases rose by 58,655 to 4,626,692 on Thursday. On Wednesday, the number of new cases had risen by 287,638. The daily increase was lower than Wednesday’s rise and down from 270,301 new cases from the previous Thursday.

Germany, Italy, and Spain reported 3,961 new cases on Thursday, which was up from 3,179 new cases on Wednesday. On the previous Thursday, 3,593 new cases had been reported.

From the U.S, the total number of cases rose by 58,655 to 4,626,692 on Thursday. On Wednesday, the total number of cases had increased by 69,828. On Thursday, 23rd July, a total of 69,116 new cases had been reported.

For the Japanese Yen

Industrial production rose by 2.70% in June, following an 8.9% slump in May. Economists had forecast a 1.2% rise.

According to the Ministry of Economy, Trade and Industry,

Industries that mainly contributed to the increase were:

  • Motor vehicles, production machinery, and plastic products.

Industries that mainly contributed to the decrease were:

  • Inorganic and organic chemicals, pulp, paper, and paper products, and other manufacturing.

Industrial production forecasts for July were also positive. Following a 9.2% jump in production forecasted back in June, production is now forecasted to surge by 11.3% in July. In August, production is forecast to rise by 3.4%.

The Japanese Yen moved from ¥104.698 to ¥104.597 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.37% to ¥104.34 against the U.S Dollar.

Out of China

In July, the NBS Manufacturing PMI rose from 50.90 to 51.1, while the Non-Manufacturing PMI slipped from 54.4 to 54.2.

Economists had forecast PMIs of 50.7 and 54.1 respectively.

The Aussie Dollar moved from $0.72039 to $0.72052 upon release of the figures.

For the Aussie Dollar

Producer Price Index and private sector credit figures were in focus early in the day.

According to the ABS,

  • Final demand excluding exports fell by 1.2% in the 2nd quarter and by 0.4% over the past 12-months.
  • Petroleum refining and petroleum fuel manufacturing (-30.1%), child care services (-36.7%), and other agri (-6.4%) weighed.
  • There were increases in other transport equipment (+3.6%), computer and electronic equipment (+3.1%), and other motor vehicle and motor vehicle part manufacturing (+1.2%).

According to the RBA,

Total credit fell by 0.2% in June, following a 0.1% decline in May.

  • Housing credit increased by 0.2%, following a 0.2% rise in May.
  • Personal credit fell by 0.6%, following a 1.3% slide in May, with business credit falling by 0.8%. In May, business credit had fallen by 0.6%.

The Aussie Dollar moved from $0.72032 to $0.72169 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.29% to $0.72145.

Elsewhere

At the time of writing, the Kiwi Dollar was down by 0.01% to $0.6698.

The Day Ahead:

For the EUR

It’s another busy day ahead on the economic calendar. Key stats include 2nd quarter GDP numbers from France, Spain, and the Eurozone that are scheduled for release. June’s consumer spending and retail sales figures for France and Germany will also draw attention.

Prelim June inflation figures for France, Italy, and the Eurozone, also due out but will likely have a muted impact.

Away from the economic calendar, the Dollar could crumble further should lawmakers fail to pass the stimulus package. An alternative would be an agreement to extend the current enhanced federal unemployment insurance policy.

At the time of writing, the EUR was up by 0.30% to $1.1882.

For the Pound

It’s yet another particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

A lack of stats will continue to leave the Pound in the hands of Brexit and the Dollar. The recent lack of economic data from the UK has allowed Dollar weakness to support a move back through to $1.31 levels.

At the time of writing, the Pound was up by 0.26% to $1.3130.

Across the Pond

It’s a busy day ahead for the U.S Dollar. June’s personal spending and inflation figures are key stats due out later today. Finalized consumer sentiment figures for July are also due out. Barring any material downward revision, however, it will likely be brushed aside.

Away from the calendar, the focus on the day will be on Capitol Hill. A failure by lawmakers to pass the stimulus package or to extend the current unemployment benefit would weigh.

We can also expect plenty of Trump tweets as COVID-19 numbers continue to rise across the U.S.

At the time of writing, the Dollar Spot Index was down by 0.31% to 92.731.

For the Loonie

It’s a relatively busy day ahead on the economic calendar. Key stats include May GDP and June RMPI figures.

Expect the GDP numbers to be the key driver on the day.

Away from the economic calendar, however, any further risk aversion would likely mask any upbeat numbers…

At the time of writing, the Loonie was up by 0.04% to C$1.3418 against the U.S Dollar.

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

USD/CAD Daily Forecast – Canadian Dollar Loses Ground As WTI Oil Dips Below $40

USD/CAD Video 30.07.20.

U.S. Dollar Tries To Develop Upside Momentum

USD/CAD returned back above 1.3400 as WTI oil dipped below the $40 level and put pressure on commodity-related currencies.

The U.S. dollar is mostly flat against a broad basket of currencies, and the U.S. Dollar Index has settled below 93.5 in a rather volatile trading session.

The recent U.S. Initial Jobless Claims report indicated that 1.43 million Americans filed for unemployment benefits in a week, mostly in line with the analyst consensus of 1.45 million.

The Continuing Jobless Claims report brought a negative surprise as it showed that Continuing Jobless Claims increased from 16.2 million to 17 million.

This increase indicates that the U.S. job market has likely taken another blow from the continued spread of the virus.

Second-quarter U.S. GDP report was horrific as GDP declined by 32.9%. However, the market was ready to hear the bad news since analysts expected a decline of 34.1%.

It remains to be seen whether the recent employment data will be able to boost safe haven buying in U.S. dollar since search for protective assets has recently shifted into the precious metals.

In addition, U.S. Treasury yields continue to decrease, making the American currency less attractive from an income point of view.

The U.S. President Donald Trump has recently added to uncertainty, raising the possibility of delaying the Presidential election due to mail-in voting because of coronavirus.

Technical Analysis

usd cad july 30 2020

USD to CAD has once again tested the resistance level at 1.3440. USD to CAD managed to get above this level but met additional resistance just below the 20 EMA level at 1.3470 and pulled back below 1.3440.

In case USD to CAD manages to settle above 1.3440, it will have good chances to get to the test of the major resistance level at 1.3500.

A move above 1.3500 will indicate that USD to CAD is ready for another attempt to establish an upside trend.

On the support side, USD to CAD has recently received support near 1.3330, just above the low of the previous downside move at 1.3315.

A move below this level will likely lead to increased downside momentum, taking USD to CAD closer to the next support level at 1.3270.

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

Economic Data Puts the Greenback and the EUR in Focus

Earlier in the Day:

It’s was a busier start to the day on the economic calendar. The Kiwi Dollar and the Japanese Yen were in action in the early part of the day.

Away from the economic calendar, COVID-19 and the U.S stimulus package remained in focus following the FED’s overnight monetary policy decision.

Looking at the latest coronavirus numbers

According to figures at the time of writing, the number of new coronavirus cases rose by 287,638 to 17,171,292 on Wednesday. On Tuesday, the number of new cases had risen by 241,391. The daily increase was higher than Tuesday’s rise while down from 288,688 new cases from the previous Wednesday.

Germany, Italy, and Spain reported 3,179 new cases on Wednesday, which was up from 2,602 new cases on Tuesday. On the previous Wednesday, 2,217 new cases had been reported.

From the U.S, the total number of cases rose by 69,828 to 4,498,209 on Wednesday. On Tuesday, the total number of cases had increased by 64,799. On Wednesday, 22nd July, a total of 72,306 new cases had been reported.

For the Kiwi Dollar

Building consents and July business confidence figures provided the Kiwi Dollar with direction early on.

According to NZ Stats, building consents rose by 0.50% in June, following a 41.7% jump in May. While up marginally for the month, consents were up by close to 20% from June 2019.

The Kiwi Dollar moved from $0.66681 to $0.66657 upon release of the data.

In July, the ANZ Business Confidence Index rose from -34.4 to -31.8.

