09-Aug-2021

1) AUD/USD Remains Depressed Below Mid-0.7300s
2) EUR/USD Holds Steady Above 1.1750 Amid Firmer Yields
3) XAU/USD Looks To Recapture $1750 On Its Road To Recovery
4) GBP/USD Eases Towards 1.3850 Amid Resurgent US Dollar Demand

1) AUD/USD Remains Depressed Below Mid-0.7300s

The AUD/USD pair remained on the defensive below mid-0.7300s through the first half of the European session, albeit has managed to hold its neck above daily swing lows.

A combination of factors failed to assist the AUD/USD pair to capitalize on its modest intraday bounce from the 0.7330-25 region, or over one-week lows touched earlier this Monday. COVID-19 jitters overshadowed stronger Chinese inflation figures and did little to provide any meaningful impetus to the China-proxy Australian dollar. Apart from this, the underlying bullish sentiment surrounding the US dollar further held traders from placing any bullish bets around the major.

Friday’s blockbuster US monthly jobs report fueled speculations that the Fed could begin tapering its asset purchases later this year. Investors also seem to have started pricing in the possibility of higher interest rates as soon as 2022, which was reinforced by an extension of the positive move in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond shot beyond the 1.30% threshold, which, in turn, continued acting as a tailwind for the USD.

Meanwhile, concerns that the fast-spreading Delta variant of the coronavirus could derail the global economic recovery weighed on investors’ sentiment. This was evident from the risk-off impulse in the markets, which further benefitted the greenback’s safe-haven status and capped the upside for the perceived riskier Aussie. Nevertheless, the fundamental backdrop seems tilted in favor of bearish traders and supports prospects for a further depreciating move for the AUD/USD pair.

There isn’t any major market-moving economic data due for release from the US on Monday. Hence, traders might take cues from scheduled speeches by Atlanta Fed President Raphael Bostic and Richmond Fed President Thomas Barkin. This, along with the US bond yields and the broader market risk sentiment, will influence the USD price dynamics and produce some short-term trading opportunities around the AUD/USD pair.

2) EUR/USD Holds Steady Above 1.1750 Amid Firmer Yields

EUR/USD is trading on the backfoot above 1.1750, licking its wounds after Friday’s US NFP jobs blowout induced sell-off. Stronger US jobs data ramped up calls for Fed’s tightening sooner-than-expected. The rally in Treasury yields is limiting the pair’s upside attempts ahead of Eurozone Sentix data.

From a technical perspective, the post-NFP downfall dragged the pair below a short-term ascending trend-line support extending from September 2020 swing lows. The bearish breakdown further adds credence to the negative outlook. Hence, some follow-through weakness back towards challenging YTD lows, around the 1.1700 mark touched in March, now looks a distinct possibility. The downward trajectory could further get extended towards the next relevant support near the 1.1610-1.1600 horizontal zone.

On the flip side, the 1.1800 round-figure mark now seems to act as immediate strong resistance. Any further move up is more likely to meet with some fresh supply and remain capped near the 1.1830-35 region. A sustained strength beyond might trigger a short-covering move and push the pair back towards the 1.1880 supply zone. This is closely followed by the 1.1900 mark, which if conquered might negate the bearish bias and allow bulls to aim back to reclaim the key 1.2000 psychological mark. The latter coincides with the very important 200-day SMA, which if cleared decisively will shift the near-term bias in favor of bullish traders.

The EUR/USD pair struggled to capitalize on its modest intraday bounce and remained well within the striking distance of the lowest level since April 5 touched earlier this Monday. The US dollar added to the post-NFP gains and stood tall near two-week tops, which, in turn, acted as a headwind for the major. Friday’s blockbuster US monthly jobs report fueled speculations that the Fed could begin tapering its asset purchases later this year.

Investors also seem to have started pricing in the possibility of higher interest rates as soon as 2022, which was evident from an extension of the positive move in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond shot beyond the 1.30% threshold. This, along with worries about the economic fallout from the fast-spreading Delta variant of the coronavirus, continued underpinning the safe-haven USD.

Meanwhile, the risk-off impulse in the market and reviving demand for traditional safe-haven assets kept a lid on any runaway rally for the US bond yields. This, in turn, might hold the USD bulls from placing any aggressive bets and help limit any further losses for the major amid absent relevant market-moving economic releases. That said, the fundamental backdrop remains tilted firmly in favor of bearish traders and supports prospects for further losses.

