‘Follow the Money’: Major Players Betting on Vaccinations to Keep Global Economy Afloat

The coronavirus is in the news again, not last year’s pandemic fueling COVID-19 version, but the fast-spreading Delta variant. While dominating the mainstream news in the United States (See CNN and FoxNews), and globally on business website such as CNBC, Reuters and Bloomberg, to name a few, we’re not really seeing a major impact on the financial markets.

This is interesting to note because the mainstream story is centered on rising infection numbers, the slow pace of vaccinations and what is likely to happen if countries don’t start clamping down on the spread of the virus. In other words, people’s health. Some experts are even calling it a “life or death” situation.

In the financial markets, obviously we’re not seeing the same reaction as we did in 2020 with stocks dropping 20% in a matter of weeks and crude oil testing prices below $20 a barrel. Instead we’re seeing a relative calm.

Is this telling us to “follow the money?” Is this telling us that since the situation is not as bad as last year, there is no need to panic? Are the financial markets indicating there is not enough information yet to understand the impact of this new outbreak? Do we wait for the bad economic numbers or do we anticipate them?

The answer is all of the above.

Of course, I don’t recommend putting your finances ahead of your health. I don’t think anyone is doing that. Traders are making their decisions on what they know at this time. Some are even basing their decisions on their belief in the vaccinations.

In this case, they feel that enough people are vaccinated so major economic shutdowns are warranted at this time. But we’ve seen different reactions all around the globe, which could be adding to the confusion over what to do. Lighten up on the long side? Buy more, start selling? Move to the sidelines?

I don’t think I am going to be able to answer any of these questions in this article, but if I had to center on one, I’d have to say “follow the money”. But I should add that I am vaccinated, so I may be biased.

Here’s What Others are Saying and Doing

Fed’s Powell Downplays Delta Variant’s Threat to the Economy

The spread of the COVID-19 delta variant is raising infections, leading some companies and governments to require vaccinations and raising concerns about the U.S. economic recovery, according to the AP.

But on Wednesday, Federal Reserve Chair Jerome Powell injected a note of reassurance, suggesting that the delta variant poses little threat to the economy, at least so far.

“What we’ve seen is with successive waves of COVID over the past year and some months now,” Powell said at a news conference, “there has tended to be less in the way of economic implications from each wave. We will see whether that is the case with the delta variety, but it’s certainly not an unreasonable expectation.”

“Dining out, traveling, some schools might not reopen,” he said. “We may see economic effects from some of that or it might weigh on the return to the labor market. We don’t have a strong sense of how that will work out, so we’ll be monitoring it carefully.”

More Corporations are Requiring Workers to Get Vaccinated ~ Axios

The federal government in May said that it is legal for companies to require employees to get vaccinated for coronavirus.

Google CEO Sundar Pichai sent an email to employees announcing that those going back to the office needed to be vaccinated. The company is also extending its work-from-home policy through October 18.

Facebook said that anyone going back to work in their U.S. campuses must be vaccinated.

Netflix is requiring that the casts for all of its U.S. productions be vaccinated, as well as everyone who comes in contact with them.

Drop in UK COVID-19 Cases Indicates Infections Surge May Be Past Peak ~ Reuters

Early last week, the UK added to the confusion when it reported its lowest daily total of new coronavirus cases since July 4, adding to signs that a recent surge in infections driven by the spread of the Delta variant may have passed its peak.

Sydney Readies for the Army as Lockdown Fails to Squash Australia Delta Outbreak ~ CNN

Sydney’s poorest neighborhoods on Friday braced for military enforcement of the city’s toughest and longest lockdown of the COVID-19 pandemic as the infection as the infection numbers held persistently high five weeks since restrictions began.

The situation appears to be so bleak in Australia that economists are already predicting a third quarter contraction.

Oil Climbs, Notches Fourth Monthly Gain on Growing Demand – Reuters

The crude oil market is interesting since it sold off sharply early in July when the Delta-variant story first broke. The biggest concern was demand destruction.

