The Week Ahead – Economic Data, Monetary Policy, and COVID-19 in Focus

On the Macro

It’s quieter week ahead on the economic calendar, with 51 stats in focus in the week ending 6th August. In the week prior, 71 stats had also been in focus.

For the Dollar:

From the private sector, ISM Manufacturing and Non-Manufacturing PMIs for July will be in focus.

Expect the Non-Manufacturing PMI due out on Wednesday to have the greatest impact.

On the labor market front, ADP nonfarm employment change and weekly jobless claims figures on Wednesday and Thursday will also influence.

Nonfarm payrolls at the end of the week, however, will be the key stat of the week.

In the week ending 30th July, the Dollar Spot Index fell by 0.79% to 92.174.

For the EUR:

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

Private sector PMIs for Italy and Spain together with finalized numbers for France, Germany, and the Eurozone will influence.

Expect Italy and the Eurozone’s PMIs to be key in the week.

German and Eurozone retail sales figures will also influence, with consumption key to a sustainable economic recovery.

For the week, the EUR rose by 0.84% to $1.1870.

For the Pound:

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

Finalized private sector PMIs for July are due out on Monday and Wednesday.

Expect any revisions to the services PMI to have a greater impact in the week.

Construction PMIs also due out, should have a muted impact, however.

While the finalized numbers will influence, the Bank of England monetary policy decision on Thursday will be the main event.

Last week, the IMF talked up the outlook for the British economy. It now rests in the hands of the BoE.

The Pound ended the week up by 1.13% to $1.3904.

For the Loonie:

It’s a busier week ahead on the economic calendar.

Trade data on Thursday and employment change figures on Friday will be the key numbers.

While trade figures will influence, expect the employment change figures to have a greater impact.

The Loonie ended the week up 0.71% to C$1.2475 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

Manufacturing sector data, building permits, retail sales, and trade data will be in focus.

Retail sales and trade data, due out on Wednesday and Thursday, will be the key stats of the week.

On the monetary policy front, however, the RBA monetary policy decision on Tuesday will be the main event.

The Aussie Dollar ended the week down by 0.30% to $0.7344.

For the Kiwi Dollar:

It’s a quiet week ahead. Mid-week, employment change figures will draw interest ahead of inflation expectation numbers on Friday.

With little else for the markets to consider in the week, expect both sets of numbers to provide direction. The markets are expecting a further pickup in inflationary pressures…

The Kiwi Dollar ended the week flat at $0.6974.

For the Japanese Yen:

Finalized private sector PMIs and Tokyo inflation figures will be in focus in the 1st half of the week.

Expect any revision to the PMIs to be of greater influence.

Late in the week, household spending figures will also draw interest.

The Japanese Yen rose by 0.75% to ¥109.720 against the U.S Dollar.

Out of China

It’s a busier day, with private sector PMIs to provide the markets with direction.

Following NBS numbers from the weekend, the market’s preferred Caixin manufacturing PMI will set the tone. Over the weekend, the NBS Manufacturing PMI fell from 50.9 to 50.4…

With service sector activity a greater component of the economy, Wednesday’s services PMI will also influence, however.

The Chinese Yuan ended the week up by 0.31% to CNY6.4614 against the U.S Dollar.

Geo-Politics

Russia and China continue to be the main areas of interest for the markets. News updates from the Middle East will also need continued monitoring…

All Eyes on NFP as Fed Won’t Make a Move on Policy without Substantial Labor Market Growth

The Federal Reserve monetary policy statement and remarks from Fed Chair Jerome Powell set the tone in several financial markets last week with the biggest influence on the U.S. Dollar. Disappointing U.S. economic reports also weighed on the greenback.

Ahead of next week, however, investors are asking whether the sell-off represents a change in the longer-term trend or just a shift in momentum.

With the Fed not scheduled to meet until September 21-22, the move likely represents a shift in momentum since policymakers left in place their change in the timeline for the next interest rate hike that it announced in its June 16 monetary policy statement.

In last Wednesday’s announcement, all it did was push the possible start of tapering nearly seven weeks into the future. It didn’t remove the possibility of tapering and it didn’t move the timeline for the next rate hike so we really can’t call its policy statement “dovish”. It should probably be best described as “less-hawkish”.

Furthermore, the Federal Open Market Committee (FOMC) will have two Non-Farm Payrolls and Consumer Inflation reports under their belt before making its late September policy decision. With the labor market and inflation the biggest concerns for the Fed and likely to exert the most influence on policymakers, these are the two reports that traders should pay attention to during August.

The U.S. will release its Non-Farm Payrolls report on August 6 along with data on Average Hourly Earnings and the Unemployment rate. Non-Farm Payrolls are expected to show the economy added 895K new jobs in July. The unemployment rate is expected to dip from 5.9% to 5.7% and Average Hourly Earnings are expected to remain steady at 0.3%.

Labor Market Growth is Powell’s Major Concern

During July, Federal Reserve Chairman Jerome Powell mentioned his concerns about labor market growth twice in his public speeches. The first mention was mid-month in his testimony before Congress. The second was in his post-monetary policy statement press conference last Wednesday.

On July 14, Federal Reserve Chairman Jerome Powell told Congress that while the economy has come a long way back from its pandemic-induced depths, the labor market “still has a long way to go.”

“Labor demand appears to be very strong; job openings are at a record high, hiring is robust, and many workers are leaving their jobs,” Powell said. “Indeed, employers added 1.7 million workers from April through June. However, the unemployment rate remained elevated in June at 5.9 percent.”

Powell added that the official unemployment rate understates the real condition of the job market as many potential workers remain on the sidelines for reasons ranging from continued fear of COVID-19, enhanced unemployment benefits and difficultly finding child case.

At last Wednesday’s press conference, Powell fielded many questions about inflation, but he also said that hiring needed to progress further before the Fed would be ready to dial down its support for the economy.

“I’d say we have some ground to cover on the labor market side,” Powell said. “I think we’re some way away from having had substantial further progress toward the maximum employment goal.”

Conclusion

While the initial reaction to the Fed and Powell was to sell the U.S. Dollar because the notion of tapering was put on hold at its last meeting, the real move in the U.S. Dollar over the short-term is likely to follow the July Non-Farm Payrolls report, due on August 6.

A weaker-than-expected report for July will be bearish for the U.S. Dollar because traders will start reducing the chances of the Fed announcing the start of tapering at its September meeting. Furthermore, if July employment data is weak then the August report due in September is also likely to be weak if the COVID crisis gets out of control.

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

The Weekly Wrap – A Dovish FED and Weak Stats Left the Greenback in the Red

The Stats

It was a busy week on the economic calendar, in the week ending 30th July.

A total of 71 stats were monitored, which was up from 33 stats in the week prior.

Of the 71 stats, 37 came in ahead forecasts, with 30 economic indicators coming up short of forecasts. There were 4 stats that were in line with forecasts in the week.

Looking at the numbers, 42 of the stats reflected an upward trend from previous figures. Of the remaining 29 stats, 27 reflected a deterioration from previous.

