Forex

The safe-haven US dollar is trading against the euro this morning at a level close to its highest level in 16 months, amid growing concern over the impact of the surge in Covid-19 infections in Europe With Austria reimposing full lockdown and Germany planning to do the same, Europe has once again become the epicenter of the pandemic, accounting for half of the world’s cases and deaths.

The greenback was near its highest level since early October against the riskier Australian and Canadian dollars, with commodity-linked currencies also under pressure from the crash in crude oil.

The dollar received additional support thanks to positive comments from Federal Reserve officials Richard Clarida and Christopher Waller, who on Friday suggested that a faster pace of stimulus reduction might be appropriate amid a recovery context. fast and high inflation.

An earlier end to the cutbacks in stimulus raises the possibility of an earlier rise in interest rates. Currently, the market is predicting that the Federal Open Market Committee (FOMC) will start raising rates by the middle of next year.

The Australian dollar remains penalized in the short term due to the slowdown in the Chinese economy and the dovish attitude of the Reserve Bank of Australia which weighs on the currency.

This week we will have to follow the decision of the National Bank of New Zealand with operators expecting a rate hike of 50 basis points.

EURO TESTS A SUPPORT RIGHT OF 127.95

The euro against the yen touched support at 127.94 which resulted in profit taking and a rebound. However, the trend remains bearish below the descending 13 and 34 period moving averages. A new test of the support line is therefore possible. Below this level, prices could continue towards the support and psychological level of 125.00.

To ward off this selling pressure, the price rally must exceed the 130.00 high point level of Friday’s long negative candlestick

Evolution of the euro against the yen in daily data:

The Dollar resumes its ascent with + 0.25% towards 1.1775 / E although the easing of rates is quite comparable on T-Bonds with -3Pts (1.25%) and Bunds (-3Pts to -0.423% ).
The Dollar crumbles by -0.1% against the Yen (whose yield is fixed once and for all at 0.00%) and gains 0.3% against the Swiss Franc at 0.9200%.

The euro experienced some contrasting movements around 2.30pm / 2.45pm before returning to its initial levels, pre-publication of the ECB press release.

The Governing Council revised its forward guidance on interest rates, to ‘underline its commitment to maintain an always accommodating monetary policy in order to reach its inflation target’.

The board expects’ key interest rates to remain at their current levels or at lower levels until inflation reaches 2% well before the end of its projection horizon and sustainably for the rest. of the projection horizon ‘.

He believes that progress in core inflation is sufficiently advanced to be compatible with a stabilization of inflation at 2% in the medium term. This may imply a transitional period of inflation moderately above target.
It is far too early to consider a slowdown in PEPP buybacks, this has not even been discussed.
The ECB anticipates a return to the pre-crisis growth rate in Q1 2022 and is betting on inflation below 2% in 2022.

So far, nothing very much in line with expectations … but there would not have been unanimity on the subject of ‘forward guidance’.

Side US figures, the Dollar is not affected by the increase of +51,000 registrations for unemployment benefits, to 419,000, the consensus was expecting stability.

Finally, the number of people receiving regular benefits stands at 3,236,000, a decrease of 29,000 from the revised level for the week of July 5, which is the lowest level since March 2020.
Resales of existing homes rose 1.4% in the United States in June, according to the National Federation of Realtors (NAR). At 5.86 million units at an annualized rate, they nevertheless came out slightly below expectations.

The NAR specifies that the inventory of unsold homes increased by 3.3% to 1.25 million, or 2.6 months of inventory (-18.3% over 1 year), and that the median price of old homes sold has increased by 23.4% year-on-year, the second largest increase since January 1999.

The Conference Board’s leading indicators are up 0.7% instead of the 0.8% targeted by the consensus (it is therefore quite close).

Forex saw several currency pairs post a bullish start to the week yesterday, and EUR USD was one of those that benefited the most from the positive sentiment in the currency market. As the week started around 1.1760 for the Euro Dollar on Sunday evening, the pair climbed to a high of 1.1817 yesterday afternoon, and is holding above the psychological level of 1.18 for now on Tuesday.

Against this backdrop, traders are wondering if the movement will continue today, or whether we should expect a correction in the EUR USD on the forex. Let’s study the fundamental and technical factors to try to answer this question.

Two key statistics in today’s Forex calendar

From a fundamental analysis point of view, it should be noted that today’s economic calendar does not include any important European statistics, but will instead feature two key US indicators.

Investors in the currency market will in fact wait for June’s US durable goods orders at 2:30 p.m. The consensus of economists foresees an increase of 0.8% for main orders, after + 0.3% previously.

At 4:00 p.m., the forex market will then turn its attention to the Conference Board’s Consumer Confidence Index. Economists expect the index to fall to 123.9 points for July, from 127.3 in June.

In addition, it will be recalled that the two-day Fed meeting starts today, with a press release scheduled for tomorrow at 8 p.m. and a press conference by Jerome Powell which will begin 30 minutes later.

Thus, some restraint could be observed on Forex on Tuesday, investors awaiting the Fed’s conclusions to take a more frank position on currencies.

What is the technical background on EUR / USD?

Although the chart profile of the Euro Dollar has improved markedly with yesterday’s rise, there are still some hurdles to overcome before we can bet on a lasting upside to the worst in forex.

The EUR / USD pair broke above a downtrend line, as well as above its 100 and 200 hour moving averages, thus confirming 3 bullish signals. short term.

However, we also note that the 1.1820 / 30 area has ended several rebounds for almost 2 weeks. Thus, the EUR USD pair has yet to cross this threshold to confirm the bullish outlook.

If it succeeds, the probability of a rise in directions of 1.22 will increase. This represents upside potential of around 400 pips from the current price. Note, however, that other potential short term resistances can be found at 1.1850, 1.1880 and 1.19.

Indeed, as seen on the daily chart above, the EUR / USD pair took support on the lower bound of a long-term triangle to display its current rebound. If the movement continues towards the upper bound, this will suggest a target towards 1.22.

Of course, before that, the threshold of 1.20 could also offer some resistance.

Finally, in the event of the Euro Dollar falling on the Forex this Tuesday, we will take into account an immediate support at 1.118, before a much greater support threshold towards 1.1750, a threshold below which 1.17 will then probably be targeted by traders.

The EUR / USD is heading towards the end of a four-day series of losses.
The US dollar index broke below 93.00 in the US session.
The risk-taking market environment makes it difficult for the USD to find demand.
After spending most of the day in a relatively tight range above 1.1750, the EUR / USD gained traction during the US hours of trading and was last traded at 1.1796, up 0.15% for the day.

DXY turns around – Wall Street in rally mode

In the absence of high-quality macro data releases and fundamental developments, the perception of risk continues to influence the market valuation of the USD. At the start of the day, the US Dollar Index (DXY) reached 93.19, its highest level since the beginning of April and did not allow the EUR / USD to recover.

While the most important indices on Wall Street continued Tuesday’s impressive upturn and opened in positive territory on Wednesday, the greenback lost strength. The renewed USD weakness is reflected in the DXY, which fell 0.1% over the course of the day to 92.86.

On Thursday the European Central Bank (ECB) will announce its interest rate decision and publish the monetary policy decision.

Ahead of this event, “the recent announcement by the ECB – that purchases under the Pandemic Emergency Purchase Program (PEPP) will continue at a much faster pace in the coming quarter than in the first few months of this year – reinforces our view that the ECB will remain very accommodative for much longer, “said Lee Sue Ann, economist at UOB Group.