Since then, however, both WTI and Brent have recovered enough to post a fourth monthly gain, with demand growing faster than supply and vaccinations expected to alleviate the impact of a resurgence in COVID-19 infections across the world.

Conclusion

The best advice appears to be: bet on the vaccinations to work, keep monitoring the global economy especially output and labor and keep an eye on gasoline demand.

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

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.

USD/CAD Daily Forecast – Test Of Resistance At 1.2480

U.S. Dollar Moves Higher After Hawkish Comments From Fed’s Bullard

USD/CAD is currently trying to settle above the resistance at 1.2480 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index has recently managed to get back above the resistance at 92 and is testing the next resistance level which is located at 92.15. In case this test is successful, the U.S. Dollar Index will move towards the resistance level which is located near the 20 EMA at 90.30 which will be bullish for USD/CAD.

Today, U.S. reported that Personal Income increased by 0.1% month-over-month in June while Personal Spending grew by 1%. Both reports exceeded analyst expectations.

Foreign exchange market traders also had a chance to take a look at the final reading of U.S. Consumer Confidence report for July which showed that Consumer Confidence declined from 85.5 in une to 81.2 in July compared to analyst consensus of 80.8.

U.S. dollar received additional support after Fed’s Bullard stated that Fed should begin to reduce its asset purchase program this fall and finish the program at the beginning of 2022. It should be noted that the recent Fed’s commentary remained dovish, and it remains to be seen whether Bullard’s views are shared by the majority of Fed members.

Technical Analysis

usd cad july 30 2021

USD to CAD managed to settle above the resistance at 1.2450 and is testing the next resistance level at 1.2480. In case this test is successful, USD to CAD will move towards the resistance at 1.2500.

A move above the resistance at 1.2500 will open the way to the test of the resistance at the 20 EMA at 1.2520. If USD to CAD gets above this level, it will head towards the next resistance at 1.2550.

On the support side, the nearest support for USD to CAD is located at 1.2450. If USD to CAD gets back below this level, it will move towards the support at the 50 EMA at 1.2435.

A successful test of the support at the 50 EMA will push USD to CAD towards the support at 1.2420. If USD to CAD manages to settle below this level, it will head towards the next support at 1.2385.

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

USD/CAD: Loonie Dips After Early Gains But Set to End Week Strong

The Canadian dollar pared early gains against its U.S. counterpart on Friday as crude oil prices marched higher and the greenback recovered after U.S. consumer spending outpaced expectations in June.

Today, the dollar to loonie conversion rose to 1.2472, up from Thursday’s close of 1.2444. The Canadian dollar had lost about 3% in June – posting the biggest monthly drop since March 2020, the early days of the pandemic, and weakened about 0.5% so far this month. Although, the loonie is set to close this week with a gain

“The CAD has extended its rebound this week, even if gains came more as a reflection of a generally softer USD. Commodity prices strengthened broadly, driving the Bloomberg Commodity Index to a new cycle and six-year high Thursday while US-Canada 2Y spreads remain at a CAD-supportive –26bps. Our fair value models continue to reflect a significant USD overvaluation against the CAD (and a broadly overvalued USD against its major currency peers), although CAD-drivers have turned even more positive this week and our FV estimate has edged to a new cycle low below 1.17,” noted Shaun Osborne Chief FX Strategist at Scotiabank.

“It remains to be seen how far the USD will correct lower, however. We think the Fed has put the market on notice that taper timing is a live debate now among policymakers, which may provide the USD with general support in the coming weeks. Speculative FX traders have largely abandoned short USD positions in recent weeks and heightened equity market volatility—something of a “tradition” in August—will tend to work against the CAD and may lift USDCAD towards the upper reaches of our estimated range for next week (1.2508).”

The dollar index, a measurement of the dollar’s value relative to six foreign currencies, was trading 0.3% higher at 92.145 at the time of writing. Still, it hovers close to this month’s low of 91.782.