For the Greenback, disappointing economic data and a dovish FED left the Dollar in the red. The Dollar Spot Index fell by 0.79% to 92.174. In the previous week, the Dollar had risen by 0.24% to 92.906.

Out of the U.S

Consumer sentiment and durable goods orders drew attention early in the week.

In June, durable goods orders ex transportation rose by 0.3%, following a 0.5% increase in May.

More significantly was a pickup in consumer confidence in July. The CB Consumer Confidence Index rose from 128.9 to 129.1. Economists had forecast a decline to 126.0.

On Thursday, jobless claims and 2nd quarter GDP numbers were in focus. The stats were skewed to the negative, however.

In the 2nd quarter, the U.S economy grew by 6.5%. This fell well short of a forecasted growth of 8.5%.

Jobless claims also fell short of expectations, with initial jobless claims falling from 424k to 400k. Economists had forecast a decline to 370k.

At the end of the week, personal spending and inflation figures came in ahead of forecasts, however.

Personal spending rose by 1.0% in June, with the annual rate of inflation seeing a pickup from 3.4% to 3.5%.

While the stats were material, the FED monetary policy and press conference were the main events of the week.

In line with market expectations, the FED left policy unchanged. The FED Chair also looked to assure the markets that there would be no near-term moves, the guidance considered dovish.

Out of the UK

It was a particularly quiet week. There were no major stats for the markets to consider in the week.

The lack of stats left the Pound in the hands of IMF economic growth forecasts, which delivered Pound support.

In the week, the Pound rose by 1.13% to end the week at $1.3904. In the week prior, the Pound had fallen by 0.14% to $1.3748.

The FTSE100 ended the week up by 0.07%, following a 0.28% gain from the previous week.

Out of the Eurozone

Through much of the week, the German economy was in focus.

Business and consumer sentiment figures delivered mixed results. While business sentiment waned in July, consumer confidence remained unchanged, in spite of the reopening of economies.

Unemployment figures from Germany were upbeat. The unemployment fell from 5.9% to 5.7% in July.

Inflationary pressures continued to surge, however, with Germany’s annual rate of inflation accelerating in July to 3.8%.

At the end of the week, 1st estimate GDP numbers and prelim inflation figures were the key stats of the week.

Quarter-on-quarter, the French economy grew by 0.9% versus a forecasted 0.7% in the 2nd quarter.

Germany saw growth of 1.5%, falling short of a forecasted 1.9%. In the 1st quarter, the economy had contracted by 2.1%.

For the Eurozone, the economy grew by 2.0%, coming in ahead of a forecasted 1.5%. The economy had contracted by 0.3% in the previous quarter.

Inflation also ticked up, aligned with member state numbers. According to prelim figures, the Eurozone’s annual rate of inflation accelerated from 1.9% to 2.2% in July, rising above the ECB’s 2% target.

For the week, the EUR rose by 0.84% to $1.1870. In the week prior, the EUR had fallen by 0.30% to $1.1771.

The DAX30 fell by 0.67%, while the CAC40 and the EuroStoxx600 ended the week up by 0.67% and by 0.05% respectively.

For the Loonie

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

Inflation and GDP numbers were the key stats of the week.

In June, the annual rate of inflation softened from 2.8% to 2.7%, bucking the trend seen across key economies.

The Canadian economy also continued to struggle in May, with the economy contracting by 0.3%. The economy had contracted by 0.5% in April.

In the week ending 30th July, the Loonie rose by 0.71% to C$1.2475. In the week prior, the Loonie had risen by 0.39% to C$1.2564.

Elsewhere

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

While the Aussie Dollar fell by 0.30% to $0.7344, the Kiwi Dollar ended the week flat at $0.6974.

For the Aussie Dollar

Inflation was the main area of focus. The stats were mixed, however, pegging the Aussie Dollar back.

In the 2nd quarter, the annual rate of inflation surged from 1.1% to 3.8%. The trimmed mean rate of inflation picked up from 1.1% to 1.6%, however.

Wholesale inflation also saw a pickup but at a softer pace than anticipated.

Australia’s annual wholesale rate of inflation ticked up from 0.2% to 2.2%. Economists had forecast a rate of 3.5%.

For the Kiwi Dollar

It was a busier week, with trade and consumer and business confidence in focus.

Trade data disappointed, with the trade surplus narrowing from NZ$498m to NZ$261m in June. The narrowing stemmed from a more marked increase in imports, however, rather than a fall exports, which limited the damage.

Business and consumer confidence figures were also skewed to the negative. The ANZ Business Confidence Index fell from -0.60 to -3.80, with the ANZ Consumer Confidence Index falling from 114 to 113.1.

The week numbers were not enough to sink the Kiwi.

For the Japanese Yen

It was another relatively busy week.

Early in the week, private sector PMIs were in focus. Later in the week industrial production and retail sales also drew attention on Friday.

While prelim private sector PMIs softened slightly in July, industrial production and retail sales impressed.

Industrial production jumped by 6.2% in June, reversing a 6.5% slide from May. More significantly, retail sales increased by 3.1%, reversing a 0.4% decline from May.

The Japanese Yen rose by 0.75% to ¥109.72 against the U.S Dollar. In the week prior, the Yen had fallen by 0.44% to ¥110.550.

Out of China

It was a quiet week on the economic data front. There were no major stats from China for the markets to consider.

In the week ending 30th July, the Chinese Yuan rose by 0.31% to CNY6.4614. In the week prior, the Yuan had ended the week down by 0.03% to CNY6.4813.

The CSI300 and the Hang Seng ended the week down by 4.98% and by 5.46% respectively.

EUR/USD Weekly Price Forecast – Euro Wipes Out Significant Losses

The Euro has rallied rather significantly during the course of the week, as we have seen the market recapture the 1.1850 level, and even threatening the 1.19 level late during the week. When you look at this chart, it is obvious that there are a lot of choppy little areas around where we are, and the fact that the Friday candlestick is starting to look like a shooting star does suggest that maybe we get a little bit of a pullback. That being said, it looks as if the Euro is trying to find its footing, so while I anticipate that we are going to go sideways more than anything else in the short term, it is likely that we will make a significant move rather soon.

EUR/USD Video 02.08.21

Looking at this chart, you can see that if we were to break down below the weekly candlestick, we could go looking towards the 1.16 level underneath which is where the 200 week EMA comes into the picture. That is an area where we see significant support coming into the market that extends down to the 1.15 handle. As far as going long is concerned, you need to see this market clear the 1.20 handle in order to have this market really take off to the upside. At that point, then we are looking towards the 1.22 handle.

That is an area that of course is massive resistance as well, so please be advised that it is worth paying close attention to. Keep in mind that a lot of what is going on in this pair in both the US dollar more than anything else, so I do not believe that you can ignore the 10 year note either.

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

EUR/USD Price Forecast – Euro Pulls Back From 200 Day EMA

The Euro has rallied a bit during the course of the trading session on Friday, but then gave back the gains to show a little less than desirable momentum. That being said, if we do close out like this, then it is very likely that the market could go lower, perhaps reaching towards the 1.1850 level underneath. If we were to break down below the 1.1850 level, then it is likely that the market could go looking towards the 1.1750 level. Breaking down below that level then opens up a flood of selling that could send this market down to the 1.16 level.

