06-Jul-2020

1) Dollar Ends Unchanged In Holiday-Thin North American Trading
2) GBP/USD: Bulls Likely To Target 1.2600 As Focus Shifts To Brexit Talks in London
3) EUR/USD Forecast: Bulls at the Mercy of Receding Demand For the Safe-Haven USD

1) Dollar Ends Unchanged In Holiday-Thin North American Trading

The greenback moved relatively narrowly on Friday as U.S. markets were closed for July 4th Independence Day holiday, price maintained a steady to firm undertone as rise in coronavirus cases in the U.S. dampened risk sentiment .

Versus the yen, price moved very narrowly in directionless Asian morning and European session , however, the safe-haven yen gained versus euro and sterling. Price opened at 107.49 and inched higher to 107.56 and later retreated to 107.46, price last traded at 107.50 near North American close.

The single currency also moved narrowly in subdued Asian morning following decline from 1.1302 to 1.1224 on Thursday, price edged higher to 1.1249 in Asia but only to hit session lows of 1.1220 in Europe. Price later climbed back to 1.1253 in holiday-thin North American trading.

Bloomberg reported policymakers at the ECB are facing a potential rift over how much their PEPP stimulus should stay weighted towards weaker countries such as Italy, one of the worst-hit countries in the region from the pandemic.

Citing sources familiar with conversations with ECB officials, this could be the first major disagreement among policymakers that could threaten to undermine the PEPP stimulus in the coming months/quarters.

The British pound swung the most against the usd among the G4 counterparts. Although price moved narrowly in Asia after retreating from Thursday’s post-NFP New York high of 1.2530 to 1.2457, cable briefly climbed to 1.2485 in early European trading due to cross-buying in sterling but quickly tumbled to 1.2439 on media report Germany’s Merkel said “we are preparing on every level for a no-deal Brexit”. Price later traded sideways and climbed to session highs of 1.2495 at the close.

Reuters reported there is a good agreement to be reached with the European Union on post-Brexit trading terms but if that can’t be achieved, there are other very good options and Prime Minister Boris Johnson told LBC radio on Friday.

Johnson said he was a bit more optimistic than EU negotiator Michel Barnier, but that if no deal was struck in then an “Australia-style” arrangement would be a “very good option”.

Australia ANZ job advertisements, Germany industrial orders, UK Markit construction PMI, EU Sentix index, retail sales and U.S. Markit services PMI, ISM non-manufacturing PMI on Monday.

New Zealand NZIER confidence, GDT price index, Australia AIG service index, RBA interest rate decision, Japan all household spending, coincident index, leading indicator, Germany industrial output, industrial production, France current account, trade balance, imports, exports, UK Halifax house prices, Italy retail sales, U.S. Redbook, JOLTS job openings and Canada Ivey PMI on Tuesday.

Japan current account, trade balance, Swiss unemployment rate, U.S. MBA mortgage application and Canada house starts annualized on Wednesday.

UK RICS housing price balance, Japan machinery orders, China PPI, CPI, Germany exports, imports, trade balance, current account and U.S. initial jobless claims, wholesale inventories, wholesale sales on Thursday.

New Zealand retail sales, Japan corp goods price, France industrial output, Italy industrial output, U.S, PPI, core PPI and Canada employment change, unemployment rate on Friday.

2) GBP/USD: Bulls Likely To Target 1.2600 As Focus Shifts To Brexit Talks in London

The GBP/USD pair reversed an intraday dip to the 1.2440-35 region and ended the day with modest gains on the last trading day of the week. The pair extended the previous day’s intraday retracement slide from weekly tops and remained on the defensive amid doubts about the possibility of reaching an agreement before the end of the transition period in December 2020, especially after the UK and EU delayed a meeting scheduled on Friday due to the divergences between the two parties. On the economic data front, the UK Services PMI was revised higher to 47.1 from the preliminary reading of 47, albeit failed to impress bullish traders.

However,  growing optimism about a sharp V-shaped global economic recovery continued undermining the US dollar’s safe-haven status and helped limit any deeper losses, rather assisted the pair to attract some dip-buying. The pair bounced around 50 pips from daily lows and the uptick remained unaffected by concerns over a continuous surge in coronavirus cases. the upbeat market mood remained supportive of the uptick through the Asian session on Monday. Bulls now seemed to make a fresh attempt to build on the momentum beyond the key 1.2500 psychological mark as the focus now shifts to another round of the key Brexit talks in London.

The incoming Brexit-related headlines will play a key role in influencing the sentiment surrounding the British pound and infuse some volatility. Later during the early North American session, traders will look forward to the US economic docket – highlighting the release of the ISM Non-Manufacturing PMI – might further contribute towards producing some meaningful trading opportunities.

From a technical perspective, nothing has changed much for the pair and the near-term bias still seems tilted in favour of bullish traders. Hence, a move back towards retesting last week’s swing high, around the 1.2530-35 region, remains a distinct possibility. The mentioned level marks with the 50% Fibonacci level of the 1.2813-1.2252 corrective slide, above which the pair seems all set to aim towards testing the 61.8% Fibo. level, around the 1.2600 round-figure mark.

On the flip side, the 38.2% Fibo. level, near the 1.2465 region, now seems to protect the immediate downside, which if broken decisively might turn the pair vulnerable to accelerate the fall back towards retesting sub-1.2400 level. The latter coincides with the 23.6% Fibo. level, below which the slide could further get extended towards the 1.2350-40 horizontal support.

3) EUR/USD Forecast: Bulls at the Mercy of Receding Demand For the Safe-Haven USD

The EUR/USD pair lacked any firm directional bias and seesawed between tepid gains/minor losses amid relatively thin liquidity conditions on Friday. The shared currency had a rather muted reaction to the release of the final version of the Eurozone Services PMI prints, which were revised higher but remained in the contraction territory. The pair finally ended nearly unchanged for the day and modest weekly gains for the second straight week.

Meanwhile, the incoming positive economic data remained supportive of expectations for a sharp V-shaped global economic recovery, which overshadowed concerns about surging coronavirus cases. This, in turn, continued undermining the US dollar’s relative safe-haven status and assisted the pair to regain positive traction on the first day of a new trading week. Bulls seemed rather unaffected by the European Central Bank Presiden Christine Lagarde’s dovish comments over the weekend.

Speaking about alternative growth models at a webinar on Saturday, Lagarde said that a falling trend in price pressures will persist over the next two years due to the coronavirus pandemic-driven economic transformation. Lagarde further added that the transition to a new economic model will be “disruptive”, hitting employment and production, albeit Europe is in an “excellent position.”

The pair moved back closer to the 1.1300 round-figure mark as traders now look forward to the release of the EU July Sentix Investor Confidence Index for a fresh impetus. The US economic docket highlights the release of ISM Non-Manufacturing PMI, which might influence the USD price dynamics and produce some meaningful trading opportunities later during the early North American session. The gauge for the US Services sector is expected to have recovered to 49.5 for June as compared to 45.4 previous.

From a technical perspective, the pair is now looking to build on the momentum beyond a three-week-old descending trend-line. The mentioned trend-line constituted to the formation of a symmetrical triangle on short-term charts. However, any meaningful positive move is likely to confront some fresh supply near the 1.1350 double-top resistance. That said, 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.

On the flip side, any meaningful pullback might now find some support near the 1.1230-25 region, which is closely followed by the 1.1200 round-figure mark. The mentioned level coincides with the lower end of the symmetrical triangle, which if broken will set the stage for a further near-term depreciating move. A subsequent slide below the 1.1180-70 will confirm a near-term bearish breakdown and accelerate the slide 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.