The dollar stalled its rally after the Fed in its Wednesday’s monetary policy decision highlighted that the interest rate hike is far away. The U.S. central bank also did not give any hint about reducing its purchases of government bonds.

“In the final week of the Olympics, we think the dollar will at least be able to stabilise after the recent correction. The prospect of the Fed’s tapering should be cemented by good payrolls, while global risk assets may still struggle to look past China’s regulatory clampdown. Elsewhere, the BoE and RBA should not deliver any new guidance,” noted analysts at ING.

However, the risk that the world’s dominant reserve currency, the USD, recovery over the coming year is high, largely driven by the Fed’s expectation of two rate hikes in 2023. A strengthening dollar and growing risk that the Federal Reserve would tighten its monetary policy earlier than expected would push the USD to CAD pair higher.

Canada is the world’s fourth-largest exporter of oil, which edged higher on tight supply and rising demand. High oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie. U.S. West Texas Intermediate (WTI) crude futures was trading around $73.51 a barrel.

Silver Price Daily Forecast – Test Of Resistance At $25.60

Silver Gains Ground Ahead Of The Weekend

Silver continues its attempts to settle above the 20 EMA at $25.60 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index is currently located in the range between the support at the 50 EMA at 91.90 and the resistance at the 92 level. If the U.S. Dollar Index manages to settle back above the 92 level, it will move towards the resistance at 92.15 which will be bearish for silver and gold price today. Stronger dollar is bearish for precious metals as it makes them more expensive for buyers who have other currencies.

Gold failed to settle above the resistance level at $1835 and pulled back towards $1825. The nearest significant support level for gold is located at the 50 EMA at $1815. If gold gets to the test of this level, silver will find itself under pressure.

Gold/silver ratio did not manage to settle back above 71.50 and is slowly moving towards the 71 level. In case gold/silver ratio manages to test the 71 level, silver will get more support.

Technical Analysis

silver july 30 2021

Silver is currently testing the resistance level at the 20 EMA at $25.60. If silver manages to get above the 20 EMA, it will gain additional upside momentum and head towards the next resistance level which is located at yesterday’s highs at $25.80.

A move above the resistance at $25.80 will push silver towards the next resistance at the 50 EMA at $26.10. If silver manages to settle above the 50 EMA at $26.10, it will head towards the resistance level which is located at $26.30.

On the support side, the nearest support level for silver is located at $25.50. If silver declines below this level, it will move towards the support at $25.30. A move below the support at $25.30 will open the way to the test of the support at $25.00. In case silver gets below $25.00, it will move towards the next support level at $24.70.

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

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.

GBP/USD Daily Forecast – U.S. Dollar Gains Ground After Yesterday’s Sell-Off

British Pound Is Moving Lower Against U.S. Dollar

GBP/USD is currently trying to settle back below the support at 1.3950 while the U.S. dollar is gaining some ground against a broad basket of currencies.

The U.S. Dollar Index failed to settle below the support level at the 50 EMA at 91.90 and is trying to get back above the 92 level. In case this attempt is successful, the U.S. Dollar Index will move towards the resistance at 92.15 which will be bearish for GBP/USD.

There are no important economic reports scheduled to be released in the UK today so foreign exchange market traders will focus on the economic data from U.S.

Analysts expect that Personal Income declined by 0.3% month-over-month in June after falling by 2% in May. Meanwhile, Personal Spending is projected to grow by 0.7%.

Traders will also have a chance to take a look at the final reading of Consumer Sentiment report for July which is projected to show that Consumer Sentiment declined from 85.5 in June to 80.8 in July.

Technical Analysis

gbp usd july 30 2021

GBP/USD is testing the nearest support level which is located at 1.3950. In case this test is successful, GBP/USD will move towards the next support at 1.3920.

In case GBP/USD gets below the support at 1.3920, it will head towards the next support at 1.3900. A successful test of this level will open the way to the test of the support which is located at the 50 EMA at 1.3880.