EUR/USD Video 02.08.21

If we turn around a break above the top of the shooting star and clear the 200 day EMA, then it is possible that the market could go looking towards the 1.20 handle. The 1.20 handle is of course an area that will attract a lot of headlines, and thereby cause the markets show signs of hesitation in that general vicinity. Ultimately, this is a market that I think continues to see a lot of choppy behavior but that is nothing new for this pair.

Pay close attention to the 10 year yields in America, because they do offer quite a bit more than Germany, so if the German bond market goes even more negative, it is possible that we may see the Euro get punished as a result. Furthermore, the PCE numbers came out less than expected during the trading session, so there is also the possibility that a bit of a “fear trade” could come back into this market.

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

An Economic Data Deluge Delivers EUR Support as the Eurozone Economy Bounces Back

Following interest in the German economy through much of the week, it was the Eurozone and member state economies in focus this morning.

The numbers were skewed to the positive, supporting market optimism.

Member States

In the 2nd quarter, the French economy expanded by 0.9%, quarter-on-quarter, reversing a 0.1% contraction in the previous quarter.

The German economy expanded by 1.5%, partially reversing a 2.1% contraction from the 1st quarter.

Italy and Spain also saw growth in the quarter.

In the 2nd quarter, the Spanish economy grew by 2.8%, reversing a 0.4% contraction from the 1st quarter. Stats from Italy were also positive, with the economy growing by 2.7%. In the 1st quarter, the economy had grown by just 0.2%, quarter-on-quarter.

The Eurozone

In the 2nd quarter, the Eurozone economy grew by 2.0%, quarter-on-quarter, reversing a 0.3% contraction from the previous quarter.

Year-on-year, the economy grew by 13.7% after having contracted by 1.3% in the previous quarter. Economists had forecast a 12.6% increase.

Inflation figures were also in focus, with the annual rate of inflation ticking up from 1.9% to 2.2%. Economists had forecast an annual rate of inflation of 2.0%.

The pickup in inflationary pressures muted unemployment figures for the Eurozone, however. In June, the Eurozone’s unemployment rate slipped from 8.0% to 7.7%. Economists had forecast a fall to 7.8%.

While the economy was in recovery, the need for a consumer driven recovery remains in question as inflationary pressures build.

Market Impact

In response to today’s stats, the EUR fell to a low $1.18751 before climbing to a post-stat and current day high $1.19087.

At the time of writing, the EUR was up by 0.09% to $1.18974.

EURUSD 300721 Hourly Chart

Next Up

Personal spending, inflation, and consumer sentiment figures from the U.S.

EUR/USD Daily Forecast – Euro Stays Strong Ahead Of The Weekend

Euro Continues To Move Higher

EUR/USD is currently trying to settle above the resistance at 1.1880 while the U.S. dollar is mostly flat against a broad basket of currencies.

The U.S. Dollar Index managed to stay above the 50 EMA at 91.90 but failed to settle above the nearest resistance level at 92. In case the U.S. Dollar Index declines below the 50 EMA, it will gain additional downside momentum which will be bullish for EUR/USD.

Today, foreign exchange market traders will focus on the economic data from EU. Flash reading of the second-quarter Euro Area GDP Growth Rate report is projected to show that Euro Area GDP Growth Rate increased by 1.5% quarter-over-quarter. On a year-over-year basis, Euro Area GDP Growth Rate grew by 13.2%.

Traders will also have a chance to take a look at preliminary Euro Area inflation data for July. Euro Area Inflation Rate is forecast to decline by 0.3% month-over-month. On a year-over-year basis, Euro Area Inflation Rate is projected to grow by 2%. Euro Area Core Inflation Rate is expected to increase by 0.8% year-over-year. Euro Area Unemployment Rate is expected to remain unchanged at 7.9%.

It remains to be seen whether these reports will have a major impact on euro’s trading dynamics as no surprises are expected on the inflation front.

Technical Analysis

eur usd july 30 2021

EUR/USD continues its attempts to settle above the resistance at 1.1880. If EUR/USD manages to settle above this level, it will get to the test of the next resistance level which is located at the 50 EMA at 1.1900.

A successful test of the resistance at the 50 EMA will open the way to the test of the resistance at 1.1925. If EUR/USD gets above this level, it will move towards the resistance at 1.1945. A move above this level will open the way to the test of the resistance at 1.1965.

On the support side, a move below 1.1880 will push EUR/USD back towards the support at 1.1860. In case EUR/USD declines below this level, it will head towards the support at the 20 EMA at 1.1840. A successful test of this level will lead to the test of the next support at 1.1830.

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

A Busy Economic Calendar Puts the EUR, the Loonie, and the Greenback in Focus

Earlier in the Day:

It was a busy quiet start to the day on the economic calendar this morning. The Kiwi Dollar and the Japanese Yen were in action in the early part of the day. Later this morning, the Aussie Dollar will also be in focus.

For the Kiwi Dollar

Consumer confidence and housing sector data were in focus this morning.

In June, building permits rose by 3.8%, reversing a 2.40% slide in May. Economists had forecast a 1.10% decline.

Of greater significance, however, was a modest fall in consumer confidence.

In July, the ANZ Consumer Confidence Index fell from 114.0 to 113.1. Economists had forecast a decline to 113.0.

According to the July survey,

  • A good time to buy a major household item rose 2 points to +24, a fresh post-COVID high.
  • Sentiment towards the finances in a year’s time also improved. A net 23% expect to be better off this time next year, up 1 point.
  • This was in contrast to sentiment towards current financial situations, which fell 6 points to +8%.
  • Views towards the economic outlook were also mixed.
  • Perceptions regarding the next year’s economic outlook fell 5 points to -2%, while the 5-year outlook rose by 2 points to +12%.

The Kiwi Dollar moved from $0.70039 to $0.70162 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.01% to $0.7011.

For the Japanese Yen

Industrial production increased by 6.2% in June, according to prelim figures, reversing most of a 6.5% slide from May. Economists had forecast a 5.1% increase.

According to the Ministry of Economy, Trade and Industry,

  • Industries that mainly contributed to the increase were motor vehicles, production machinery, and electronic parts & devices.
  • Industries that mainly contributed to the decrease were transport equipment (excl. motor vehicles) and ceramics, stone, & clay products.

According to the Ministry of Economy, Trade and Industry, retail sales increased 3.1%, reversing a 0.4% decline from May. Economists had forecast a 3.6% slide.

The Japanese Yen moved from ¥109.416 to ¥109.402 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.05% to ¥109.420 against the U.S Dollar.

For the Aussie Dollar

Wholesale inflation and private sector credit figures will draw interest.

On the inflation front, the annual wholesale rate of inflation is forecast to accelerate from 0.2% to 3.5%.

Quarter-on-quarter, economists have forecast for the producer price index to rise by 2.1%, following a 0.4% increase in the 1st quarter.

At the time of writing, the Aussie Dollar was flat at $0.7396.