According to the latest ANZ Report,

  • A net 9% of firms expect weaker economic activity in their own business, rising from -26% in June.
  • The retail sector drove the recovery, while the agriculture sector was the most negative.
  • 31% of firms say they intend to lay off staff, and 24% say they have less staff than a year ago.

The Kiwi Dollar moved from $0.66649 to $0.66570 upon release of the figures. At the time of writing, the Kiwi Dollar down by 0.18% to $0.6657.

For the Japanese Yen

According to the Ministry of Economy, Trade, and Industry, retail sales fell by 1.20%. Economists had forecast a 6.50% slide. In May retail sales had tumbled by 12.3% in May, year-on-year.

The Japanese Yen moved from ¥105.012 to ¥105.008 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.14% to ¥105.07 against the U.S Dollar.

Elsewhere

At the time of writing, the Aussie Dollar was up by 0.18% to $0.7175.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Key stats include 2nd quarter GDP and July unemployment figures from Germany.

The Eurozone’s unemployment rate and German prelim July inflation figures for July are also due out. The numbers will likely have a muted impact on the EUR.

Expect the GDP and July unemployment figures to be the key driver, along with COVID-19 news and U.S stimulus package updates.

At the time of writing, the EUR was down 0.17% to $1.1772.

For the Pound

It’s yet another particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

A lack of stats will continue to leave the Pound in the hands of Brexit and market risk sentiment.

At the time of writing, the Pound was down by 0.13% to $1.2980.

Across the Pond

It’s another relatively busy day ahead for the U.S Dollar. 2nd quarter GDP and weekly initial jobless claims figures are due out.

While we can expect influence from the GDP numbers, the weekly jobless claims could garner more attention. Another rise in claims will test the market’s resolve.

Away from the calendar, the U.S stimulus package and COVID-19 will remain in focus.

At the time of writing, the Dollar Spot Index was down by 0.10% to 93.357.

For the Loonie

It’s another particularly quiet day ahead on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

A lack of stats will leave the Loonie in the hands of market risk sentiment that will be driven by geopolitics and COVID-19.

At the time of writing, the Loonie was down by 0.05% to C$1.3346 against the U.S Dollar.

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

USD/CAD Daily Forecast – Waiting For Signals From The Fed

USD/CAD Video 29.07.20.

U.S. Dollar Remains Under Some Pressure Ahead Of Fed Interest Rate Decison

USD/CAD continues to trade near 1.3360 as traders await the Fed Interest Rate Decision and subsequent commentary from Jerome Powell.

U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, is trying to settle below the key support level at 93.5.

Currently, the U.S. Dollar Index is losing ground and has decent chances to settle below the support at 93.5 and gain additional downside momentum.

However, everything can change in a second if the Fed does not sound as dovish as the market wants it to be.

In this case, the U.S. dollar may experience a significant rebound, helped by the fact that the U.S. Dollar Index is clearly oversold.

Meanwhile, oil has settled above the $41 level, supported by a significant decrease in crude oil inventories. Oil’s relative strength provides some support to commodity-related currencies including the Canadian dollar.

Traders should expect that trading in USD/CAD will be rather calm ahead of the Fed Interest Rate Decision, with some attempts to move in either direction just ahead of the rate announcement.

However, the bigger move may happen when Jerome Powell will speak during the Fed Press Conference, half an hour after the rate announcement.

Technical Analysis

usd cad july 29 2020

USD to CAD stays near 1.3360 after an unsuccessful attempt to get to the test of the support level at 1.3315. At this point, it looks like USD to CAD will need more U.S. dollar weakness to get to the test of this level.

In case USD to CAD settles below 1.3315, it will head towards the next support level at 1.3270.

On the upside, the nearest material resistance for USD to CAD is located at 1.3440, although it looks like USD to CAD faces some resistance near 1.3400.

In case USD to CAD manages to get above 1.3440, it will head towards the major resistance level at 1.3500. Along the way, USD to CAD could face resistance at the 20 EMA, which has declined to 1.3475.

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

Mid-Week Technical Outlook: Greenback Primed for Further Weakness

Other negative factors including worsening US-China tensions, uncertainty surrounding November’s presidential elections and shaky economic data have compounded to the Dollar’s pain and misery. With the Dollar Index (DXY) on track for its biggest one month decline since April 2011, it is fair to say that bears remain in the driving seat.

King Dollar could be instore for more punishment this evening if the Federal Reserve reinforces its dovish message and expresses concerns over the US economy. While the central bank is widely expected to keep interest rates unchanged at near zero, much of the attention will be directed towards the policy statement and speech by Fed Chairman Jerome Powell. Given how data from unemployment claims still remains a cause for concern, Powell may reiterate that the Fed will do whatever it can to support the recovery – meaning interest rates may be left at near-zero for even longer.

Looking at the technical picture, the DXY fulfills the prerequisites of a bearish trend on the daily timeframe. Prices are trading within a bearish channel, the MACD has crossed to the downside while the candlesticks are trading well below the 20 Simple Moving Average. If 94.00 proves to be reliable resistance, the DXY may slip back towards 93.50 and 93.00, respectively. A breakdown below 93.00 could open the doors back to levels not seen since August 2018 below 92.20.

USDJPY eyes 104.65 level

Yesterday we discussed the possibility of the USDJPY testing 104.65 after breaking below the 105.00 support level. Prices are under pressure on Wednesday morning and could trend lower if the Dollar weakens ahead of the Federal Reserve policy meeting. Sustained weakness below the 105.00 dynamic resistance could trigger a selloff towards 104.65 and 104.10.

USDCAD breakdown setup in play

The USDCAD is gearing for a breakdown below the 1.3350 on the daily timeframe. Prices are trading comfortably below the 20 and 50 Simple Moving Average while there have been consistently lower lows and lower highs. A solid breakdown below this support could trigger a decline straight towards 1.3200 which is 150 pips away.

AUDUSD rides higher on Dollar weakness

Expect the Australian Dollar to appreciating against a broadly weaker Dollar in the short term. The daily charts suggest that bulls still have some stamina with a breakout above 0.7150 opening a path towards 0.7300. If 0.7150 proves to be a stubborn resistance, prices may decline back towards the 0.6960 regions.

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

The Stimulus Package, COVID-19, and the FED Keep the Dollar in Focus

Earlier in the Day:

It’s was a relatively quiet start to the day on the economic calendar. The Aussie Dollar was in action in the early part of the day.

Away from the economic calendar, COVID-19 and the U.S stimulus package remained in focus ahead of the FED.

Looking at the latest coronavirus numbers

According to figures at the time of writing, the number of new coronavirus cases rose by 241,391 to 16,883,654 on Tuesday. On Monday, the number of new cases had risen by 229,469. The daily increase was higher than Monday’s rise and up from 240,565 new cases from the previous Tuesday.

Germany, Italy, and Spain reported 2,602 new cases on Tuesday, which was down from 7,167 new cases on Monday. On the previous Tuesday, 1,889 new cases had been reported.

From the U.S, the total number of cases rose by 64,799 to 4,498,209 on Tuesday. On Monday, the total number of cases had increased by 61,571. On Monday, 21st July, a total of 67,140 new cases had been reported.

For the Aussie Dollar

2nd quarter inflation figures were in focus in the early part of the day.

The annual rate of inflation came in at -0.3%, which was marginally better than a forecasted -0.4%. In the 1st quarter, the annual rate of inflation had stood at 2.20%. In the 1st quarter, the annual rate of inflation had accelerated from 1.8% to 2.20%. Quarter-on-quarter, consumer prices fell by 1.90%, following a 0.3% rise in the 1st quarter. Economists had forecast a 2.00% slide.