On the upside, GBP/USD needs to get back above 1.3950 to have a chance to develop upside momentum in the near term. The next resistance level for GBP/USD is located at the recent highs at 1.3980.

If GBP/USD manages to settle above the resistance at 1.3980, it will move towards the next resistance level at 1.4000.

A move above the resistance at 1.4000 will push GBP/USD towards the resistance at 1.4020. In case GBP/USD gets above this level, it will head towards the next resistance level at 1.4040.

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.

U.S. Dollar Index (DX) Futures Technical Analysis –

The U.S. Dollar fell to its lowest level since June 29 on Thursday, a day after the U.S. Federal Reserve said the job market still had “some ground to cover” before it would be time to ease monetary stimulus, knocking the wind out of a month-long rally by the greenback.

At 20:01 GMT, September U.S. Dollar Index futures are trading 91.875, down 0.442 or -0.48%.

The index, which is still up 1.6% since the Fed’s June 16 meeting, after a hawkish shift from the U.S. central bank, found little support from U.S. economic data on Thursday.

Gross Domestic Product data showed that while the U.S. economy grew solidly in the second quarter, boosted by massive government aid, growth fell short of economists’ expectations.

GDP increased at a 6.5% annualized rate last quarter, the Commerce Department said on Thursday, well below the 8.5% rate economists polled by Reuters had forecast.

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.

Daily September U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down earlier on Thursday when sellers took out a pair of main bottoms at 92.075 and 91.995. A trade through the closing price reversal top at 93.195 will change the main trend to up.

The first support is a pair of long-term retracement levels at 91.945 to 91.850.

If the selling pressure continues then look for another steep break into another pair of retracement levels into 91.490 to 91.370.

On the upside, the nearest resistance is a long-term Fibonacci level at 92.495.

The main range is 89.545 to 93.195. The primary target of this current sell-off is its retracement zone at 91.370 to 90.940.

Daily Swing Chart Technical Forecast

The direction of the September U.S. Dollar Index into the close on Thursday is likely to be determined by trader reaction to 91.950 and 91.850.

Bullish Scenario

A sustained move over 91.950 will indicate the presence of buyers. If this is able to generate enough upside momentum over the short-run, we could see a rebound rally into the Fibonacci level at 92.495.

Bearish Scenario

A sustained move under 91.850 will signal the presence of sellers. This could trigger another acceleration to the downside with the next major area a potential support cluster at 91.490, 91.505 and 91.370.

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

USD/CAD Daily Forecast – Test Of Support At 1.2450

Canadian Dollar Rallies As Commodity Markets Move Higher

USD/CAD is currently trying to settle below the support level at 1.2450 while the U.S. dollar is under significant pressure against a broad basket of currencies.

The U.S. Dollar Index has recently managed to get below the 92 level and is currently testing the support at the 50 EMA at 91.90. If this test is successful, the U.S. Dollar Index will move towards the next support level at 91.80 which will be bearish for USD/CAD.

Today, foreign exchange market traders had a chance to take a look at the latest job market data from U.S. Initial Jobless Claims declined from 424,000 (revised from 419,000) to 400,000 compared to analyst consensus of 380,000. Continuing Jobless Claims increased from 3.26 million (revised from 3.24 million) to 3.27 million compared to analyst consensus of 3.2 million.

Second-quarter GDP Growth Rate report showed that GDP grew by 6.5% quarter-over-quarter compared to analyst consensus of 8.5%. Pending Home Sales decreased by 1.9% month-over-month in June while analysts expected that they would grow by 0.3%.

All economic reports from U.S. missed analyst estimates which put additional pressure on the American currency. Meanwhile, Canadian dollar moved higher as commodity markets rebounded.

Technical Analysis

usd cad july 29 2021

USD to CAD managed to settle below the support at 1.2480 and is testing the next support level at $1.2450. If USD to CAD settles below this level, it will move  to another test of the next support level which is located at the 50 EMA at 1.2435.