The Day Ahead

For the EUR

It’s a particularly busy day ahead on the economic data front, with the 2nd quarter GDP numbers, consumer spending, and inflation in focus.

French, German, and Eurozone 1st estimate GDP numbers for the 2nd quarter will be the key stats of the day, however.

At the time of writing, the EUR was up by 0.03% to $1.1891.

For the Pound

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

The lack of stats leaves the IMF’s growth forecasts for the UK, delivered earlier in the week, to continue to resonate.

At the time of writing, the Pound was up by 0.05% to $1.3966.

Across the Pond

It’s a busy day ahead on the economic calendar.

Personal spending and inflation figures for June together with finalized consumer sentiment figures for July will be in focus.

Barring any marked revisions to prelim consumer sentiment figures, expect the personal spending and inflation figures to be key.

Following the FED’s policy decision on Wednesday, any FOMC member chatter will also need monitoring.

On Thursday, the U.S Dollar Spot Index ended the day down by 0.50% to 91.864.

For the Loonie

It’s also a busy day on the economic calendar. Wholesale inflation, RMPI, and GDP numbers will be in focus.

With a lack of stats through much of the week, expect Loonie sensitivity to today’s numbers.

Away from the economic calendar, crude oil prices and market risk sentiment will also influence.

At the time of writing, the Loonie was down by 0.01% to C$1.2449 against the U.S Dollar.

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

EUR/USD Mid-Session Technical Analysis for July 29, 2021

The Euro hit its highest level against the U.S. Dollar since July 6 on Thursday after the U.S. Federal Reserve’s reassurance that interest rate hikes remain distant. The recent losses in the single-currency had already lost momentum leading into Wednesday’s Federal Reserve meeting and Chairman Jerome Powell’s remark that rate increases were “a ways away” was enough to drive it higher.

At 13:55 GMT, the EUR/USD is trading 1.1882, up 0.0038 or +0.32%.

The EUR/USD was also boosted by disappointing U.S. economic news. The U.S. second-quarter gross domestic product accelerated 6.5% on an annualized basis, considerably less that the 8.4% Dow Jones estimate.

Meanwhile, a separate data point showed that 400,000 people filed initial claims for unemployment benefits for the week ended July 24. That level is nearly double the pre-pandemic norm and above a Dow Jones estimate of 385,000.

In the Euro Zone, bond yields rose on Thursday as investor sentiment reached a record high and state-level data hinted that German inflation would exceed expectations.

Euro Zone economic sentiment hit a record high in July, estimates from the European Commission showed, though a drop in optimism among consumers and the slower rate of increase may signal the peak is fast approaching.

Finally, German consumer price increases accelerated in July, with several states reporting annual inflation rates between 3.4% and 4.3%, suggesting a national-estimate would exceed the 3.3% expected in a Reuters poll.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The main trend changed to up earlier today when buyers took out the last swing top at 1.1881. The rally stopped just short of the next swing top at 1.1895. A trade through 1.1752 will change the main trend to down.

The short-term range is 1.1975 to 1.1752. The EUR/USD is currently testing its retracement zone at 1.1864 to 1.1890. The latter is a potential trigger point for an acceleration to the upside.

The main range is 1.2218 to 1.1752. If there is an upside breakout then look for the rally to possibly extend into its 50% level at 1.1985.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD into the close on Thursday is likely to be determined by trader reaction to 1.1864 and 1.1890.

Bearish Scenario

A sustained move under 1.1864 will indicate the presence of sellers. If this move creates enough momentum then look for the selling to possibly extend into 1.1819.

Bullish Scenario

A sustained move over 1.1890 will signal the presence of buyers. Taking out 1.1895 will reaffirm the uptrend. The daily chart indicates there is plenty of room to the upside so watch for a near-term acceleration into 1.1975 and 1.1985.

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

EUR/USD Price Forecast – Euro Reaching Towards Death Cross

The Euro rallied a bit during the course of the trading session on Thursday, breaking above the 1.1850 level. That is an area that of course has been important more than once, and at this point in time blowing through it of course is a good sign. However, the 50 day EMA is trying to cross below the 200 day EMA, near the 1.1925 level. At this point, a lot of traders will be paying close attention to this, as it is a longer-term negative sign. Furthermore, the 200 day EMA does tend to attract a lot of attention, so signs of exhaustion would more than likely be sold into.

EUR/USD Video 30.07.21

While the US dollar continues to soften, the reality is that it might be a little bit overdone considering that the interest rate differential still favors the United States, so all things been equal that will continue to put a little bit of downward pressure on the Euro itself. Having said that, if we were to break above the “death cross”, that opens up the possibility of a move towards the 1.20 handle. If we were to break above there, then it opens up the possibility of a move towards the 1.2150 level, that being said, the market is more likely than not to find sellers sooner or later.

I do not like the Euro in general, as it is very choppy to say the least, but ultimately this is a market that I think continues to see a bit of a reaction to the Jerome Powell statement. Given enough time though, I do think that we might have a nice selling opportunity, all it would take is a little bit of a “risk off move” in the markets overall.

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

Dollar Comes Back to The Bearish Trend. Gold and Silver Rise

  • Jerome Powell buried the USD, helped precious metals and as almost always…stocks
  • U.S. dollar index breaks the lower line of the channel up formation and goes down
  • Silver comes back inside of the symmetric triangle pattern, that’s bullish
  • Gold climbs higher
  • The NZDJPY is creating an inverse head and shoulders pattern on an important support
  • The CHFJPY goes higher after a very handsome technical setup, which we discussed in our previous video
  • The EURUSD with a false bearish breakout of a neckline, that’s super bullish
  • The USDCAD goes down as expected. Shooting star on a weekly chart is no joke
  • Indices push higher, same thing, different day

German Unemployment Slides, Delivering EUR Support

Following German business and consumer sentiment figures this week, German unemployment was in focus this morning.

Unemployment

In July, unemployment slid by 91k, following a 39k decline in June. As a result of the decline, the unemployment rate fell from 5.9% to 5.7%. Economists had forecast a 22k decline and for the unemployment rate to fall to 5.8%.

Market Impact

Ahead of today’s unemployment figures, the EUR had fallen to a pre-stat and current day low $1.18388 before visiting $1.186 levels.

In response to today’s stats, the EUR fell to a post-stat low $1.18647 before climbing to a post-stat and current day high $1.18801.

At the time of writing, the EUR was up by 0.27% to $1.18743.

EURUSD 290721 Hourly Chart

Next Up

Prelim inflation figures from Germany ahead of 2nd quarter GDP and weekly jobless claims figures from the U.S. It could get choppy for the EUR if initial jobless claims tumble and GDP numbers beat forecasts…

Chinese Officials Calm Markets

Led by a 3% recovery in the Hang Seng, the large equity markets in the Asia Pacific region advanced after the MSCI benchmark recorded the lows for the year yesterday. Europe’s Dow Jones Stoxx 600 is posting modest gains that were sufficient to lift the benchmark to new record highs. US equity futures are firm. US and European 10-year yields are little changed. The US is firm around 1.26%. European yields are also 1-2 bp higher. The biggest reaction in the capital markets is the setback in the dollar, which is softer against nearly all currencies through the European morning.