According to the ABS,

  • The June quarter slide was attributed to free child care (-95%), sliding automotive fuel prices (-19.3%), and a fall in pre-school and primary education prices (-16.2%). Excluding these, consumer prices would have risen by 0.1%.
  • Cleansing and maintenance price rose by 6.2%, with non-durable household products up by 4.5%.
  • There were also increases in prices for furniture (+3.8%), major household appliances (+3.0%), and audio, visual, and computing equipment (+1.8%).
  • In the June quarter, the quarter-on-quarter decline was the largest in the 72-year history of the CPI.
  • It was only the 3rd time since 1949 that the annual rate of inflation had turned negative.

The Aussie Dollar moved from $0.71645 to $0.71575 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.04% to $0.71575.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.03% to ¥105.14 against the U.S Dollar, with the Kiwi Dollar down by 0.11% to $0.6654.

The Day Ahead:

For the EUR

It’s another particularly quiet day ahead on the economic calendar. There are no material stats from the Eurozone to provide the EUR with direction.

The lack of stats will leave the EUR in the hands of COVID-19 updates and geopolitics. Late in the day, the FED is also in action later in the day.

From the U.S, the continued spike in new COVID-19 cases has weighed heavily on the Dollar. Any 2nd wave hitting EU member states beyond Spain would be a test the EUR.

At the time of writing, the EUR was up by 0.03% to $1.1720.

For the Pound

It’s yet another particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

A lack of stats will continue to leave the Pound in the hands of Brexit and market risk sentiment.

At the time of writing, the Pound was down by 0.11% to $1.2918.

Across the Pond

It’s another relatively busy day ahead for the U.S Dollar. June pending home sales and goods trade figures are due out later today.

The stats will likely have a muted impact on the Dollar and risk sentiment, however. For the Dollar and the broader market, the FOMC monetary policy decision and press conference is the main event.

Away from the calendar, the U.S stimulus package, tensions between the U.S and China, and COVID-19 will remain in focus.

At the time of writing, the Dollar Spot Index was up by 0.10% to 93.788.

For the Loonie

It’s another particularly quiet day ahead on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

A lack of stats will leave the Loonie in the hands of the weekly EIA crude oil inventory numbers and market risk sentiment.

The key to the U.S economy and its trading partners is the passing of the latest COVID-19 stimulus package. Any further delays would further limit the upside in the Loonie.

At the time of writing, the Loonie was down by 0.01% to C$1.3381 against the U.S Dollar.

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

USD/CAD Daily Forecast – Support At 1.3315 Is The Next Important Level

USD/CAD Video 28.07.20.

U.S. Dollar Tries To Rebound Ahead Of Fed Meeting

USD/CAD rebounded closer to the previous support level at 1.3360 as the U.S. dollar attempted to rebound against a broad basket of currencies while WTI oil lost momentum and declined closer to the $41 level.

The U.S. Dollar Index has found support at 93.5 and made an attempt to gain more upside momentum above the 94 level. This attempt was not successful, and the U.S. Dollar Index settled in the range between 93.5 and 94.

Tomorrow, the U.S. Federal Reserve will announce its Interest Rate Decision and provide commentary which is expected to be dovish. This commentary will serve as a major catalyst for the American currency.

If the commentary is very dovish, the U.S. Dollar Index may breach the support at 93.5 and head lower, which will be bearish for USD/CAD.

Another topic in focus for currency traders is the new coronavirus aid package which is currently debated by Republicans and Democrats. Failure to negotiate a new deal before the end of July may put additional pressure on the American currency.

Meanwhile, the situation in the oil market remains worrisome for the Canadian dollar and other commodity-related currencies.

Oil continues to trade in a tight range not far from the $40 level, and recent attempts to gain more upside momentum were not successful.

In case WTI oil dives below the $40 level, the Canadian dollar will likely find itself under significant pressure.

Technical Analysis

usd cad july 28 2020

USD to CAD has recently tried to settle below the nearest support at 1.3360 but failed to do this and returned above this support level. I’d note that the ease of movement of USD to CAD puts this support level under question.

In case USD to CAD gains more downside momentum, it will head towards the test of the support level at 1.3315 which is located at the low of the previous downside move.

On the upside, the nearest resistance level is located at 1.3440.

A move above this level will open the way to the test of the major resistance level at 1.3500, although USD to CAD may also face resistance just below this level at the 20 EMA.

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

Dollar Bounces, Gold Slips, while Equities Hold Their Own

In the emerging market space, the liquid and accessible currencies, like the Turkish lira, Mexican peso, and Russian rouble, are down the most. The lira has fallen 1% after intrasession volatility that pushed it to a record low against the euro yesterday. That seems to be the source of the pressure on the lira against the dollar.

The South African rand is among the weakest among emerging market currencies today even though the IMF approved a $4.3 bln loan, the most granted so far to assist in combatting the virus. Despite the correction in the foreign exchange market, equities are mostly firm. In the Asia Pacific region, only a few markets could not sustain gains.

Japan, Taiwan, and Australia were among them. South Korea led the region with a nearly 1.8% gain. Europe’s Dow Jones Stoxx 600 is up almost 0.5% after falling for the past two sessions (~2%). US shares are little changed. US bond yields backed up yesterday, with the 10-year yields popping back above 60 bp. This exerted upward pressures in Asia and Europe. Gold reached $1981 before the profit-taking pushed it to about $1907 from where it is recovering. September WTI is little changed around $41.50 a barrel.

Asia Pacific

China is resorting to local lockdowns to combat the new outbreak in the virus. The 61 cases reported Monday were the most in four months. Separately, New Zealand became the latest country to suspend the extradition treaty with Hong Kong. That means that of the intelligence-sharing Five Eyes, only the US has not done so, though it has threatened to do so.

India has banned almost 50 Chinese apps to largely check the workaround the 59 apps banned last month. Another 250 apps are under review. India has cited threats to user privacy and national security. This is a new front in the confrontation with China. The US and Japan are considering their own bans on some Chinese apps.

The dollar is in a quarter of a yen range on either side of JPY105.45, as it is confined to yesterday’s range. The upside correction does not appear over, and the greenback could test previous support and now resistance near JPY106, where an option for $600 mln expires today (and a $1.8 bln option expires Thursday).

The Australian dollar is little changed as it moves within the $0.7065-$0.7180 range that has confined it for around a week now. It has held above $0.7115 today, but it may be retested. The PBOC set the dollar’s reference rate at CNY6.9895 today, nearly spot on where the models suggested. After falling to a four-day low near CNY6.9870, the dollar recovered back above CNY7.0. China seems intent on not allowing the US to get an advantage by devaluing the dollar, something that President Trump has advocated. A stable dollar-yuan rate in a weak dollar environment means that the yuan falls against the CFETS basket. Against the basket, the yuan is at its lowest level in a little more than a month.

Europe

News from Europe is light and the week’s highlights which include the first look at Q2 GDP (median forecast in the Bloomberg survey is for a 12% quarterly contraction), June unemployment (~7.7% vs. 7.4%), and the first look at July CPI (median forecast is for a 0.5% decline for a 0.2% increase year-over-year) still lie ahead.

Today’s focus is mostly on earnings and bank earnings in particular. European banks are being encouraged to extend the hold off of dividend payout and share buybacks that were first introduced in March. This may be worth around 30 bln euros. The UK is fully aboard too. In terms of loan-loss provisioning, European banks are expected to set aside around the same amount as they did in Q1, which was about 25 bln euros. In comparison, the five largest US banks have added a little more than $60 bln in the first half to cushion sour loans.

Fitch lowered its five-year growth potential for the UK from 1.6% to 0.9%. It also took EMU’s potential to 0.7% from 1.2%. This could weaken the resolve of asset managers, where industry surveys suggest a desire to be overweight European stocks and the euro on ideas of economic and/or earnings outperformance. That said, the number of analyst upgrades has surpassed the number of downgrades in Europe for the first time this year.

The euro reached $1.1780 yesterday. As the momentum stalled in Asia, some light profit-taking has been seen that saw it briefly dip just below $1.17 in early European turnover. Intraday resistance is seen near $1.1740-$1.1750. In the recent move, the session high has often been recorded in North America, and we’ll watch to see if the pattern holds today. The market may turn cautious ahead of tomorrow’s outcome of the FOMC meeting.

