24-Aug-2021

1) GBP/USD Jumps Towards 1.3750 As USD Licks Its Wounds
2) EUR/USD Advances Towards 1.1750 Amid Risk-On Mood
3) Gold Steps Back From Wall Of Resistance Around $1,800

1) GBP/USD Jumps Towards 1.3750 As USD Licks Its Wounds

GBP/USD is catching a fresh bid towards 1.3750, looking to extend the previous rally. Markets have recovered following concerns of late over timings of the Federal reserve’s tapering and the rapid resurgence of the coronavirus in a new delta variant.

The GBP/USD pair trades a few pips below the 61.8% retracement of its July rally at 1.3730, the immediate resistance level. The near-term is mildly bullish, as the pair has moved well above a still bearish 20 SMA, although still well below bearish longer ones. Meanwhile, technical indicators have crossed into positive territory but quickly lost bullish strength.

The British Pound was among the most benefited currencies from the broad dollar’s weakness, with GBP/USD recovering up to 1.3732 and finishing the day nearby. Buyers ignored mixed UK data, as the August Markit Manufacturing PMI printed 60.1 while the services Index came in at 55.5, the latter missing expectations and well below the previous one.

The solid performance of Wall Street was attributed to concerns related to the spread of the Delta variant in the US, suggesting the Federal Reserve would not be able to trim facilities in the near term. Softer than anticipated data reinforced the idea, keeping equities afloat and the greenback under pressure. The UK macroeconomic calendar has nothing relevant to offer this week.

2) EUR/USD Advances Towards 1.1750 Amid Risk-On Mood

EUR/USD edges higher towards 1.1750 amid the upbeat market mood. US dollar tracks mildly bid Treasury yields to consolidate the heaviest fall in two months. Market cheer vaccine optimism and easing of taper tantrums amid covid woes and geopolitical fears.

Euro/dollar has jumped above the broken downtrend resistance line that has been accompanying it since the beginning of the month and also topped the 50 Simple Moving Average on the four-hour chart. A third bullish sign is a Momentum, which has turned to the upside. All in all, the trend is turning positive.

Resistance is at a daily high of 1.1748. It is followed by 1.1780 and 1.1805, which capped the pair last week, and then by 1.1825.

Support awaits at 1.1720, a cushion from last week, and then by 1.1705, 1.1690, and 1.1660, the latter being the 2021 trough.

Dead-cat bounce? Not this time. After a steadfast rise of 90 pips, EUR/USD’s upward journey looks like a change of course rather than a temporary correction. The swing is mostly fueled by dollar weakness, but the euro has new reasons to rise.

The safe-haven greenback has been under selling pressure after the US Food & Drugs Administration (FDA) gave full approval to the Pfizer/BioNTech COVID-19 vaccine.  It only had emergency authorization beforehand. Apart from potentially helping convince hesitant Americans to get a shot in the arm, it also facilitates vaccine mandates for institutions and companies.

Broader immunization could help defeat the disease and especially the highly transmissible Delta variant wreaking havoc in America and imply stronger growth for the entire world, thus sending other currencies higher against the dollar. In the meantime, the virus weighs on the currency in another way.

Markets eagerly await the Federal Reserve’s Jackson Hole event later in the week, with Chair Jerome Powell’s speech on Friday being the highlight. However, by announcing the event will be held virtually, the Fed signaled that withdrawing support is somewhat less urgent. If the almighty central bank is forced to scale down its activity due to Delta, the American economy probably needs additional assistance for now.

On the other side of the pond, the euro benefits from an upgrade to German growth figures for the second quarter. The continent’s largest economy expanded by 1.6% according to updated statistics, compared with 1.5% originally reported.

More importantly, Europe is dealing better with coronavirus at this point, not only leading in vaccinations but also suffers from fewer cases. While infections are rising in the US, they are edging lower in the eurozone. Fears of a worrying uptrend in Germany have subsided.

3) Gold Steps Back From Wall Of Resistance Around $1,800

Gold (XAU/USD) drops 0.17% intraday to $1,802 amid a quiet session ahead of the European markets open on Tuesday. The yellow metal jumped the most since August 13 the previous day but lacks the fundamentals to cross the sturdy barrier to the north.

Gold’s daily chart shows that the upside has stalled just below the powerful hurdle at $1811, which is the confluence of the 100 and 200-Daily Moving Averages (DMA). If the downside pressure accelerates, the gold price could drop further towards the bearish 50-DMA at $1791, below which the horizontal 21-DMA at $1787 could get tested.

The 14-day Relative Strength Index (RSI) has turned lower but holds well above the midline, suggesting that any downside attempts could be temporary. However, gold bulls will need acceptance above the aforesaid strong resistance at $1811 to unleash additional gains towards the $1820 round figure. The buyers will then target the August highs of $1832.

This Tuesday, gold price is retreating from multi-week highs, testing the bearish commitments near $1800, as an improvement in the risk sentiment weighs on the safe-haven metal. Markets cheer the renewed covid vaccine optimism after the Food and Drug Administration (FDA) on Monday granted full approval to Pfizer/ BioNTech’s COVID-19 vaccine, making it the first in the US to win the coveted designation. The vaccine approval alleviated the tensions around the Delta variant contagion. The risk-on mood appears to cap the tepid bounce seen in the US dollar while fuelling over a 1% rally in the Treasury yields, which makes the non-yielding gold less attractive.

Next of relevance for gold price remains the US second-tier housing data alongside the incoming covid updates. However, the broad market sentiment and the US dollar price action will remain the key drivers for gold prices going forward.