Among the majors, the New Zealand and Canadian dollars and the Norwegian krone are the strongest. The yen and Swiss franc are the laggards. Among emerging market currencies, the South African rand and Hungarian forint are the strongest. The JP Morgan Emerging Market Currency Index extended yesterday’s gains and is poised for its best two days this month.

Meanwhile, the decline in real yields and a weaker dollar appear to be helping lift gold above its 200-day moving average near $1821. Falling oil inventories in the US are helping lift crude prices. The September WTI contract is up by more than 1% for the second day as prices push above $73 a barrel. After falling on Tuesday, the CRB rose yesterday, its sixth gain in the past seven sessions.

Asia Pacific

Chinese officials moved to calm markets. They did so by the regulators meeting with banks and trying to isolate the crackdown on private education while signaling that IPOs in the US are not banned. State funds may have been deployed to support equities. The PBOC provided additional liquidity. The CNY30 bln (~$4.6 bln) via seven-day repo was the largest such operation this month. Even if Chinese officials succeed in stabilizing the market, the damage to sentiment and confidence among foreign investors will take some time to heal.

First, outside of some general narrative, it is not clear Beijing’s end game. Second, what appears to be capriciousness and clumsiness did not just begin in recent days but is part of a sequence of events that goes back to the intended Ant IPO last year. Third, the opaqueness and activist state approach does not attract foreign investment. Fourth, these recent events show why integrating China into the world’s capital markets is a gradual process that is not simply moving in one direction. The main challenge is not technology, which means that a digital yuan may not be the game-changer that some have suggested.

After buying a record among Japanese bonds in the week through July 16 (JPY2.57 trillion), foreign investors pared their holdings last week by JPY223 bln. The most interesting development last week with Japanese portfolio flows was the continued divestment of foreign bonds. Japanese investors sold JPY1.09 trillion of foreign bonds. It was the fourth liquidation in the past five weeks. Indeed, the average weekly sales over this run have been JPY544 bln, the most in a five-week period since March as the fiscal year was drawing to a close.

The dollar is hovering near this week’s lows against the yen set on Tuesday near JPY109.60. There is little support below there until last week’s low closer to JPY109. There is an option for about $380 mln at JPY109.30 that expires today. On the upside, the greenback has not been able to poke above JPY110.00 today. The Australian dollar is bid, and it is straddling the $0.7400 are near midday in Europe. It has not closed above $0.7400 since July 15.

It appears to be absorbing offers that may be related to the A$1.1 bln in options expiring today between $0.7385 and $0.7400. The $0.7425 area holds the 20-day moving average, and the Aussie has not closed above it since mid-June. The dollar had broken out of the recent range against the Chinese yuan and reached its best level in three months on Tuesday (~CNY6.5125). It has since surrendered the gains and move back to the lower end of the previous trading range (~CNY6.45). It is on track for its biggest two-day drop against the yuan in six months. The dollar’s reference rate was set at CNY6.4942, nearly spot-on the median projection (CNY6.4944) in the Bloomberg survey.

Europe

Germany reported a larger than expected decline in unemployment and what appears to be an upside surprise on inflation. The unemployment queues fell by an impressive 91k in July after a 39k decline in June. It was the largest drop since late 2006. The median forecast called for a 29k decline. The unemployment rate fell to 5.7% from 5.9%. It was at 5% before the pandemic struck.

The German states have reported their CPI figures, and the national figures will be out shortly. The states reported a monthly rise of 0.8%-1.0%, which poses an upside risk to the median forecast expected a 0.6% rise in the national calculation, which would lift the year-over-year rate to 3.2% from 2.3%. The EU harmonized measure was expected to rise by 0.4% for a 2.9% year-over-year pace (up from 2.1% in June).

Spain, the other large EMU country reporting unemployment and inflation figures today. The Q2 unemployment rate eased even if not as much as expected, falling to 15.26% from nearly 16% in Q1. The EU harmonized inflation measure fell 1.2% on the month, which due to the base effect saw the year-over-year rate rose to 2.9% from 2.5%.

Tomorrow is a big day of releases for the eurozone. It reports the June unemployment rate (seen steady at 7.9%, though the risk is on the downside), CPI (seen at 2% but the risk is on the upside), and the first estimate for Q2 GDP ( a 1.5% quarterly gain, which would be the first expansion in three quarters and only the second quarterly expansion since Q3 19 (it was stagnant in Q4 19).

The euro is extending its rally for the fourth consecutive session. It has forged a base around the $1.1750-$1.1760 area and tested it at the start of the week. Today it is pushing against $1.1880, a three-week high. It closed above the 20-day moving average yesterday for the first time since June 7, and the five-day moving average is crossing above the 20-day moving average for the first time since then as well. It has not traded above $1.19 this month, and there is an 800 mln euro option struck there that expires today. Sterling is also advancing for the fourth consecutive session.

It settled last week slightly below $1.3750 and reached $1.3970 today, its highest level since June 23. Recall that sterling peaking on June 1 is near $1.4250. It is moving above the (50%) retracement level (~$1.3910) today, and the next retracement (61.8%) is just shy of $1.40.

America

There are two main takeaways from yesterday’s FOMC statement and press conference. First, the Fed is still on track to make a formal tapering announcement in a couple of months. The actual tapering could begin before year-end, depending on the economy. Powell seemed relatively calm about the prospects that the new Delta variant will cause a major economic disruption. The Jackson Hole-September FOMC meeting timeframe still seems reasonable, especially if the upcoming employment data is as strong as anticipated, and there are several forecasts for non-farm payrolls to rise by a million when announced at the end of next week. Second, the Fed continues to argue that elevated price pressure is temporary.

Powell has argued that a relatively small basket of goods in the CPI basket accounts for the prices. We have noted that only about a third of the components are rising faster than 2%. Powell pointed to cars (new, used, and rental), airfare, and hospitality as significant contributors. The Fed Chair continued to push back against linking house price increases to its MBS purchases and seemed to suggest early tapering off those purchases did not have wide support. The minutes will shed light on this debate.

More than a month after President Biden said a deal was struck, the Senate appears to be on the verge of approving a bipartisan physical infrastructure bill. It will be around $550 bln in new spending, and almost another $500 bln is anticipated in federal money for highways that are part of the regular cycle. It will be partly paid for by reallocated unspent covid relief funds and tapping the Strategic Oil Reserves and a few other more gimmicky measures like counting revenue for future growth and boosting the reporting for crypto trades to capture more tax revenues.

The US reports its preliminary estimate for Q2 GDP. The median forecast in Bloomberg’s survey calls for an 8.5% annualized pace after 6.4% in Q1. Personal consumption is expected to have risen by double digits for the second consecutive quarter. The GDP deflator is projected to rise to 5.4% from 4.3%. We suspect the US economic growth is peaking, and the slowing will be gradual, but by H2 22, the sub-3% pace will return. Separately, the US reported weekly jobless claims. They unexpectedly rose by 50k in the previous week, which was the second increase in three weeks and the first back above the 400k-mark since mid-June. Unperturbed, economists in the Bloomberg survey are looking for 385k claims last week.