Sterling poked above $1.29 yesterday for the first time in four months. It made a marginal new high today (~$1.2905), but it too is consolidating. Support is seen in the $1.2830-$1.2850 area. As the euro was trending higher against the dollar yesterday, it also rose to about CHF1.0840, its highest level here in July. However, today’s consolidation has seen the euro slip back to around CHF1.0775. Look for it to find support above CHF1.0760.

America

The US reports house prices, Conference Board consumer confidence, and the Richmond Fed’s July manufacturing survey. Even in the best of times, these are not the typical market movers. The focus instead is three-fold: corporate earnings (today’s highlights include McDonald’s, Pfizer, and 3M), the negotiation over the fiscal bill, and the start of the FOMC meeting. Canada has not economic reports, while Mexico’s weekly reserve figures are due. It continues to gradually accumulate reserves. They have risen by about 4.5% this year after a 3.5% increase last year.

The Economic Policy Institute estimates that a cut in the $600 a week extra unemployment insurance to $200 a week will reduce aggregate demand and cut the number of jobs that were projected to be created. It expects a loss of about 2.5% growth and 3.4 mln fewer jobs. After this week’s FOMC meeting and the first look at Q2 GDP, the US July employment report is due at the end of next week.

It is one of the most difficult high-frequency economic reports to forecast. Still, the outlook darkened after last week’s increase in weekly initial jobless claims, which covered the week that the non-farm payrolls survey is conducted. Another increase, which is what the median forecast in the Bloomberg survey expects, is only momentarily going to get lost in the excitement around the GDP report.

The relatively light news day allows us to look a little closer at Mexico’s June trade data that was out yesterday. Mexico reported a record trade surplus of $5.5 bln. Yet, it is not good news. Mexico is hemorrhaging. The IGAE May economic activity index, reported at the end of last week, showed a larger than expected 22.73% year-over-year drop. The 2.62% decline in the month was nearly three times larger than economists forecast. With the virus still not under control, the government’s forecast for a 9.6% contraction this year is likely to be overshot. The record trade surplus was a function of a larger decline in imports (-23.2%) than exports (-12.8%).

Auto exports are off more than a third (34.6%) this year, to $47.5 bln. Other manufactured exports are down 3.4% to $113.8 bln. Petroleum exports have fallen by nearly 42% in H1 to $8.0 bln. Agriculture exports edged up by 7.3% to $10.5 bln to surpass oil. The peso’s strength reflects not the macroeconomy but its high real and nominal interest rates in the current environment. Yesterday, the dollar fell below MXN22.00 for the first time this month. The June low was near MXN21.46.

The US dollar initially extended its losses against the Canadian dollar, slipping to CAD1.3330, just ahead of last month’s low (~CAD1.3315) before rebounding to almost CAD1.3400. The upside correction could run a bit further, but resistance in the CAD1.3420-CAD1.3440 area may offer a sufficient cap today. The greenback found support against the Mexican peso near MXN21.90 and bounced back to around MXN22.07. Resistance is seen near MXN22.20. The peso is up about 4.5% this month, but within the region has been bettered by Chile (~+6.75%) and Brazil (~+6.15%). The Colombian peso’s almost 2..2% gain puts it in the top 10 best performing emerging market currencies so far this month.

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

Consumer Confidence, COVID-19, and Fiscal Stimulus Keep the Greenback in Focus

Earlier in the Day:

It’s was another quiet start to the day on the economic calendar. There were no material stats through the Asian session to provide the majors with direction.

A lack of stats left the markets in the hands of geopolitics and COVID-19.

Tensions between the U.S and China and the continued spike in new U.S COVID-19 cases support the Asian majors amidst the Dollar meltdown.

Looking at the latest coronavirus numbers

According to figures at the time of writing, the number of new coronavirus cases rose by 229,469 to 16,642,263 on Monday. On Sunday, the number of new cases had risen by 213,347. The daily increase was higher than Sunday’s rise and up from 182,589 new cases from the previous Monday.

Germany, Italy, and Spain reported 7,167 new cases on Monday, which was up from 663 new cases on Sunday. On the previous Monday, 5,413 new cases had been reported. The spike came from Spain that had not reported any new cases for 2 consecutive days before a 6,361 jump on Monday.

From the U.S, the total number of cases rose by 61,571 to 4,433,410 on Monday. On Sunday, the total number of cases had increased by 56,130. On Monday, 20th July, a total of 62,790 new cases had been reported.

The Majors

At the time of writing, the Japanese Yen was up by 0.07% to ¥105.30 against the U.S Dollar. The Aussie Dollar was up by 0.28% to $0.7169, with the Kiwi Dollar up by 0.21% to $0.6698.

The Day Ahead:

For the EUR

It’s a particularly quiet day ahead on the economic calendar. There are no material stats from the Eurozone to provide the EUR with direction.

A lack of stats will continue to leave the EUR in the hands of COVID-19 and geopolitics. With the Greenback on the slide as a result of the continued rise in new COVID-19 cases, only an EU-wide 2nd wave can really do any damage.

At the time of writing, the EUR was up by 0.11% to $1.1765.

For the Pound

It’s another particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

A lack of stats will leave the Pound in the hands of Brexit and market risk sentiment.

At the time of writing, the Pound was up by 0.13% to $1.2899.

Across the Pond

It’s another relatively busy day ahead for the U.S Dollar. July consumer confidence and May house price figures are due out later today.

With the FED in action tomorrow, we can expect plenty of interest in the consumer confidence figures. The U.S is struggling with the 2nd wave of the COVID-19 pandemic. Concerns over the impact on the economy amidst current unemployment levels will likely weigh.

Away from the calendar, the U.S stimulus package, tensions between the U.S and China, and COVID-19 will also influence.

At the time of writing, the Dollar Spot Index was down by 0.17% to 93.513.

For the Loonie

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

Concerns over the impact of COVID-19 on the U.S economy has limited the upside for the Loonie. Rising tensions between the U.S and China have also impacted. The narrative is unlikely to change anytime soon, particularly as the U.S struggles to curb the 2nd wave spread of the virus.

At the time of writing, the Loonie was up by 0.16% to C$1.3334 against the U.S Dollar.

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

USD/CAD Daily Forecast – Support At 1.3360 Stays Strong

USD/CAD Video 27.07.20.

Canadian Dollar Gains Are Limited Because Of Weak Oil

USD/CAD is trying to continue its downside move as the U.S. dollar is losing ground against a broad basket of currencies while WTI oil is under pressure.

The U.S. Dollar Index has settled below the 94 level and is trying to get below 93.5. In recent days, the U.S. dollar has not enjoyed its previous safe haven status and various bad news, like the surge in the number of new coronavirus cases or worsening relations with China, have hurt the American currency.

The downside move of the U.S. Dollar Index was fast and RSI has reached the extremely oversold territory, suggesting that a rebound may happen soon. However, the pressure is very significant so the U.S. dollar will need material upside catalysts to break the current downside trend.

While the continued weakness of the U.S. dollar is bearish for USD/CAD, the gains of the Canadian dollar are limited by the oil price weakness.

Apparently, oil traders are worried that oil demand will not rebound as fast as expected due to continued problems on the coronavirus front so WTI oil stays below the $41 level despite the weakness of the U.S. dollar which is bullish for commodities.

Technical Analysis

usd cad july 27 2020

USD to CAD made another attempt to settle below the nearest support at 1.3360 but this support level remained strong. RSI is at moderate levels so USD to CAD has more room to develop downside momentum in case of additional weakness of the U.S. dollar.

In this scenario, USD to CAD will head towards the next support level at 1.3315, which is the low of the previous downside move.

On the upside, the nearest resistance level is located at 1.3440. This resistance has recently been tested and proved its strength so USD to CAD will need some additional support to get above this level.