A move below the 50 EMA at 1.2435 will push USD to CAD towards the support at 1.2420. If USD to CAD declines below 1.2420, it will move towards the support level at 1.2385. A successful test of this level will open the way to the test of the support at 1.2350.

On the upside, the previous support level at 1.2480 will serve as the first resistance level for USD to CAD. In case USD to CAD manages to get back above this level, it will move towards the resistance at 1.2500. A move above this level will push USD to CAD towards the resistance at 1.2520.

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

USD/CAD: U.S. Dollar Weakness Pushes Loonie to Two-Week High; Volatility To Last

The Canadian dollar rose against its U.S. counterpart on Thursday as the U.S. dollar tumbled to a month low after the Federal Reserve reiterated that the interest rate will remain zero for a long time.

Today, the dollar to loonie conversion fell to 1.2447, from 1.2527 on Wednesday. The Canadian dollar had lost about 3% in June – posting the biggest monthly drop since March 2020, the early days of the pandemic, and weakened about 0.6% so far this month.

“Canada’s headline inflation faced a slowdown (from 3.6% to 3.1% YoY) in June. That is probably a welcome development by the Bank of Canada as it supports the central bank’s view that inflation spikes will have a transitory nature. That said, it will hardly impact the BoC’s tapering plans, in our view. After all, the jobs market has proven to be very strong in the recovery and core inflation was broadly unchanged (and above target) from May to June,” noted Petr Krpata, Chief EMEA FX and IR Strategist at ING.

“We remain of the view that the BoC will end asset purchases by the end of 2021 and that the case for the first hike in 2022 is getting stronger. From an FX perspective, we think that the central bank’s hawkishness can help CAD outperform once market sentiment improves and investors find fresh interest in entering reflationary/carry trades.”

The dollar index, a measurement of the dollar’s value relative to six foreign currencies, hit this month’s low of 91.910 and was trading 0.42% lower at 91.934 at the time of writing.

Following the Fed’s monetary policy announcement on Wednesday, the dollar lost momentum after it noted that a rate hike in the near future is unlikely. No hints were given by the U.S. central bank about reducing its purchases of government bonds.

“In terms of the dollar, the currency was slightly softer following the meeting. This suggests currency watchers may have been expecting somewhat stronger guidance from the Fed on the ‘tapering’ issue,” noted analysts at AIB.

“As the European session gets underway this morning, the modestly softer dollar tone is reflected in EUR/USD trading up at the midpoint of $1.18-1.19, while GBP/USD has regained some ground in $1.39 territory. Elsewhere, EUR/GBP remains pinned down near to the 85p mark.”

Nevertheless, the USD is at high risk of recovering over the next year. This is partially due to expectations of two rate hikes in 2023 by the Fed. A stronger dollar and growing odds of the Fed tightening monetary policy sooner than expected would push the USD/CAD pair higher.

Oil prices in Canada have edged higher amid hopes of an inventory report that is expected to be bullish. Higher oil prices result in increased U.S. dollar earnings for Canadian exporters, which translate to a stronger loonie. U.S. West Texas Intermediate (WTI) crude futures traded higher by 0.67 cents, or 0.94%, to $73.06 a barrel.

Silver Price Daily Forecast – Silver Rallies As Dollar Dives After Fed’s Comments

Weak Dollar And Dovish Fed Provided Strong Support To Silver

Silver is currently trying to settle above the 20 EMA at $25.60 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index is currently trying to get to the test of the 50 EMA at 91.90. If the U.S. Dollar Index manages to settle below the 50 EMA, it will gain additional downside momentum which will be bullish for silver and gold price today. Weak dollar is bullish for precious metals as it makes them cheaper for buyers who have other currencies.

Gold also enjoys support from weak dollar. Gold has recently managed to get above the 50 EMA at $1810 and is moving towards July highs near $1835. A move above the resistance at $1835 will open the way to the test of the $1850 level which will be bullish for silver and other precious metals.