The US dollar is breaking down against the Canadian dollar. It is convincingly falling through the 20-day moving average (~CAD1.2525) for the first time since mid-June. The greenback is trading near two and a half week lows against the Canadian dollar to test CAD1.2450. Recall it peaked near CAD1.28 on July 19. The next target is near CAD1.24, the halfway mark of the US dollar’s recovery from the five-year low set on June 1 near CAD1.20.

The Mexican peso shrugged off Moody’s downgrade of Pemex deeper below investment grade (Ba3 and retained a negative outlook). Of the main rating agencies, only S&P sees Pemex as an investment-grade risk. The dollar has approached MXN19.85 to take out last week’s low. The next area of support is seen near MXN19.80. It should be capped in front of MXN19.97.

This article was written by Marc Chandler, MarctoMarket.

EUR/USD Daily Forecast – Test Of Resistance At 1.1860

U.S. Dollar Is Losing Ground Against Euro

EUR/USD is currently trying to settle above the resistance at 1.1860 while the U.S. dollar is moving lower against a broad basket of currencies.

The U.S. Dollar Index is testing the nearest support level which is located at 92.15. A move below this level will push the U.S. Dollar Index towards the support at 92 which will be bullish for EUR/USD.

Today, foreign exchange market traders will have a chance to take a look at the final reading of Euro Area Consumer Confidence report. Analysts expect that Euro Area Consumer Confidence decreased from -3.3 in June to -4.4 in July.

Euro Area Industrial Sentiment is projected to improve from 12.7 in June to 13 in July while Euro Area Services Sentiment is expected to grow from 17.9 to 19.9.

In the U.S., traders will focus on the second-quarter GDP Growth Rate report which is expected to show that GDP grew by 8.5% quarter-over-quarter. Initial Jobless Claims are projected to decline from 419,000 to 380,000 while Continuing Jobless Claims are expected to decrease from 3.24 million to 3.2 million.

U.S. will also provide Pending Home Sales report which is expected to show that Pending Home Sales grew by 0.3% month-over-month in June.

It remains to be seen whether EUR/USD will be sensitive to economic reports today or traders will stay focused on yesterday’s commentary from the Fed.

Technical Analysis

eur usd july 29 2021

EUR/USD managed to settle above the resistance at the 20 EMA at 1.1830 and is testing the next resistance level at 1.1860. If this test is successful, it will move towards the next resistance at 1.1880.

A move above 1.1880 will push EUR/USD towards the resistance at the 50 EMA at 1.1900. In case EUR/USD gets above this level, it will move towards the next resistance level at 1.1925.

On the support side, the previous resistance at the 20 EMA at 1.1830 will serve as the first support level for EUR/USD. A move below this level will push EUR/USD towards the support at 1.1800.

If EUR/USD declines below 1.1800, it will head towards the next support at 1.1775. A successful test of this level will open the way to the test of the next support at 1.1750.

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

Powell Presses Pause on Dollar’s Rally; Sterling Surging

By Tom Westbrook

About a month of dollar gains had already lost momentum leading in to Wednesday’s Federal Reserve meeting and Chairman Jerome Powell’s remark that rate increases were “a ways away” was enough to tip it a touch lower still.

The euro edged to a two-week high of $1.1860 and the Australian and New Zealand dollars clung to gains made in a bounce on Wednesday. Sterling, which has been surging on optimism over the re-opening of the British economy, touched a one-month high of $1.3940.

The dollar index was softer for a fourth straight session, last trading at a two-week low of 92.110, while the Chinese yuan edged up to stand as high as 6.4691 per dollar in onshore trade and has now regained ground lost in tandem with a regulatory-driven plunge in Chinese equities on Tuesday. [CNY/]

“In the short-term, there’s been a reduction of taper fears, and that’s why we’ve seen the dollar heading lower,” said Jeffrey Halley, senior analyst at brokerage OANDA in Jakarta.

“Improving risk sentiment should be associated with a weaker dollar,” added National Australia Bank’s head of FX strategy Ray Attrill.

A Bloomberg report on a call China’s securities regulator held with banks and brokers to soothe nerves following heavy equities selling also helped sentiment and riskier currencies.

A CNBC report saying China Securities Regulatory Commission told brokerages on the call that China would continue to allow companies to list in the United States offered further support, as did solid rises in Chinese stock indexes on Thursday.

The Australian dollar was last up about 0.1% at $0.7379, capped by concerns over a lengthening lockdown in Sydney that is likely to drag on the national economy.

The New Zealand dollar rose 0.2% to $0.6971.

SURGING STERLING

Recent resilience in safe-haven currencies such as the Japanese yen and Swiss franc suggests plenty of caution remains in currency markets as global coronavirus cases rise, yet at the same time sterling’s gains reflect optimism that the British economy can be re-opened as vaccinations progress.

The British currency is the biggest G10 gainer on the dollar this week. It climbed some 2.6% from a five-month low it touched last week to the one-month top it hit on Thursday.

The pound notched up its highest levels in almost four months on the euro on Wednesday. It has also made strong gains on the yen and especially on the Australian dollar, against which it is up 3.6% from low touched in early July.

Though experts and Prime Minister Boris Johnson have cautioned it is too early to draw conclusions, England’s re-opening last week has yet to spark a surge in cases or in hospitalisations.

“At the moment, the UK’s (COVID) position is pretty good and I do think that’s had an impact,” said NAB’s Attrill.

Later on Thursday, traders will be looking at German labour and inflation data, European sentiment surveys and second-quarter U.S. GDP – where the consensus is for 8.5% annualised growth, albeit from a wide range of forecasts.

(Reporting by Tom Westbrook; Editing by Edwina Gibbs)

Economic Data from the Eurozone and the U.S Put the EUR and the Dollar in the Spotlight

Earlier in the Day:

It was another relatively quiet start to the day on the economic calendar this morning. The Kiwi Dollar was in action in the early part of the day.

For the Kiwi Dollar

Business confidence was in focus this morning.

In July, the ANZ Business Confidence Index fell from -0.6 to -3.8%. Economists had forecast an increased to 1.2%.

According to the latest ANZ Report,

  • While business confidence was down, firms’ own activity rose by 5 points to +32%.
  • Investment intentions increased by 7 points to 25.5%, while employment intentions eased by 1 point.
  • Cost expectations rose by 5 points to a net 86.2%. A net 62.8% of respondents intend to raise their prices, up 6 points. General inflation expectations rose by 19 bps to 2.41%.
  • Profit expectations increased by 2 points to 5.8%, however.
  • Export intentions rose by a modest 1 point to 13.4%.

The Kiwi Dollar moved from $0.69584 to $0.69545 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.07% to $0.6954.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.16% to ¥109.730 against the U.S Dollar, while the Aussie Dollar was down by 0.15% to $0.7365.

The Day Ahead

For the EUR

It’s a relatively busy day ahead on the economic data front, with the German economy back in the spotlight.