In case USD to CAD is able to settle above 1.3440, it will head towards the major resistance level at 1.3500. The 20 EMA has declined towards this level which will make it stronger. A move above the 20 EMA will signal a return of the upside momentum.

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

Dollar Slide Continues, while Gold Soars

Emerging market currencies are fully participating, with the JP Morgan Emerging Market Currency Index posting its fifth gain in six sessions. The greenback’s retreat appears to have become decoupled with the equity market. The yen’s strength, for example, had a limited impact on Japanese shares, which were narrowly mixed, with the Topix rising and the Nikkei falling.

Asia Pacific bourses were mixed, though most of the large ones, including China, South Korea, Australia, and Taiwan advanced. Note that the shake-up in the chip space that saw Intel shares crushed at the end of last week lifted Taiwan Semiconductor Manufacturing Company up 10% and helped the Taiex rise 2.2%. European stocks were struggling, but the better than expected German IFO helped equities recover. US equities are trading higher after the S&P 500 posted back-to-back losses at the end of last week for the first time this month. Bond markets are also mixed.

The European core is doing better than the periphery, but yields are +/- 2 bp. The US 10-year is near 57 bp. Gold is rallying for the seventh consecutive session at around $1944 is at new record levels. Its 2% gain is the most in three months. Oil, on the other hand, is little changed with the September WTI contract trading quietly around $41 a barrel, inside the pre-weekend range.

Asia Pacific

Japan reported it May All Industries Activity Index fell 3.5% in May after the April reading was revised to -7.6% from -6.4%. This is like a proxy for GDP. While the US and EMU report Q2 GDP this week, Japan’s first estimate is not due until the middle of next month. Separately, the May Leading Index was revised lower (to 78.4 from 79.3) but still held on to a small gain from April’s 77.7.

Hong Kong’s imports and exports recovered in June, but not by as much as had been hoped. Exports fell 1.3% from a year ago, a 7.4% slide in May. Economists had project outright growth. Imports fell 7.1% from a year ago. Economists had expected that May’s 12.3% slump would have been halved. The net result was an HKD33.3 bln deficit. Of note, Hong Kong’s exports to China rose 8.8% from a year ago, while its exports to the US were 21.4% below a year ago (-14.4% in May). Exports to Taiwan were also stronger. Exports to Europe were weaker.

Helped by the economic recovery and government infrastructure spending, China reported June industrial profits rose 11.5% year-over-year, following May’s 6% improvement. Still, profits were off 12.8% in H1 from a year ago. Private sector and foreign businesses trailed in the profit-recovery, underscoring the role of state-owned enterprises. Although the manufacturing sector led the rebound in the PMI to be released at the end of the week, it is the service sector that appears to be recovering quicker.

The dollar was sold through JPY106 before the weekend while Tokyo was on holiday. The market was cautious and took it back to JPY106 at the close. Japanese traders sold the dollar back off to around JPY105.45 before Europe entered the fray and has kept it in a narrow range near its trough, awaiting the US market leadership. Initial resistance is seen near JPY105.70. The Australian dollar is firm near $0.7120.

It reached a high last week, closer to $0.7180. The intraday technicals suggest it is poised to move higher in North America today. The PBOC set the dollar’s reference rate at CNY7.0029, which was stronger than expected, and the yuan snapped a three-day decline. The greenback finished the mainland session near its reference rate.

Europe

The German IFO survey lent credence to the improvement seen in the preliminary PMI before the weekend. The current assessment rose to 84.5 from 81.3. It is the best since March. The expectations component improved to 97.0 from 91.6, its best since November 2018. This lifted the assessment of the overall business climate to 90.5 from 86.3. It has not been this high since January.

The idea that Europe is outperforming the US is so far limited to some recent PMI surveys and may be vulnerable to the new flare-up in Covid-19 in several countries, including Spain and France. The divergence is unlikely to be reflected in this week’s first estimate of Q2 GDP. The eurozone contracted by 3.6% quarter-over-quarter in Q1 and is expected to have shrunk by another 12% in Q2. The US contracted by 5% at an annualized pace in Q1, which is about 1.2% quarterly. The median forecast for Q2 GDP in the Bloomberg survey is for a 35% annualized decline, which is about 7.8% on a quarterly basis.

The EU debt issuance under the Recovery Plan is embraced by some as the Hamiltonian moment. We recognize its potential but are reluctant to extrapolate to a fiscal union from what could be one-off emergency measures. We have suggested it could be scaffolding but that the building of the greater union is still in the distant future. Bundesbank President Weidmann cautioned that while he endorsed the action, it should not serve as “a springboard for large scale EU debt for regular household financing.” He emphasized the temporary nature of it, and urged a control mechanism to ensure the funds are spent “wisely and efficiently.”

The euro’s run higher is being extended for the 10th session of the past 11. It has fallen once since July 9. Today’s push in the Asia Pacific timezone saw $1.1725 before consolidating and easing to almost $1.1680 in the European morning. This pullback may provide a better buying opportunity for North American dealers who have been consistent dollar sellers in the run. Sterling is bid as well and has moved above last month’s high (~$1.2815) to rise to its best level since March (~$1.2860). Support now is seen near $1.2800. Meanwhile, the euro, which had tested the GBP0.9000 area last week, tested the upper end of this month’s range near GBP0.9140.

America

The US reports June durable goods orders today and the Dallas Fed’s manufacturing survey. The manufacturing and housing market seems to be leading the US recovery, and this is expected to be evident in today’s reports. Headline durable goods orders are expected to have risen by around 7% after the 15.7% gain in May.

However, the May report was bolstered by defense and aircraft orders. Excluding these, June orders will likely be stronger than May’s 1.6% increase. The report may help economists fine-tune their forecasts for Q2 GDP, which is released later this week. Of course, the FOMC’s two-day meeting, which concludes Wednesday, is the other main highlight of the week.

The moratorium on evictions from federally-backed rental properties enshrined in the CARES Act came to an end over the weekend. The landlords can give tenants a 30-day notice to vacate the premises. Prior to the passage of the moratorium, federally-backed apartment buildings accounted for a third of eviction cases.

The $600 a week extra unemployment insurance is set to expire at the end of the week. Some Republicans are pushing for an employment bill to be passed this week, which would tie the extra compensation to the previous pay, capping it at around 70%, according to press accounts. Part of the problem, and why this approach was previously rejected, is the logistical challenge that may prove to be beyond the capacity of many states to properly implement.

At just below 59 bp, the 10-year posted its lowest weekly close in history. The 10-year real yield closed at a record low of minus 92 bp. A dovish FOMC statement is expected amid the mounting virus cases and the escalation of US-China tensions, as officials prepare for additional measures as early as September. Unlike a year ago, the US-China tensions are not being spurred by rounds of tariffs but geopolitics. In fact, it appears that China has stepped up its purchases of US agricultural products in recent weeks.

The US dollar bears have their sights set on last month’s low near CAD1.3315. The greenback was sold through CAD1.34 last week but straddled the area in the previous two sessions. The Canadian dollar often lags behind the other major currencies in moves against the US dollar. The CAD1.3400 area should offer initial resistance, and a move above CAD1.3450 would likely squeeze the greenback shorts.

Mexico reports its June trade balance today. It is expected to return to surplus after two months of large deficits (~$3.5 bln). The dollar is trading a little above this month’s lows (~MXN22.1550). A break could see MXN21.90-MXN22.00. The peso’s strength is not so much a reflection of its domestic economic situation as much as it is about the broader risk appetites and its high real and nominal rates.

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

COVID-19, Economic Data, Geopolitics, and Fiscal Stimulus in Focus

Earlier in the Day:

It’s was a quiet start to the week on the economic calendar. There were no material stats through the Asian session to provide the majors with direction.

A lack of stats left the markets in the hands of geopolitics and COVID-19.

Negative sentiment towards the U.S – China spat and a continued rise in new COVID-19 cases weighed on risk appetite.

