12-Aug-2021

1) GBP/USD Drops Towards 1.3850 Amid Mixed UK Data, USD Rebound
2) EUR/USD Remains Capped Below 1.1750 As Dollar Attempts A Bounce
3) Gold Price Bulls Have The Upper Hand Above $1,750 Level
4) NZD/USD Slides To Fresh Session Lows, 0.7000 Mark Back In Sight

1) GBP/USD Drops Towards 1.3850 Amid Mixed UK Data, USD Rebound

GBP/USD is easing towards 1.3850, undermined by mixed UK growth and industrial numbers.  The cautious market mood lifts the US dollar’s safe-haven demand, adding to the weight on the pair. Focus shifts to US data.

GBP/USD bulls take a breather around 1.3870-65, after snapping a three-day uptrend, amid Thursday’s Asian session. The cable pair dropped to the lowest in 12 days before bouncing off 1.3802 the previous day. In doing so, the quote portrays a bullish flag formation on the four-hour (4H) play. In addition to the upside favoring chart pattern, the pair’s sustained trading above 200-SMA and steady RSI, modest as well, keep GBP/USD buyers hopeful.

However, a convergence of the flag’s upper line and early July’s top, surrounding 1.3910, becomes a strong resistance for the bulls to cross before aiming the previous month’s high near 1.3985 and the 1.4000 threshold.

The British economic calendar is all set to entertain the cable traders during the dull hours of early Thursday, at 06:00 GMT with the preliminary GDP figures for Q2 2021. Also increasing the importance of that time are monthly GDP figures for June, Trade Balance, Manufacturing Production and Industrial Production details for the stated period.

Having witnessed a 1.6% contraction of economic activities in the previous quarter, market players will be interested in the first estimation of the Q2 GDP figures, expected +4.8% QoQ, to confirm the economic transition amid the covid resurgence fears. Market expectations back +22.1% YoY figures versus -6.1% previous readouts.

2) EUR/USD Remains Capped Below 1.1750 As Dollar Attempts A Bounce

EUR/USD is hovering below 1.1750, as the US dollar attempts a bounce amid a tepid risk tone. Treasury yields drop as softer US CPI data lifts the pressure off the Fed for an imminent tapering. US PPI and Jobless Claims awaited.

From a technical perspective, the lack of any follow-through buying suggests that the recent downtrend might still be far from being over. Moreover, technical indicators on the daily chart are holding deep in the bearish territory and still far from being in the oversold zone. This, along with the recent break below a short-term ascending trend-line extending from September 2020 swing lows, favors bearish traders.

From current levels, any meaningful slide might continue to find decent support near the 1.1700 mark. A convincing break below will reaffirm the bearish outlook and prompt some aggressive technical selling. The pair might then accelerate the fall towards intermediate support near the 1.1665-60 region before eventually dropping to November 2020 lows, around the 1.1600 round figure.

On the flip side, bulls might wait for a move beyond the overnight swing high, around the 1.1755 region, before placing fresh bets. Any subsequent positive move might still be seen as a selling opportunity and remain capped near the 1.1800 mark. This is followed by resistance near the 1.1830-35 region, which if cleared decisively might trigger a short-covering move. The next relevant hurdle is pegged near the 1.1880 supply zone ahead of the 1.1900 mark.

A sustained strength beyond might negate the bearish bias and allow the pair to aim back to reclaim the key 1.2000 psychological mark. The latter coincides with the very important 200-day SMA and should act as a key pivotal point for short-term traders.

The EUR/USD pair struggled to capitalize on the previous day’s modest bounce from the vicinity of YTD lows and witnessed a subdued/range-bound price action through the early European session on Thursday. A combination of factors held traders from placing any aggressive bets around the US dollar, which, in turn, failed to provide any meaningful impetus to the major. Signs of moderating inflationary pressure in the US eased fears about an early withdrawal of the stimulus by the Fed and led to some follow-through decline in the US Treasury bond yields. This kept the USD bulls on the defensive and extended some support to the major.

However, the Fed officials have started to guide the market towards early tapering and higher interest rates as soon as 2022. Kansas City Fed President Esther George said on Wednesday that the time had come to end the central bank’s bond-buying program. Adding to this, Dallas Fed President Rob Kaplan said that he will press his colleagues to announce a plan to taper bond purchases at the next meeting in late September. This comes on the back of hawkish comments by Atlanta Fed President Raphael Bostic and Boston Fed President Eric Rosengren earlier this week, which continued acting as a tailwind for the USD.

Meanwhile, investors remain worried that the spread of the highly contagious Delta variant of the coronavirus could derail the global economic recovery. This was evident from the prevalent cautious mood around the equity markets, which further underpinned the safe-haven greenback and capped the upside for the pair. There isn’t any major market-moving economic data due for release from the Eurozone, leaving the pair at the mercy of the USD price dynamics. Later during the early North American session, traders might take cues from the release of the Producer Price Index and the usual Initial Weekly Jobless Claims data from the US. This, along with the US bond yields and the broader market risk sentiment, might influence the USD price dynamics and produce some trading opportunities around the major.

