21-Aug-2020

1) Dollar Falls On Downbeat U.S. Initial Jobless Claims Data
2) EUR/USD: Seems Poised To Resume Bullish Trend, Eurozone Pmis In Focus
3) USD/CAD Technical: Transmits Negative Prognosis, Weakening Prevails

1) Dollar Falls On Downbeat U.S. Initial Jobless Claims Data

The greenback pared intra-day gains made in Asia and European morning and fell in New York to end the day lower on Thursday due to the release of downbeat U.S. initial jobless claims data as well as weakness in U.S. Treasury yields.

 Reuters reported U.S. initial claims for state unemployment benefits rose to a seasonally adjusted 1.106 million for the week ended Aug. 15, from an upwardly revised 971,000 in the prior week, the Labor Department said on Thursday. Economists polled by Reuters had forecast 925,000 applications in the latest week.

Versus the Japanese yen, although dollar briefly rose to session highs at 106.21 in Asian morning, price met renewed selling and later fell to 105.75 in New York afternoon on cross-buying in jpy as well as fall in U.S. Treasury yields before trading sideways.

Although the single currency moved sideways in Asia and then rose to 1.1868 in European morning, price quickly fell to 1.1813 on cross-selling in euro before rebounding in tandem with cable to 1.1855 at New York open but only to drop again to session lows of 1.1803. Later, the pair recovered to 1.1864 on usd’s weakness and then swung broadly sideways.

Reuters reported European Central Bank policymakers debated last month the extent of their flexibility in conducting emergency bond purchases as part of unprecedented efforts to revive the euro zone economy, the accounts of their July meeting showed on Thursday.    But the account of the meeting suggests some policymakers are not keen for another increase in the ECB’s 1.35 trillion euro pandemic emergency purchase programme (PEPP).

The formulation in the accounts suggest that this was a minority view, however, with other members of the Governing Council backing a more liberal interpretation of flexibility given unprecedented uncertainty.

The British pound went through a volatile session. Although cable dropped from 1.3119 in Australia to session lows of 1.3065 in European morning, the pair erased intra-day losses and then rallied to 1.3149 on cross-buying in sterling before retreating to 1.3080 in New York morning. However, price then rose again to 1.3226 near New York closing on renewed usd’s weakness.

Australia manufacturing PMI, services PMI, UK GfK consumer confidence, PSNB, PSNCR, retail sales, retail sales ex-fuel, Markit manufacturing PMI, Markit services PMI, CBI trends orders, Japan core nationwide CPI, nationwide CPI, Jibun Bank manufacturing PMI, France Markit manufacturing PMI, Markit services PMI, Germany Markit manufacturing PMI, Markit services PMI, EU Markit manufacturing PMI, Markit services PMI, consumer confidence, Canada retail sales, retail sales ex-autos, new housing price index, and U.S. Markit manufacturing PMI, Markit services PMI, existing home sales.

2) EUR/USD: Seems Poised To Resume Bullish Trend, Eurozone Pmis In Focus

The EUR/USD pair refreshed weekly lows on Thursday, albeit managed to find decent support near the 1.1800 mark and finally ended near the top end of its daily trading range. The US dollar built on the previous day’s goodish bounce led by less dovish FOMC meeting minutes and was seen as one of the key factors behind the pair’s early downtick. The attempted USD rebound quickly ran out of the steam following the release of downbeat US macro data, which added to growing concerns about the US economic recovery.

Data released on Thursday showed that the Philly Fed Manufacturing Index fell to 17.2 in August as compared to consensus estimates pointing to a reading of 21. Moreover, Initial Jobless Claims unexpectedly rose back above the 1 million mark during the week ended August 14. In fact, the number of Americans filing for unemployment-related benefits jumped to 1106K as compared to 925K expected. Adding to this, a fresh leg down in the US Treasury bond yields exerted some additional pressure on the greenback.

On the other hand, the shared currency was underpinned by the fact that the European governments have taken decisive action to support economic growth. Conversely, lawmakers in the US have been struggling to reach consensus over additional stimulus measures, which is another reason that has dampened the appeal to hold the greenback and boosted confidence in the euro. Hence, Friday’s release of the flash version of the German and Eurozone PMI prints for August will now be looked upon for some meaningful impetus.

Meanwhile, the US economic docket features the release of the preliminary Manufacturing and Services PMI. The data might influence the USD price dynamics and further contribute to produce some meaningful trading opportunities on the last day of the week.

From a technical perspective, the emergence of some dip-buying and the subsequent uptick during the Asian session on Friday suggests that the near-term bullish trend might still be far from being over. A subsequent move back above the 1.1900 mark will reaffirm the positive outlook and lift the pair further towards the 1.1940-50 supply zone. Some follow-through buying should pave the way for a move to reclaim the key 1.2000 psychological mark. The momentum could further get extended and lift the pair towards the 1.2100 level for the first time since April 2018.

On the flip side, the 1.1840-35 region now seems to protect the immediate downside, which is followed by the 1.1800 mark. Failure to defend the mentioned support levels will negate the bullish bias and prompt some technical selling. The pair might then turn vulnerable to extend the corrective slide back towards monthly swing lows support, around the 1.1710 region, with some intermediate support near the 1.1765 area.

3) USD/CAD Technical: Transmits Negative Prognosis, Weakening Prevails

USDCAD appears to have declared a negative route below the descending line drawn from the 50-month peak of 1.4667. The bearish tone of the 50- and 100-day simple moving averages (SMAs) and the falling mid-Bollinger band (20-day SMA), which has merged with the diagonal line, further aid the broader negative outlook.

The short-term oscillators are uttering temporary mixed signals in directional momentum. The MACD, in the negative region, is marginally above its red signal line as they both follow a horizontal path. The RSI is dipping in bearish territory towards the 30 mark, while the stochastic %K line completed a bullish crossover at the 20 level, endorsing improvements in the pair.

If the pair experiences extra weakening, limitations may develop from the lower Bollinger band around the immediate 1.3100 – 1.3232 support region. Successfully falling under this, the price could then rest at the 1.3028 low before testing the 14½-month bottom of 1.2950. Should the pair deteriorate even below this critical trough, sellers may target the key 1.2884 barrier from October 2018.

Otherwise, resistance may originate from the 1.3244 obstacle ahead of the fortified trend line. A break above the mid-Bollinger band (diagonal line), could accelerate the price towards the 1.3398 high and the heavy resistance section of 1.3450 – 1.3490 overhead. Overtaking this zone, which encapsulates the 50-day SMA and the upper Bollinger band, the 200-day SMA at 1.3542 could challenge the climb. Additional gains may then meet the 1.3645 border ahead of the 100-day SMA at 1.3671.