News of the Republicans agreeing on the next Stimulus package in the U.S supported riskier assets in the early part of the day, however.

Economic data from the U.S was skewed to the negative late last week, making fresh stimulus vital to economic recovery.

Looking at the latest coronavirus numbers

According to figures at the time of writing, the number of new coronavirus cases rose by 213,347 to 16,412,794 on Sunday. On Saturday, the number of new cases had risen by 268,668. The daily increase was lower than Saturday’s rise and 246,207 new cases from the previous Sunday.

Germany, Italy, and Spain reported 663 new cases on Sunday, which was up from 646 new cases on Saturday. On the previous Sunday, 491 new cases had been reported.

From the U.S, the total number of cases rose by 56,130 to 4,371,839 on Sunday. On Saturday, the total number of cases had increased by 67,398. On Sunday, 26th July, a total of 65,368 new cases had been reported.

The Majors

At the time of writing, the Japanese Yen was up by 0.40% to ¥105.72 against the U.S Dollar. The Aussie Dollar was up by 0.28% to $0.7125, with the Kiwi Dollar up by 0.41% to $0.6668.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Key stats include July’s IFO Business Climate Index figures for Germany.

Expect the EUR to respond to the figures, with forecasts pointing to a slight pullback amidst the spike in new COVID-19 cases.

Away from the economic calendar, chatter from Beijing and Washington and COVID-19 figures will also influence.

From Brussels, the progress of the EU Recovery Fund will also be in focus.

At the time of writing, the EUR was up by 0.33% to $1.1695.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

A lack of stats will leave the Pound in the hands of Brexit and market risk sentiment.

At the time of writing, the Pound was up by 0.29% to $1.2831.

Across the Pond

It’s a relatively busy day ahead for the U.S Dollar. June’s durable goods and core durable goods orders are due out later in the day.

While we can expect market reaction to the numbers, the U.S stimulus package, COVID-19, China, and Trump will remain the key drivers.

At the time of writing, the Dollar Spot Index was down by 0.38% to 94.079.

For the Loonie

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

A lack of stats will continue to leave the Loonie in the hands of market risk appetite.

At the time of writing, the Loonie was up by 0.19% to C$1.3390 against the U.S Dollar.

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

Dollar Momentum

The five-week slump in the Dollar Index is the longest since late 2017/early 2018. Although we were early dollar bears, the downside momentum appears stronger than the momentum indicators suggested last week. Even shallow dollar bounces have been sold.

By and large, as we will see below, the momentum indicators continue to suggest a consolidative or corrective phase may be near. Yet, there does appear to have been a material shift in sentiment toward the dollar. Speculators in the futures market have been net long euros, for example, since mid-March. The change seems to be among asset managers, judging from flow reports and surveys, and interpolating from the options market, some levered participants as well. It also appears that the North American market is leading the current move.

The dollar’s decline should not be exaggerated. The year-to-date move has been modest. The strongest major currency has been the Swedish krona, which often acts as a high-beta euro. It has risen nearly 6% against the US dollar. Despite intervention by the Swiss National Bank, in the face of US threats to cite it as a currency manipulator, the franc’s 4.5% gain in second-place behind Sweden. Meanwhile, Sweden’s neighbor, Norway, sports the weakest of the major currency, with almost a 4.7% decline. Sterling’s roughly 3.8% decline puts it just ahead of the Norwegian krone. The dollar’s modest decline is not a material factor for policy or trade, even if the momentum gets noticed.

Dollar Index

The downward pressure on the Dollar Index is evident in the fact that it has risen in four sessions this month, and once in the last 11 sessions, and none last week. It is at its lowest level since October 2018 and finished the week on its lows. For the better part of three weeks, it has been sliding down with the lower Bollinger Band (~94.55). The next area of chart support is seen in the 93.75-94.00 area. The momentum indicators are still falling but stretched.

Euro

The euro will take a six-day advancing streak into next week. It not only pushed above $1.15, but it crossed and settled above $1.16 as well at new highs for the move (~$1.1645). The euro finished last month, near $1.1230. Although some narratives link the euro’s strength to the EU Recovery Plan, July will be the third consecutive monthly gain for the euro, the longest such move in three years. The MACD is still trending higher, while the Slow Stochastic is arching, set to turn down in the coming days. Rarely has there been a session in the last few weeks that the euro did not bump against or through the upper Bollinger Band. Initial support may be in the $1.1550-$1.1580 band.

Japanese Yen

With the Tokyo market closed before the weekend for the Health and Sports Day holiday, foreign exchange dealers took the dollar below the JPY106 level that has marked the floor since March. The JPY105.20 area marks the (61.8%) retracement objective of the rally from the March low (~JPY101.20), and a move below JPY105 would begin escalating the pain of yen strength on many Japanese companies. The yen’s strength, as exaggerated as it may be without Tokyo, coupled with the weakness in Asian and US shares ahead of the weekend, warning of the risk of catch-up on Monday. Resistance now will likely be seen ahead of previous support around JPY106.65.

British Pound

Sterling made new highs for the month, a little shy of the $1.28 level. The June high, which is highest since the panic struck in March, was a tad above $1.28 and near the upper Bollinger Band (~$1.2810). The next important chart point is not until closer to $1.30. The momentum indicators are stretched but still moving higher. Support is likely to be found near $1.2700. The euro is firm against sterling. It bounced smartly off the GBP0.9000 level tested following a reversal at the start of the week after reaching almost GBP0.9140. The euro needs to take out the GBP0.9180-GBP0.9200 area to be meaningful.

Canadian Dollar

The US dollar convincingly broke below the CAD1.3500 shelf that had been forged ahead of the 200-day moving average (~CAD1.3515). It fell to around CAD1.3350 before consolidating ahead of the weekend by straddling CAD1.3400. The June low was near CAD1.3315. The greenback fell every day last week for a 1.3% decline. It finished last month by CAD1.3580. The momentum indicators just about to enter over-extended territory. A possible head and shoulder pattern may have been carved since mid-June, and if valid, 1) it would project toward CAD1.3200, and 2) suggests the CAD1.3500 area offers resistance.

Australian Dollar

The Aussie shot up through $.0.7180, its highest level since April last year. A little profit-taking was seen in the previous two sessions, and the Aussie found bids ahead of the $0.7050 area, now expected to be support. It managed to hold to a solid 1.4% gain for the week to extend its streak to the fifth consecutive week and put it into positive territory for the year. A couple hundredths of a cent decline in the face of the nearly 4% drop in the Shanghai Composite illustrates a more significant point we have made about the decoupling of the two. Still, the technical indicators are flashing a yellow sign as they have failed to confirm the new highs.

Mexican Peso

The dollar’s roughly 0.8% decline against the peso last week gave back the previous two weeks of gains and maintaining the broadly sideways trading range since mid-June. The greenback has given up nearly 3/4 of the prior month’s 3.6% gain. The Slow Stochastic appears curling higher, while the MACD has almost flatlined. The lower volatility makes Mexico attractive for carry trades, but the strength of the Swiss franc and yen discourage their use, leaving the dollar as arguably the cleanest expression. A near-term downtrend line from earlier this month held before the weekend and begins the new week near MXN22.60. The month’s low so far is about MXN22.15.

Chinese Yuan

The dollar posted a key upside reversal against the yuan in the middle of last week, making a new low for the move (~CNY6.9650) before shooting up and closing above the previous day’s high. Follow-through buying was seen in the last couple of sessions, and the dollar finished the week near CNY7.02, a two-week high. Linking the yuan’s weakness to the political tit-for-tat consulate shutdowns does not necessarily mean manipulation by Chinese officials.

The operative channel could be the equity market where the Shanghai Composite has fell by a little more than 4% over the past two sessions, and the Shenzhen Composite shed 5%. The momentum indicators favor dollar gains, but with the greenback’s losses before the weekend in North America warns of the likelihood of a lower fix.