Gold/silver ratio gained significant downside momentum and is moving towards the 71 level. If gold/silver ratio declines below this level, it will continue its downside move and head towards the 20 EMA at 70.60 which will be bullish for silver.

Technical Analysis

silver july 29 2021

Silver has recently managed to get above the resistance at $25.50 and is testing the next resistance level which is located at the 20 EMA at $25.60. RSI remains in the moderate territory despite the strength of the current upside move, and there is plenty of room to gain additional upside momentum in case the right catalysts emerge.

If silver settles above the 20 EMA, it will get to the test of the next resistance level at $25.80. A move above this level will open the way to the test of the resistance at the 50 EMA at $26.10. In case silver gets above the 50 EMA, it will move towards the resistance at $26.30.

On the support side, a move below $25.50 will push silver towards the support at $25.30. If silver declines below this level, it will head towards the next support which is located at $25.00. A successful test of this level will open the way to the test of the support at $24.70.

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

U.S Dollar Bulls Devastated By Dovish Remarks From Federal Reserve Bank

During Thursday morning’s Asian session, safe-haven currency was down, continuing to hover around a two-week low. U.S. Federal Reserve Chairman Jerome Powell has insisted that there will be no rate hikes in the near future, weighing down the U.S. currency.

The Dollar Index is a measure of the greenback against a basket of other currencies and it was 0.17% lower at 92.15 index points when this report was drafted after recording its third straight plunge the previous sessions.

The precious metal gained over 0.8% yesterday and is currently trading around $1,818 per ounce after reaching its highest level since July 20, according to market reports.

Dollar bulls remain under pressure of around 92.25 index points during Thursday’s Asian session. In spite of the Fed’s refusal to discuss tapering, the greenback gauge has shown a three-day decline since Wednesday.

Recent news concerning the Senate’s decision on Joe Biden’s infrastructure spending bill has affected DXY Bulls in staying firm.

Despite the dollar’s gains for about a month, it lost some traction ahead of the Fed meeting on Wednesday. Chairman Powell’s comments about rate increases being “a ways off” exacerbated the declines.

It should be noted that following the FOMC announcement, the US Fed Funds Future indicates the market fully expects 25 basis points of tightening by March 2023. However, US dollar bulls should be reminded of their recent dovish reaction.

Moreover, the Fed’s head warned that the job market still had “some ground to cover” before the central bank began reducing its assets, though he did not specify an exact timeline.

The Fed chief also downplayed the threat of COVID-19, and its Delta variant, to the U.S. economic recovery from the continuous spread of COVID-19, and its variants worldwide.

Fed Nothingburger, Dollar Lower, Focus on GDP, PCE

It was a rather pedestrian FOMC Statement day on Wednesday. There is GDP data incoming, and the widely Fed-followed Core PCE Price Index data comes out on Friday. What can we take away from the FOMC Statement and press conference?

Rates unchanged. No rush to raise interest rates. Inflation should persist.

No surprises here.

However, there was some notable price action in the US Dollar Index during Wednesday’s session. The US Dollar Index initially rose on the FOMC statement at 2:00 PM. During the press conference, the USD fell as Fed Chair Jerome Powell mentioned that inflation should persist for several months. It is noteworthy price action and can be a forward-looking indicator for the direction of other asset prices.

First, let’s take a look at the daily chart of the $DXY:

Figure 1 – US Dollar Index November 1, 2020 – July 28, 2021, Daily Candles Source stockcharts.com

As we know, the US Dollar has been in a longer-term downtrend. The repeating pattern has been lower daily highs. Short the dollar was a heavily crowded trade recently that we examined and discussed. After reaching oversold conditions, a quick bounce occurred. However, with no rush to raise interest rates and Fed open market operations continuing, the $DXY could try the downside once again. This downward move could impact the prices of commodities even further to the upside. There is a key Fibonacci level that was not quite reached in the index on its last downside attempt (near $88.41).