3) Gold Price Bulls Have The Upper Hand Above $1,750 Level

Gold recorded its biggest one-day percentage gain since May 6 on Wednesday and moved further away from the early week flash crash to the lowest level since March. Worries about the economic fallout from the fast-spreading Delta variant of the coronavirus extended some support to the safe-haven precious metal through the first half of the trading action. The intraday buying picked up pace following the release of US consumer inflation figures, which moderated a bit in July and eased fears about an early withdrawal of the stimulus by the Fed.

The headline CPI climbed 0.5% in July and the yeat rate remained at a 20-year high level of 5.4% for the second straight month. However, the closely watched measure of inflation that excludes volatile food and energy price – core CPI – fell short of market expectations and rose 0.3%. As a result, the yearly rate decelerated to 4.3% from 4.5%, which was a 29-year high. The US dollar and the US Treasury bond yields both retreated after the underwhelming US inflation data, which, in turn, pushed the dollar-denominated commodity back above the $1,750 level.

That said, comments by Kansas City Fed President Esther George, saying that the time had come to end the central bank’s bond-buying program, helped limit the USD profit-taking slide. George noted that the standard for reducing the bond-buying program may have already been met by the current spike in inflation, recent labour market improvements and the expectation for continued strong demand. Adding to this, Dallas Fed President Rob Kaplan said that he will press his colleagues to announce a plan to taper bond purchases at the next meeting in late September.

This, to a larger extent, helped offset Richmond Fed President Thomas Barkin’s earlier remarks, saying that it may take a few months more for the US job market to recover enough for the Fed to reduce its crisis-era support for the economy. Nevertheless, the XAU/USD finally settled near the top end of its daily trading range and held steady through the Asian session on Thursday. As investors continue to assess the likely timing for policy tightening by the Fed, the commodity might wait for a fresh catalyst before the next leg of a directional move.

In the meantime, traders might take cues from the US economic docket – featuring the release of Producer Price Index (PPI) and the usual Initial Weekly Jobless Claims. Apart from this, the US bond yields might influence the USD price dynamics and provide some impetus to the non-yielding yellow metal. This, along with the broader market risk sentiment, will also be looked upon for some meaningful trading opportunities.

From a technical perspective, the overnight move back above 100-hour SMA might have set the stage for additional gains. However, any subsequent positive move is likely to confront stiff resistance near the $1,760 region, marking the 50% Fibonacci level of the $1,832-$1,688 downfall. Some follow-through buying beyond the $1,765 area will be seen as a fresh trigger for bullish traders and lift the commodity further towards the 61.8% Fibo. level, around the $1,777 area. A sustained move beyond should allow bulls to aim back to reclaim the $1,800 round-figure mark.

On the flip side, the $1,745-43 confluence region – comprising of 100-hour SMA and 38.2% Fibo. level – now seems to protect the immediate downside. Failure to defend the mentioned support might prompt some technical selling and drag the metal further towards the $1,725 zone en-route the 23.6% Fibo. level, around the $1,720 level. A convincing break below will negate any near-term positive bias and turn the XAU/USD vulnerable to slide back below the $1,700 mark, towards retesting multi-month lows support, around the $1,688 region.

4) NZD/USD Slides To Fresh Session Lows, 0.7000 Mark Back In Sight

The NZD/USD pair edged lower heading into the European session and dropped to fresh daily lows, around the 0.7020 region in the last hour.

The pair struggled to capitalize on its weekly gains recorded over the past two trading sessions and met with some fresh supply on Thursday amid a modest US dollar uptick. The fact that Fed officials have started to guide the market towards early tapering and higher interest rates as soon as 2022 helped limit the post-CPI USD profit-taking. This, along with a generally softer tone around the equity markets, further collaborated to drive flows away from the perceived riskier kiwi.

Kansas City Fed President Esther George said on Wednesday that the time had come to end the central bank’s bond-buying program. Adding to this, Dallas Fed President Rob Kaplan said that he will press his colleagues to announce a plan to taper bond purchases at the next meeting in late September. This comes on the back of hawkish comments by Atlanta Fed President Raphael Bostic and Boston Fed President Eric Rosengren earlier this week, which continued acting as a tailwind for the greenback.

That said, some follow-through decline in the US Treasury bond yields might hold the USD bulls from placing any aggressive bets and lend some support to the NZD/USD pair. This, in turn, warrants some caution for bearish traders and positioning for any further depreciating move. Market participants now look forward to the US economic docket, featuring the releases of the Producer Price Index (PPI) and Initial Weekly Jobless Claims. Apart from this, the US bond yields and the market risk sentiment might influence the USD price dynamics, producing some trading opportunities around the major.