Gold

The rally continued with the yellow metal rising every day last week, reaching nearly
$1906.50 at the end of last week. It will take a six-day rally into the last week of July. Its resilience in the face of the heavier tone in the equity markets will support the arguments seeing it has a hedge to equities. There are two obvious targets. The first is the record high from 2011 a little above $1921, and the other is the round, psychological level of $2000. It is difficult to talk about resistance in never-before-seen prices, but if our view of interest rates and the turn in the dollar cycle is fair, then $2500 might not seem unreasonable.

Oil

After rallying to start the week and selling off in the second half, the September WTI contract finished the week little changed a little below $41 a barrel. The week’s high was about $42.50, which closed the breakaway gap created in the March disruption. Around $41.70, the contract reached the middle of this year’s range. Before the next retracement (61.8%) near $46.35 comes the 200-day moving average (~$44.35). The MACD did not confirm the high. The Slow Stochastic did but has still turned lower. This month, September WTI has not closed below its 20-day moving average ($40.60) and offered support ahead of the weekend.

US Rates

Disappointing preliminary PMI on the heels of the first increase in weekly jobless claims, and the end of the S&P 500 three-week rally saw the 10-year yield slip to 55 basis points at the end of last week, the lower end of the range since March. Still, it managed to close around 58 bp to end a four-day decline. The focus is on the Federal Reserve meeting and the negotiations over the next fiscal package, while the virus sets the general parameters.

The 10-year yield has drifted lower for the past three weeks after finishing June near 65 bp. The two-note yield has been in a three basis point range this month (~13.5-16.5). The effective (weighted) average fed funds rate, which the futures contract settle against, has quietly crept higher. Both last week and the previous week, the effect rate rose to 10 bp. Recall that as recently as June 1, it was at five basis points. The secured overnight financing rate is also trading firmly around 12-13 bp at the high over the past two weeks. Many are linking it to the Fed’s decision to lift the minimum bid rate for its repo facility earlier this month.

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

The Week Ahead – Geopolitics, the FED, Economic Data, and COVID-19 in Focus

On the Macro

It’s a busier week ahead on the economic calendar, with 57 stats in focus in the week ending 31st July. In the week prior, just 41 stats had been in focus.

For the Dollar:

It’s a busy week ahead on the economic data front.

In the 1st half of the week, June’s durable and core durable goods orders are due out along with July consumer confidence figures.

Expect consumer confidence to be the key driver, however. The figures will indicate sentiment towards the spike in new COVID-19 cases and unemployment.

The focus will then shift to 2nd quarter GDP numbers and the weekly initial jobless claims figures on Thursday.

With the markets expecting the worst on the GDP front, the weekly jobless claims will need to drop to sub-1.3m levels.

At the end of the week, inflation, personal spending, and finalized consumer sentiment figures will also draw attention.

On the monetary policy front, the FED delivers its July monetary policy decision on Wednesday. While no rate cut is expected, the markets will want the assurance of more support and perhaps some adjustments to its asset purchasing program. The press conference will garner plenty of attention.

The Dollar Spot Index ended the week down by 1.57% to 94.435.

For the EUR:

It’s also a busy week ahead on the economic data front.

At the start of the week, July’s IFO Business Climate Index figures are due out of Germany.

We may see some resilience in the EUR and the European majors, however, as progress is made with the EU Recovery Fund.

The focus will then shift to the 2nd half of the week.

On Thursday, 2nd quarter GDP and July unemployment figures are due out of Germany.

At the end of the week, French 2nd quarter GDP numbers and June consumer spending figures are in focus.

Expect prelim July inflation figures from member states and the Eurozone to have a muted impact.

Following the agreement on the mechanics of the EU Recovery Fund. Progress will need to be made in the coming weeks to support the EUR at its current levels.

The EUR/USD ended the week up by 2.00% to $1.1656.

For the Pound:

It’s a particularly quiet week ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

A lack of stats will leave the Pound firmly in the hand of Brexit and trade talks.

The GBP/USD ended the week up by 1.80% to $1.2794.

For the Loonie:

It’s a relatively quiet week ahead on the economic calendar.

The markets will need to wait until Friday for May GDP and June RMPI figures.

While we expect some sensitivity to the numbers, U.S fiscal policy measures and COVID-19 updates will remain a key driver.

One curveball continues to be the ongoing spat between the U.S and China…

The Loonie ended the week up by 1.22% to C$1.3415 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively busy week ahead for the Aussie Dollar.

2nd quarter inflation and wholesale inflation figures are due out on Wednesday and Friday.

We don’t expect the numbers to have a lasting impact on the Aussie Dollar, however.

June’s private sector credit figures, also due out on Friday, will likely be brushed aside.

2nd quarter GDP figures from key economies, COVID-19 news, and geopolitics will remain the key drivers. A jump in new COVID-19 cases and deteriorating relations with China would likely test support for the Aussie Dollar.

The Aussie Dollar ended the week up by 1.56% to $0.7105.

For the Kiwi Dollar:

It’s another quiet week ahead on the economic calendar.

After a quiet start to the week, building consent and business confidence figures are due out on Thursday.

Expect the ANZ Business Confidence figures to have a greater influence on the Kiwi.

Away from the numbers, private sector PMIs from China, COVID-19, and geopolitics will remain in focus.

The Kiwi Dollar ended the week up by 1.28% to $0.6641.

For the Japanese Yen:

It is a quiet week ahead on the economic calendar.

June retail sales figures, due out on Thursday, and industrial production numbers on Friday are the key stats for the week.

We would expect the Yen to brush aside the stats, however, with the market focus elsewhere.

Progress towards a COVID-19 vaccine would pin back any upside in the Yen. Support could come from the U.S administration, however.

There’s the spat with China and the U.S fiscal stimulus package to track.

The Japanese Yen ended the week up by 0.82% to ¥106.14 against the U.S Dollar.

Out of China

It’s a quiet week ahead on the economic data front.

July’s private sector PMIs are due out on Friday. Expect the figures to influence risk appetite at the end of the week.

Away from the economic calendar, any chatter from Beijing will also need consideration.

The Chinese Yuan ended the week down 0.37% to CNY7.0184 against the U.S Dollar.

Geo-Politics

UK Politics:

Brexit will remain in focus in the week. Both sides agreed to continue negotiations through to September, which has bought Boris and the Pound some time.

With Germany having made it clear that they will focus on talks in September and October, however, it might be a slow summer.

U.S Politics:

It was quite a week for Trump and the Republicans last week. Expect more of the same in the week ahead.

First on the agenda will be to get the next fiscal stimulus package wrapped up. With benefits expiring at the end of the month, failure to deliver the next phase would be a blow to Trump’s hopes of a 2nd term.

Then we have the spat with China to consider and there’s the continued rise in new COVID-19 cases.

Corporate Earnings

Out of Germany, Deutsche Bank (Wed) is the marquee name delivering earnings results.

From France, LVMH (Mon), Peugeot (Tues), Total (Thurs), Airbus Grp (Thurs), Renault (Thurs), BNP Paribas (Fri), and Air France KLM (Fri) are key names delivering results.

The Coronavirus:

It was another bad week, with the number of new COVID-19 cases continuing to rise at a marked pace.

From the market’s perspective, the 3 key considerations have been:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. No spikes in new cases as a result of the easing of lockdown measures.
  3. Governments continue to progress towards fully opening economies and borders.

Last week, we saw positive news of progress towards a vaccine deliver support to riskier assets early in the week. This will need to continue in the week ahead to offset the negative impacts of points ii) and iii).

At the time of writing, the total number of coronavirus cases stood at 16,199,447. Monday to Saturday, the total number of new cases increased by 1,531,149. Over the same period in the previous week, the total number had risen by 1,385,504.

Monday through Saturday, the U.S reported 417,070 new cases to take the total to 4,315,709. This was down marginally from the previous week’s 419,276.

For Germany, Italy, and Spain, there were 17,083 new cases Monday through Saturday. This took the total to 771,697. In the previous week, there had been 10,124 cases over the same period. Spain accounted for 12,166 of the total new cases… With EU member states reopening borders, the chances of a 2nd wave across the EU will be on the rise.