Hence, any attempted recovery move might be seen as a selling opportunity and runs the risk of fizzling out rather quickly. Market participants now look forward to scheduled speeches by Atlanta Fed President Raphael Bostic and Richmond Fed President Thomas Barkin. This, along with the US bond yields and the broader market risk sentiment, might influence the USD price dynamics and provide some impetus to the major ahead of the US consumer inflation figures, due on Wednesday.

3) XAU/USD Looks To Recapture $1750 On Its Road To Recovery

Gold price is extending its sharp recovery rally from five-month lows of $1,688 into the European session, as the bulls look to recapture the $1,750 barrier.

The gold price tumbled nearly 4.5% in early Asia after stops likely got triggered below the critical $1750 psychological level. Amid holiday-thinned market conditions, Asian traders reacted to solid US jobs data, which stoked concerns of a sooner-than-expected Fed’s tightening, exaggerating the sell-off in the gold price.

Gold price is extending its sharp recovery rally from five-month lows of $1688 into the European session, as the bulls look to recapture the $1750 barrier. The retreat in the US dollar across the board from two-week tops could be associated with the pullback in the gold price. Meanwhile, rising Chinese inflation combined with the renewed growth concerns in the world’s second-largest economy aided the swift retracement in the yellow metal. The progress on the US $1 trillion infrastructure bill also offered some support to the bright metal. Although the gains in the Treasury yields may cap its rebound going forward.

4) GBP/USD Eases Towards 1.3850 Amid Resurgent US Dollar Demand

GBP/USD retreats towards 1.3850 as the US dollar resumes the upside amid the downbeat market mood. UK PM Johnson warned over plotting Chancellor Sunak’s demotion, British Business Chief urges for help over Brexit. Covid updates, stimulus news in focus.

From a technical perspective, the recent pullback from the vicinity of the 1.4000 psychological mark constituted the formation of a double-top on the daily chart. Moreover, repeated failures near a short-term descending trend-line resistance and subsequent weakness below the 1.3870 horizontal support now seem to have confirmed a descending triangle breakdown. The combination of bearish patterns suggests that the recent strong rebound from the lowest level since early February has run out of steam.

However, the lack of any strong follow-through selling warrants some caution for aggressive bearish traders. This makes it prudent to wait for a convincing break below the 38.2% Fibonacci level of the 1.4249-1.3572 downfall, around the 1.3830 region, before positioning for any further depreciating move. The pair might then turn vulnerable to slide further below the 1.3800 mark and extend the downward trajectory towards the 1.3765-60 support en-route 1.3730-25 region, or the 23.6% Fibo. level.

On the flip side, any meaningful recovery now seems to confront some resistance near the 1.3900 mark. This is closely followed by the 1.3920 confluence hurdle, comprising 100-day SMA and the mentioned descending trend-line. A sustained strength beyond, leading to some follow-through move beyond mid-1.3900s might prompt some technical buying. The pair might then aim back to challenge the double-top resistance near the 1.4000 mark, which if cleared will shift the bias back in favor of bullish traders.

The GBP/USD pair struggled to capitalize on its post-BoE positive move and witnessed heavy selling on Friday amid a broad-based US dollar strength. Stronger-than-expected US monthly jobs report fueled speculations that the Fed could start tapering its asset purchases later this year, which, in turn, provided a strong lift to the greenback. In fact, the headline NFP print showed that the US economy added 943K new jobs in July, surpassing even the most optimistic estimates. Adding to this, the previous month’s reading was also revised higher to 938K from 850K reported earlier.

Further details revealed that the US unemployment rate dropped from 5.9% in June to 5.4% during the reported month, beating expectations of 5.7%. There was also good news on the wage front as average hourly earnings surged 4.0% YoY, marking another step toward the Fed’s goal of substantial further progress in the labor market recovery. The report forced investors to bring forward the likely timing for the Fed policy tightening, as soon as early 2020. This was evident from a sharp surge in the US Treasury bond yields, which turned out to be another factor that underpinned the buck.

The yield on the benchmark 10-year US government bond jumped back above the 1.30% threshold during the Asian session on Monday and continued acting as a tailwind for the greenback. Apart from this, worries that the spread of the highly contagious Delta variant of the coronavirus could derail the global economic recovery further benefitted the safe-haven USD. The combination of factors dragged the pair to one-and-half-week lows, though bulls managed to find some support near mid-1.3800s amid the recent optimism over the declining trend of new coronavirus cases in the UK.

There isn’t any major market-moving economic data due for release on Monday, either from the UK or the US. Hence, the US bond yields, along with the broader market risk sentiment will play a key role in influencing the USD price dynamics and provide some impetus to the major. Traders might further take cues from scheduled speeches by Atlanta Fed President Raphael Bostic and Richmond Fed President Thomas Barkin for some meaningful opportunities around the pair.