Unemployment and inflation figures will be in focus later today.  Expect plenty of interest in the numbers, with market sensitivity to inflation lingering despite the ECB’s latest shift in its price objective.

At the time of writing, the EUR was up by 0.03% to $1.1848.

For the Pound

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

At the time of writing, the Pound was up by 0.06% to $1.3911.

Across the Pond

It’s a busy day ahead on the economic calendar.

1st estimate GDP numbers for the 2nd quarter and weekly jobless claims figures will be in focus later today.

We can expect plenty of interest in today’s numbers. Expect any sharp increase in jobless claims to overshadow positive GDP numbers, however.

At the time of writing, the U.S Dollar Spot Index was down by 0.09% to 92.235.

For the Loonie

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

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

At the time of writing, the Loonie was up by 0.05% to C$1.2522 against the U.S Dollar.

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

EUR/USD Price Forecast – Euro Pulls Back on Wednesday Waiting for the Fed

Later in the day, the Federal Reserve will be releasing a statement and therefore a lot of traders will be trying to position ahead of it. As things stand right now, it looks as if the Euro is trying to figure out what it wants to do longer term, and my suggestion is that we will probably eventually go looking towards the 1.16 level underneath. It is also worth noting that we are starting to get the “death cross”, as the 50 day EMA is crossing below the 200 day EMA.

EUR/USD Video 29.07.21

Obviously, traders are going to be parsing very closely whether or not the Federal Reserve is going to be tapering or not. At this point, we should also be getting a lot of noise due to that announcement, and keep in mind that the Euro is considered to be the “anti-dollar”, so therefore this might be one of the noisier pairs late in the day. Nonetheless, I think that the 1.1850 level should offer resistance, and of course that 200 day EMA above there. In other words, I think unless there is some type of major regime change, I anticipate that any rally at this point in time will probably continue to be sold into.

If we break down below the lows, then it is likely that we go looking towards 1.16 level rather quickly, as it does make quite a bit of sense that we would see further follow-through in what has already been a relatively long-term trend. Regardless, I do not have any interest in buying this pair anytime soon.

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

German Consumer Sentiment Stagnates, Weighing on the EUR

Following German business sentiment figures on Monday, German consumer confidence was in focus this morning.

Consumer Sentiment

For August, the GfK Consumer Confidence Index held steady at -0.30. Economists had forecast a decline to -2.0.

According to the GfK survey,

  • Following a 10-year high, economic expectations moderated in July, falling by 3.8 points to 54.6.
  • Income expectations slipped by 5.1 points to 29 points, which was still up 10 points year-on-year.
  • By contrast, the propensity to buy was on the rise, increasing by 1.4 points to 14.8. In spite of the rise, consumption propensity was still down by almost 28 points year-on-year.

Market Impact

Ahead of today’s consumer sentiment figures, the EUR had risen from a pre-stat low $1.18125 to a pre-stat high $1.18276.

In response to today’s stats, the EUR rose to a post-stat and current day high $1.18306 before falling to a post-stat and current day low $1.17919.

At the time of writing, the EUR was down by 0.20% to $1.17923.

EURUSD 280721 Hourly Chart

Next Up

U.S trade data ahead of the all-important FED monetary policy decision and press conference…

EUR/USD Mid-Session Technical Analysis for July 28, 2021

The Euro is trading lower on Wednesday against the U.S. Dollar, but the early inside move suggests investor indecision and impending volatility with investors refraining from placing major bets ahead of the outcome of a U.S. Federal Reserve meeting.

The Fed is due to release its monetary policy statement at 18:00 GMT, followed shortly by a press conference by Federal Reserve Chairman Jerome Powell. Investors are hoping the Federal Open Market Committee (FOMC) provides clues as to the timing of tapering its current bond stimulus purchases amid surging U.S. inflation.

At 12:22 GMT, the EUR/USD is trading 1.1804, down 0.0011 or -0.09%.

Ahead of the Fed, the market is split over whether the Fed will make any major policy shifts at this meeting. Some believe policymakers may be willing to wait until after the next U.S. Non-Farm Payrolls report (August 6) and the July CPI report due to be released on August 11. If this is the case, then look for the Fed to make the announcement at the central bankers’ summit at Jackson Hole, Wyoming in mid-August.

The ECB last Thursday struck a dovish tone with investors, driving the Euro lower before profit-taking and position-squaring helped put in a short-term bottom. Some traders feel that a hawkish Fed could trigger a resumption of the selling pressure on the single-currency.

Daily EURUSD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum has shifted to the upside. A trade through 1.1881 will change the main trend to up, while a move through 1.1752 will signal a resumption of the downtrend.

The minor trend is up. This is controlling the momentum. A trade through 1.1755 will change the minor trend to down. Taking out 1.1841 will indicate the buying is getting stronger with the minor top at 1.1851 the next likely target.

The minor range is 1.1752 to 1.1841. Its 50% level or pivot at 1.1797 is currently being tested.

The short-term range is 1.1881 to 1.1752. Its 50% level at 1.1817 helped stop today’s early rally.

The main range is 1.1975 to 1.1752. Its retracement zone at 1.1864 to 1.1890 is the primary upside target and last potential resistance area before the main trend changes to up.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Wednesday is likely to be determined by trader reaction to 1.1797.

Bearish Scenario

A sustained move under 1.1797 will indicate the presence of sellers. If this move generates enough downside momentum then look for a drive into the minor bottom at 1.1755, followed by the main bottom at 1.1752. If the latter fails as support then look for the selling to possibly extend into thee March 31 main bottom at 1.1704.

Bullish Scenario

A sustained move over 1.1797 will signal the presence of buyers. At this point a labored rally could develop with the first two upside targets 1.1817 and 1.1841. Taking out the later should trigger a further rally into 1.1851 and 1.1864. Sellers are likely to come in again at this point, defending the main top at 1.1881.

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

Fed Day

The China-inspired losses saw the MSCI Asia Pacific Index fall to new lows for the year today, though Hong Kong’s Hang Seng posted a 1.3% gain. Europe’s Dow Jones Stoxx 600 is posting the first gain of the week, led by information technology, real estate, and consumer discretionary. Despite strong bank earnings, financials are matching the market, not outperforming it. US futures are oscillating around little changed levels.

The US 10-year benchmark yield is firm at 1.25%, while European yields are mostly slightly softer but sufficient to take German, French, Dutch, and Greek yields to new 3-4 month lows. The Antipodean currencies and yen are the heaviest against the US dollar, with the Canadian dollar the only major currency gaining on the greenback through the European morning. Emerging market currencies are mixed, leaving the JP Morgan EM FX index little changed.

The Chinese yuan gained for the first time in five sessions. API estimated a 4.7 mln barrel drop in US oil stocks and a large (6.2 mln barrel) drawdown in gasoline inventories, which, if confirmed, would be the largest since March. September WTI is around 1% higher today. Gold continues to move broadly sideways and is straddling the $1800-level today.

Iron ore and steel rebar futures fell in Shanghai, while copper is recovering from yesterday’s decline, which snapped a five-day advance. September lumber dropped 6.7% yesterday to bring this week’s decline to about 8.3% after jumping 18% last week on Canada’s wildfires. The CRB Index fell 0.6% yesterday to end is five-day, 6.8% advance.