Over the weekend, Reuters had reported a record rise in new COVID-19 cases in almost 40 countries last week.

The Weekly Wrap – COVID-19, Geopolitics, and Economic Data Drove the Majors

The Stats

It was a quieter week on the economic calendar, in the week ending 24th July.

A total of just 41 stats were monitored, following the 74 stats from the week prior.

Of the 41 stats, 23 came in ahead forecasts, with 17 economic indicators coming up short of forecasts. Just 1 stat was in line with forecasts in the week.

Looking at the numbers, 33 of the stats reflected an upward trend from previous figures. Of the remaining 8, 7 stats reflected a deterioration from previous.

For the Greenback, it was a 5th consecutive week in the red. In the week ending 24th July, the Dollar Spot Index fell by 1.57% to 94.435. In the week prior, the Dollar had fallen by 0.73%.

For the U.S, the Dollar was on the back foot throughout the week. News of progress towards a COVID-19 vaccine weighed on the Dollar in the early part of the week.

Domestic issues will have also tested demand for the Dollar, however. News of the U.S administration sending Federal agents to control protests tested the Dollar. Rising tension between the U.S and China didn’t help as Trump looked to distract voters from the continued spike in new COVID-19 cases.

Looking at the latest coronavirus numbers

At the time of writing, the total number of coronavirus cases stood at 15,930,779 for Friday, rising from last Friday’s 14,189,223 total cases. Week-on-week (Saturday thru Friday), the total number of cases was up by 1,741,556 on a global basis. This was higher than the previous week’s increase of 1,584,328 in new cases.

In the U.S, the total rose by 478,299 to 4,248,311. In the week prior, the total number of new cases had risen by 484,462.

Across Germany, Italy, and Spain combined, the total number of new cases increased by 17,404 to bring total infections to 771,051. In the previous week, the total number of new cases had risen by 10,432. Spain continued to see larger rises over the week.

Out of the U.S

It was another relatively quiet week on the economic data front.

Key stats included the weekly jobless claims figures and July’s private sector PMI numbers.

In the week ending 17th July, jobless claims rose by 1.416m following 1.3m from the previous week. It was yet more evidence that the economic recovery has more speed bumps to come.

Private sector PMIs also failed to impress. While manifesting sector activity returned to expansion in July, the services sector continued to contract.

With the stats on the negative, the Dollar was on the slide for the wrong reasons.

Rising tensions between the U.S and China, the use of Federal agents, and COVID-19 also weighed on the Greenback.

In the equity markets, the NASDAQ fell by 1.33%, with the Dow and S&P500 declining by 0.76% and 0.28% respectively.

Out of the UK

It was another busy week on the economic calendar.

Key stats included June retail sales and prelim private sector PMI numbers.

The stats were skewed to the positive for the Pound.

In June, retail sales surged by 13.9%, month-on-month, with core retail sales jumping by 13.5%.

A 2nd consecutive monthly jump saw sales return to pre-COVID-19 levels.

Private sector activity also impressed. According to prelim figures, the all-important services PMI jumped from 47.1 to 56.6.  With the Manufacturing PMI rising from 50.1 to 53.6, the composite increased from 47.7 to 57.1.

The only negative for the Pound was weaker than expected recovery in industrial trend orders. In July, industrial trend orders rose from -58 to -46. Economists had forecast a rise to -38.

Away from the economic calendar, the Pound also found support in the week. A combination of improved economic indicators and positive progress on trade talks delivered the upside.

In the week, the Pound rallied by 1.80% to $1.2794 in the week, reversing a 0.43% loss from the previous week. The FTSE100 ended the week down by 2.65%, partially reversing a 3.20% gain from the previous week.

Out of the Eurozone

It was a busy week on the economic data front.

Key stats included German and Eurozone consumer confidence figures and prelim private sector PMIs.

The stats were skewed to the positive.

While the consumer confidence slipped in the Eurozone, confidence in Germany improved in August.

More importantly, private sector activity continued to see a pickup in activity in July.

The Eurozone’s Services PMI jumped from 48.3 to 55.1, with the Manufacturing PMI rising from 47.4 to 51.1.

Supported by a marked pickup in service sector activity in both France and Germany, the Eurozone Composite rose from 48.5 to 54.8.

On the geopolitical risk front, rising tension between the U.S and China was EUR negative.

At the start of the week, agreement on the mechanism of the EU Recovery Fund delivered a boost, however.

For the week, the EUR rallied by 2.00% to $1.1656, following a 1.13% gain from the previous week.

For the European major indexes, it was a bearish week. The CAC30 and EuroStoxx600 slid by 2.23% and 1.45% respectively, while the DAX40 slipped by 0.63%.

For the Loonie

It was a relatively busy week on the economic calendar.

Economic data included May retail sales and June inflation figures.

Retail sales bounced back from April’s slump, with inflationary pressures picking up in June.

Crude oil prices also headed northwards in the week, providing the Loonie with support.

The Loonie rose by 1.22% to end the week at C$1.3415 against the Greenback. In the week prior, the Loonie had risen by 0.09% to C$1.3415.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 24th July, the Aussie Dollar rose by 1.56% to $0.7105, with the Kiwi Dollar gaining 1.28% to $0.6641.

For the Aussie Dollar

It was a relatively quiet week for the Aussie Dollar.

Retail sales figures disappointed on Wednesday, in spite of a 2.40% rise off the back of a 16.9% surge in May. Economists had forecast a 7.1% gain.

Also negative was a fall in business confidence. In the second quarter, the NAB Quarterly Business Confidence fell from -12 to -15, which was to be expected. The decline reflected the impact of the COVID-19 pandemic on the business sentiment.

On the monetary policy front, the RBA meeting minutes provided few surprises.

The upside in the week came as a result of the news of progress towards a COVID-19 vaccine. Even rising tensions between the U.S and China failed to send the Aussie into reverse.

For the Kiwi Dollar

It was another relatively quiet week on the economic data front.

Key stats were limited to June trade figures.

A rise in exports and little movement in imports led to a narrowing of the trade deficit in June. The stats ultimately had a muted impact on the Kiwi Dollar, however, with geopolitics in focus on Friday.

Tracking the Aussie Dollar, hopes of a COVID-19 vaccine to boost the global economy supported the Kiwi.

For the Japanese Yen

It was a busy first half of the week on the data front, with Japan on holiday on Thursday and Friday.

June trade figures and July’s prelim private sector PMIs were in focus in the week.

The stats were mixed. In June, exports slid by 26.2%, following a 28.3% tumble in May. A more marked decline in imports, however, led to a narrowing of the trade deficit to ¥268.8bn.

From the private sector, both the manufacturing and services sectors reported a slower pace of contraction. It was of little consolation, however, with the rises in the PMIs only marginal.

The Manufacturing PMI rose from 40.1 to 42.6, with the Services PMI rising from 45.0 to 45.2.

Over the week, the stats had a muted impact on the Japanese Yen, however.

A weakening U.S Dollar stemming from the progress towards a COVID-19 vaccine supported the Yen.

The Japanese Yen rose by 0.82% to end the week at ¥106.14 against the Greenback. In the week prior, the Yen had fallen by 0.08%.

Out of China

It was a quiet week on the economic data front.

There were no material stats to provide the markets with direction.

On the monetary policy front, the PBoC left the 3-year and 5-year loan prime rates unchanged. This was in line with expectations, with the PBoC having pre-warned the markets of the likely end to policy easing near-term.

Over the week, rising tensions between the U.S and China weighed on the Yuan.

In the week ending 24th July, the Chinese Yuan fell by 0.37% to CNY7.0184 against the Dollar. In the week prior, the Yuan had gained 0.10%.

The CSI300 declined by 0.86% in the week, with the Hang Seng falling 1.53%, as U.S – China tensions weighed once more.