03-Jul-2020

1) EUR/USD: Turning Bearish Again Amid Renewed Coronavirus Jitters
2) GBP/USD: Coronavirus jitters/Brexit uncertainties capped gains, for the time being
3) USD/JPY: Bull-Trap and Bearish Engulfing Weigh but Neutral Tone Dominates On Friday

1) EUR/USD: Turning Bearish Again Amid Renewed Coronavirus Jitters

The EUR/USD pair failed to capitalize on the overnight uptick to the 1.1300 mark and finally settled in the red, near the lower end of its daily trading range. Optimism over a potential COVID-19 vaccine remained support of the upbeat market mood and undermined the safe-haven US dollar through the first half of trading action on Thursday. This, in turn, was seen as one of the key factors behind the pair’s early positive move. The global risk sentiment was further supported by stellar US monthly jobs report for June.

The headline NFP showed that the US economy created 4.8 million jobs in June as compared to gains of 3 million expected. Moreover, the previous month’s reading was reived upward to 2.699 million as against 2.509 million reported earlier. Additional details revealed that the unemployment rate fell to 11.1% from 13.3% in May. The stronger-than-expected employment details provided further evidence that the worse of the coronavirus pandemic was probably over and revived hopes of a sharp V-shaped global economic recovery.

Surging coronavirus cases in the US discouraged investors from taking excessive risk. The US Centers for Disease Control and Prevention (CDC) reported 54,357 new COVID-19 cases on Thursday, with the death toll rising 725 to 128,024. Investors remain concerned that a continuous spread of the highly contagious disease might result into renewed lockdown measures and the rolling back the plans to reopen economic activity. The market worries stoked demand for the safe-haven USD and prompted some fresh selling around the major.

The pair retreated around 80 pips from daily tops and remained on the defensive through the Asian session on Friday, albeit has still managed to hold above the 1.1200 mark and remained well within a familiar trading range. Market participants now look forward to the final Eurozone Services PMI prints for a fresh impetus. Given that the US markets will remain closed in observance of Independence Day, thin liquidity conditions might hold investors from placing any directional bets and lead to a subdued trading action on the last day of the week.

From a technical perspective, the pair on Thursday failed near a three-week-old descending trend-line, which constitutes the formation of a symmetrical triangle on short-term charts. This comes on the back of a bearish double-top formation near mid-1.1300s and supports prospects for a further near-term depreciating move. The lower end of the said triangle, around the 1.1200 mark, also marks the neckline support of the double-top pattern and hence, should act as a key pivotal point for short-term traders.

A convincing breakthrough the mentioned support, leading to a subsequent weakness below the 1.1180-70 region will confirm a near-term bearish breakdown. The pair might then accelerate the slide further towards the 1.1100 round-figure mark. The downward trajectory could further get extended towards retesting the very important 200-day SMA, currently near the 1.1040-35 region.

On the flip side, the 1.1290-1.1300 region might continue to act as immediate strong resistance. Any subsequent positive move is likely to confront a stiff resistance near the 1.1350 supply zone. A sustained strength beyond might be seen as a fresh trigger for bullish traders and assist the pair to reclaim the 1.1400 round-figure mark. Some follow-through buying has the potential to lift the pair further towards YTD tops, just ahead of the key 1.1500 psychological mark.

2) GBP/USD: Coronavirus jitters/Brexit uncertainties capped gains, for the time being

The GBP/USD pair built on this week’s goodish rebound from mid-1.2200s and shot to over one-week tops on Thursday, albeit struggled to find acceptance at higher levels. The early positive move was sponsored by some follow-through US dollar selling amid optimism over a potential COVID-19 vaccine, which remained supportive of the upbeat market mood. The global risk sentiment got an additional boost following the release of stronger-than-expected US monthly jobs report.

The headline NFP showed that the US economy created 4.8 million jobs in June as compared to gains of 3 million expected. Moreover, the previous month’s reading was reived higher to 2.699 million as against 2.509 million reported earlier. Additional details revealed that the unemployment rate fell to 11.1% from 13.3% in May. The details provided further evidence that the worse of the coronavirus pandemic was probably over and revived hopes of a sharp V-shaped global economic recovery.