Asia Pacific

Investors are continuing to try to make sense of Beijing’s aggressive moves that appear to be a broad offensive that can only result in a slowing if not reversing of past efforts to integrate into global capital markets. The ultimate goal is not clear. Beijing had appeared to be willing to use the capital inflows to ease restrictions on capital outflows. Some even speculated that this would gradually allow the yuan to be convertible.

Although we disagreed, many observers see that introducing the digital yuan as early as next year’s Olympics would challenge the US dollar’s role. The recent actions appear to deal a blow to such speculation. Lastly, there is some thought that the PBOC could ease policy again (following the recent cut in reserve requirements) to lend support to the stock market, if needed.

Australia’s Q2 CPI came in slightly above forecasts with a 0.8% rise after 0.6% in Q1. The year-over-year pace jumped to 3.8% from 1.1%. The underlying measures were as expected, with a 1.6% year rise (from 1.1%) for the trimmed mean and a 1.7% (from 1.3%) weighted median. Still, the data is unlikely to stand in the way of the RBA announcing increased bond purchases at next week’s meeting (August 3). The lockdown in Sydney and social restrictions elsewhere are threatening the economy.

Keep an eye on Japanese weekly portfolio flows that are released first thing tomorrow in Tokyo. In the previous week, ending July 9, foreigners appear to have bought a recorded amount of Japanese bonds (JPY2.57 trillion or ~$23.3 bln). To put the figure in perspective, the previous four-week average was around JPY546 bln. For their part, Japanese investors have sold foreign bonds for the past three weeks, and the average weekly sale of JPY804 bln is the most since early March. On the other hand, equity portfolio flows have been minor.

The dollar is consolidating in about a quarter of a yen below JPY110.00 so far today. The greenback has been recovering since dipping briefly below JPY109.60 near midday in NY yesterday. A move above JPY110.00 could see JPY110.20, but the subdued session will likely continue until the FOMC statement. The Australian dollar is stagnant. It remains within the range set on Monday (`$0.7330-$0.7390). There is an option for A$710 mln at $0.7390 that expires today and another for about A$515 mln at $0.7400 that expires tomorrow.

The dollar spiked to CNY6.5125 yesterday, its highest level in three months, and broke out of the CNY6.45-CNY6.50 month-old range. However, it was pushed back into the range today as the yuan rose for the first time in five sessions. The PBOC set the dollar’s reference rate at CNY6.4929, slightly lower than the median expectation picked up in Bloomberg’s forecast (CNY6.4935).

Europe

The UK and the EU are still at odds over the Northern Ireland Protocol. However, the EC moved to de-escalate the situation. Rather than push forward with its threat of imminent legal action as the end of the month should mark a new phase of enforcement, it appears to have granted a grace period of the summer to find an amicable solution.

Germany’s August GfK consumer confidence survey was unexpectedly weak. Rather than rising to 1.0 as economists projected, it remained at -0.3. The disastrous floods seem to be the main culprit. Tomorrow, Germany reports July CPI figures and employment data. The EU harmonized measure of CPI is expected to rise to 2.9% from 2.1% in June. Unemployment may have ticked down to 5.8% from 5.9%. It was at 5.0% steadily in H2 19.

The week’s highlight for the eurozone comes on Friday with the aggregate CPI (there seems to be upside risks to the 2.0% median forecast in Bloomberg’s survey) and the first look at Q2 GDP.

In the UK, Nationwide reported its house price index fell 0.5% in July. It is the first decline since March and the largest fall since last June. The year-over-year rate moderated to 10.5% from 13.4% in June. A tax break is winding down. On July 1, the stamp-duty threshold on new purchases was halved to GBP250k, adding GBP12.5k to the average home bought in London. Starting October 1, the threshold will return to GBP125k.

The euro is trading quietly in the upper end of yesterday’s range that saw it reach $1.1840, its highest level since mid-July. It has held above $1.18 so far today, and if sustained, will be the first session since July 12 that it has not traded with a $1.17-handle. There is a billion-euro option at $1.18 that expires today and another at $1.1820, and a third at $1.1850.

Tomorrow, there is a 1.36 bln euro option struck at $1.1850 that will also expire. It suggests that the area will likely be sticky. Sterling is firm but holding below $1.39 that it approached yesterday. An option for almost GBP400 mln is struck at $1.3925 that expires today. Tomorrow there is an option for almost GBP410 mln at $1.3900 that also will be cut. Initial support is seen near $1.3860 and then $1.3820.

America

Following Monday’s unexpected decline in June’s new home sales (-6.6%) and a downward revision to the May series (-7.8% rather than -5.9%), the US reported weaker than expected June durable goods orders, mitigated in part by the upward revisions to the May data. Separately, house price increases accelerated in May.

Today’s reports of the advance goods trade balance and retail and wholesale inventories will give economists the last opportunity to adjust the Q2 GDP forecasts ahead of tomorrow’s report. The median forecast in Bloomberg’s survey sees 8.5% annualized growth in Q2 after a 6.4% pace in Q1. The price deflator is expected to accelerate to 5.4% from 4.3%.

The outcome of the FOMC meeting is center stage today. No change in policy is expected, though some members seem to want to adjust the asset purchases immediately with special attention to the mortgage-backed securities. This seems unlikely. However, Powell is unlikely to push against expectations that an announcement could be made at the next FOMC meeting in September.

By pledging to give the market a clear advance warning, it would seem to need to say something relatively soon to keep its options open for an adjustment in the pace and possibly the composition of its purchase by the end of the year. Powell could deter dissents by striking a compromise by replacing the agency bonds purchases with more Treasuries, but this too seems unlikely. The FOMC statement is unlikely to deviate much from the last one, and the Fed is unlikely to see the rising Delta covid cases as substantially impacting its economic outlook.

Canada reports June CPI figures. The year-over-year rate is expected to ease (3.2% from 3.6%) for the first time this year. Canada has three core measures, two of which may have also softened (median and trim iterations). At the end of the week, Canada will report May’s monthly GDP. It is expected to have matched April’s 0.3% contraction, but the data seems dated.

Mexico’s June trade surplus was much smaller than expected ($762 mln vs. median Bloomberg survey forecast for $2 bln). Partly, it appears that domestic demand is improving, and this will likely be seen in the Q2 GDP report due at the end of the week. The median forecast anticipated a 1.8% expansion in the quarter after a 0.8% pace in Q1.

The US dollar is encountering selling pressure near CAD1.26 for the fifth consecutive session. Key support is seen near CAD1.2525, though there is an option for almost $390 mln at CAD1.2550 that expires today. Momentum indicators like the MACD and Slow Stochastic are trending lower, and the greenback’s recovery from the multi-year low set on June 1 near CAD1.20 looks over or nearly so.

The US dollar is trading near seven-day lows against the Mexican peso (~MXN19.9330). Chart support is seen in the MXN19.80-MXN19.82 band. Nearby resistance is pegged near MXN20.03.

This article was written by Marc Chandler, MarctoMarket.