Figure 2 – US Dollar Index July 28, 2021 – July 28, 2021, 1-minute Candles Source stooq.com

I find value in this type of analysis; when you can take a daily/longer-term trend/outlook and then take an intraday peek on a day such as a Fed day. I would have guessed that the market would be factoring in further inflation already. However, based on the $DXY behavior intraday, it appears that the US Dollar may want to get set to go and retest the recent low near $89.50.

GDP Data, Core PCE

On Thursday morning, we are getting GDP (q/q), and on Friday morning we will get the Core PCE data. GDP can be a market mover, and the Fed does like to monitor the PCE data for inflation signals.

As the US Dollar may weaken some, a place to park some cash could be in the UDN – Invesco DB US Index Bearish ETF. I wouldn’t expect any home runs here; the ETF is unleveraged, but a 2 – 3% pop could be in the cards here if the $DXY wants to test its recent lows.

Figure 3 – Invesco DB US Dollar Index Bearish Fund – September 4, 2020 – July 28, 2021, Daily Candles Source stockcharts.com

UDN is doing its job rather well and is inversely tracking the US Dollar Index at an efficient rate. Other traders could use the $DXY product on ICE if their accounts are enabled for it. ICE passes through the monthly fee for its products to retail traders (somewhere in the neighborhood of $110 per month) to trade these products and receive quotes.

So, using UDN can give traders some pure exposure to a dollar decline. We will be eyeballing the $21.48 – $21.64 levels as potential TP targets for now. Levels and sentiment can change quickly, so stay tuned!

Now, for our premium subscribers, let’s review the other markets that we are covering. Not a Premium subscriber yet? Go Premium and receive my Stock Trading Alerts that include the full analysis and key price levels.

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Thank you.

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

Rafael Zorabedian
Stock Trading Strategist

Sunshine Profits: Effective Investment through Diligence & Care

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This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Rafael Zorabedian, Sunshine Profits’ employees, affiliates, as well as members of their families may have a short or long position in any securities, futures contracts, options or other financial instruments including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Past performance is not indicative of future results. There is a risk of loss in trading.

 

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.

GBP/USD Daily Forecast – U.S. Dollar Declines As Fed Remains Dovish

British Pound Is Moving Higher Against U.S. Dollar

GBP/USD is moving towards the resistance level at 1.3950 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index is currently trying to settle below the support level at 92.15. In case this attempt is successful, the U.S. Dollar Index will get to the test of the next support at the 92 level which will be bullish for GBP/USD.

Yesterday, Fed Chair Jerome Powell reiterated his dovish message and stated that inflation pressures remained transitory. The Fed maintains its current asset purchase program, although some Fed members have started to discuss whether the Fed should reduce the purchases mortgage-backed securities before it reduces the purchases of Treasuries. The Fed will likely provide additional details about such discussions in Jackson Hole at the end of August.

The U.S. dollar lost ground against a broad basket of currencies after Fed’s comments as traders expected to see more clarity on the future reduction of asset purchase program. At this point, it looks that the Fed will not begin to reduce asset purchases before 2022, which is rather bearish for the American currency.

Technical Analysis

gbp usd july 29 2021

GBP/USD managed to get above the resistance at 1.3920 and continues its upside move. The next resistance level for GBP/USD is located at 1.3950. In case GBP/USD settles above this level, it will move towards the resistance at 1.3980.

A successful test of the resistance at 1.3980 will push GBP/USD towards the resistance at 1.4000. If GBP/USD manages to settle above this level, it will head towards the next resistance level at 1.4020.

On the support side, the previous resistance at 1.3920 will serve as the first support level for GBP/USD. In case GBP/USD declines below 1.3920, it will move towards the next support at 1.3900.

A move below 1.3900 will push GBP/USD towards the support which is located at the 50 EMA at 1.3880. A successful test of the support at the 50 EMA will push GBP/USD towards the support at 1.3865.

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)