However, growing worries about a continuous surge in the number of coronavirus cases discouraged investors from taking excessive risk. The market turned cautious amid the growing possibility of renewed lockdown measures and the rolling back the plans to reopen economic activity to contain the outbreak. This, in turn, drove some haven flows towards the greenback and kept a lid on any strong gains for the major, rather prompted some fresh selling at higher levels.

This coupled with persistent Brexit uncertainties, which further took its toll on the British pound and contributed to the pair’s intraday pullback of around 65 pips. In the latest Brexit-related news, the UK and EU negotiators failed to make any substantial breakthrough on a number of important issues. Meanwhile, a meeting scheduled on Friday has been delayed for next week due to the divergences between the two parties, which casts serious doubts about the possibility of reaching an agreement before the end of the transition period in December 2020.

Nevertheless, the pair settled near the lower end of its daily trading range, though lacked any strong follow-through selling. The pair managed to hold its neck above mid-1.2400s through the Asian session on Friday as market participants now look forward to the final UK Services PMI for a fresh impetus. Meanwhile, the US markets will remain closed in observance of Independence Day. Hence, relatively thin liquidity conditions could lead to a subdued/range-bound trading action on the last day of the week, albeit any Brexit headlines might infuse some volatility.

From a technical perspective, the pair, so far, has managed to hold above a previous hurdle, now turned support near the 1.2450-40 region. This coupled with the fact that spot prices remain well above important intraday moving averages – 100 & 200-hour SMAs – favours bullish traders and supports prospects for additional gains. Hence, a move back above the key 1.2500 psychological mark, en-route the 1.2540-45 intermediate hurdle and the 1.2600 round-figure mark, remains a distinct possibility.

On the flip side, any subsequent fall below mid-1.2400s is likely to find some support near the 1.2420-15 region (200-hour SMA) ahead of the 1.2400 mark. Failure to defend the mentioned support levels might prompt some additional weakness and accelerate the slide back towards a three-week-old descending trend-line resistance breakpoint, around mid-1.2300s.

3) USD/JPY: Bull-Trap and Bearish Engulfing Weigh but Neutral Tone Dominates On Friday

The pair is holding within a narrow range on Friday, partially on low volumes due to US holiday and partially on conflicting signals that caused Thursday’s action to end in long-legged Doji, signaling strong indecision.

Risk sentiment boost from solid US NFP was offset by growing concerns about rising number of new virus cases.

Today’s action is moving between 55DMA (107.39) and 30DMA (107.60) that mark initial boundaries.

Conflicting daily studies (mixed MA’s setup / flat momentum and RSI) lack clearer signal, but near-term action could be weighed by Tue/Wed bearish engulfing and bull-trap above 50% of 109.85/106.07.

Negative scenario would require break of 55DMA;  Fibo 38.2% of 106.07/108.16 upleg (107.36) and daily cloud base (107.25) to open way for further easing.

It’s a holiday in the US, but low volumes are notable already in the European session. The USD/JPY pair is confined to a fifteen pips’ range ever since the day started, trading around the 107.50 price zone. The market sentiment is sour heading into the weekend, as the US has reported over 50,000 new coronavirus cases in 24 hours for two days in a row. Despite the country published an upbeat monthly employment report, concerns about the future of the economy weighed more.

Speculative interest ignored encouraging Japanese data, as the country published the June Jibun Bank Services PMI, which recovered from 26.5 to 45. Also, China released the Caixin Services PMI, which unexpectedly surged to 58.4 from 55 in May, and against the 49.9 expected. The macroeconomic calendar has nothing to offer for the rest of the day.

The USD/JPY is ending the week with modest gains, although still lacking direction. The long-term perspective is neutral amid the safe-haven condition of both currencies. In the shorter-term, and according to the 4-hour chart, the pair is also neutral but has the potential of falling further, as technical indicators remain within negative levels, with modest downward slopes. In the meantime, the pair is stuck between directionless moving averages. The bearish case will be firmer on a break below 106.95, a Fibonacci support level.