26-Aug-2020

1) New Zealand Dollar Wavers As Trade Surplus Narrows
2) EUR/USD: Range-Play Intact, Focus Remains On Powell’s Speech
3) GBP/USD: In Search Of A Firm Near-Term Direction, Powell’s Speech Awaited

1) New Zealand Dollar Wavers As Trade Surplus Narrows

The New Zealand dollar was little changed during the Asian session as investors reacted to the mixed trade numbers. According to the Statistics bureau, exports fell from $5.08 billion in June to $4.9 billion in July. In the same month, imports increased slightly from $4.61 billion to $4.63 billion. As a result, the trade surplus declined from the previous $475 million to $282 million. These numbers came at a time when the number of coronavirus cases in New Zealand have dropped slightly. Also, the country’s government recently extended the lockdown in Auckland for four more days.

The US dollar index rose slightly during the Asian session. The pair is reacting to the mixed economic data from the United States that came out yesterday. Data from the Conference Board showed that consumer confidence declined from 91.7 in July to 84.8 in August. This decline was lower than the 93.0 that analysts were expecting. It was also the second straight month that the confidence has dropped. Other data showed that new home sales in the US rose by 13.9% in July to 901K. That was significantly higher than the 1.3% increase that analysts were expecting. Later today, the dollar will react to durable goods orders numbers from the United States.

The price of crude oil rose above a key resistance as traders reacted to the weekly stock numbers released by the American Petroleum Institute (API). The data showed that oil inventories in the US dropped by more than 4.5 million in the previous week. That was a bigger decline compared to the previous 4.26 million. The price will react to the official inventory data from the EIA. Analysts expect that the inventories dropped by more than 3.69 million barrels. Separately, Mexico will release its GDP data while Singapore will release its industrial production numbers today.

The NZD/USD pair was little changed during the Asian session. It is trading at 0.6551, which is in the same range it was yesterday. On the daily chart, the price is along the 50-day simple moving average and above the 61.8% Fibonacci retracement level. The signal and main lines of the MACD have moved below the neutral line while the price is also above the ascending trend line. The pair is likely to remain at this level ahead of the Jerome Powell speech.

2) EUR/USD: Range-Play Intact, Focus Remains On Powell’s Speech

A combination of factors assisted the EUR/USD pair to regain some positive traction on Tuesday, albeit the uptick lacked any strong bullish conviction. The optimism over a potential vaccine and treatment for the highly contagious coronavirus disease remained supportive of the upbeat market mood. This coupled with easing concerns about a diplomatic standoff between the US and China undermined the greenback’s relative safe-haven status against its European counterpart. Even a strong pickup in the US Treasury bond yields failed to impress the USD bulls or provide any meaningful impetus.

On the other hand, the shared currency benefitted from the final version of the German GDP report, which showed that the Eurozone’s largest economy contracted by a record 9.7% during the second quarter as against 10.1% estimated previously. Adding to this, the German Ifo Business Climate Index rose to 92.6 in August from the 90.5 previous and surpassed market expectations pointing to a reading of 92.2. Meanwhile, the Current Assessment Index jumped to 87.9 from 84.5 in July, while the Expectations Index edged higher to 97.5 for August as against 97.0 reported in the previous month.

The USD remained depressed following the disappointing release of the Conference Board’s Consumer Confidence Index, which tumbled to the lowest level in more than six years, to 84.8 in August. The data added to growing market worries about the US economic recovery and kept a lid on the risk-on mood. This, in turn, drove some haven flows and helped limit the USD slide. Investors also seemed reluctant to place any aggressive bets ahead of the Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium, which further collaborated towards capping gains for the major, instead prompted some selling during the Asian session on Wednesday.

In the absence of any major market-moving economic releases from the Eurozone, the pair remains at the mercy of the USD price dynamics. Meanwhile, the US economic docket highlights the release of Durable Goods Orders, seen up 4.3% MoM in July. This would mark a notable slowdown from the 7.6% increase recorded in June. Any significant divergence from the expected numbers might provide some trading impetus, through the reaction is more likely to remain limited.

From a technical perspective, the recent range-bound trading action points to the indecision over the next leg of a directional move and thus, warrants some caution before placing aggressive bets. Hence, any subsequent slide below the 1.1800 mark might continue to attract some dip-buying and remain limited. The next relevant support is pegged near the 1.1755 region, which if broken could drag the pair towards testing sub-1.1700 level, or monthly lows set on August 3.

On the flip side, immediate resistance is pegged near the 1.1850-60 region, above which the pair could move back to the 1.1900 mark. Some follow-through buying now seems to pave the way for a further near-term appreciating move towards the 1.1940-50 supply zone before bulls eventually aim to conquer the key 1.2000 psychological mark.

3) GBP/USD: In Search Of A Firm Near-Term Direction, Powell’s Speech Awaited

The GBP/USD pair staged a solid rebound from mid-1.3000s, or one-week lows and rallied over 100 pips on Tuesday. The strong intraday positive move was sponsored by the emergence of some fresh selling around the US dollar and seemed rather unaffected by weaker UK data. The optimism over a potential vaccine and treatment for the highly contagious coronavirus diseases remained supportive of the upbeat market mood. This coupled with easing concerns about a diplomatic standoff between the US and China undermined the greenback’s relative safe-haven status. The USD failed to gain any respite from a strong pickup in the US Treasury bond yields.

Meanwhile, the lack of progress in Brexit talks did little to hinder the momentum, with bulls shrugging off weaker UK CBI distributive trade survey. In fact, sales fell into negative territory to -6% in August from +4% in July. From the US, the Conference Board’s Consumer Confidence Index tumbled to the lowest level in more than six years and came in at 84.8 in August. The data fueled concerns about the US economic recovery and kept a lid on the risk-on mood. This, in turn, drove some haven flows towards the USD. This, along with investors’ reluctance to place aggressive bets ahead of the Jackson Hole Symposium capped gains for the major.

The pair edged lower during the Asian session on Wednesday and in the absence of any major market-moving economic releases from the UK, remains at the mercy of the USD price dynamics. Later during the early North American session, the release of the US Durable Goods Orders data will be looked upon for some short-term trading opportunities. The key focus, however, will remain on the Fed Chair Jerome Powell’s speech on Thursday, which will be closely scrutinized for clues over the US central bank’s future monetary policy stance.

From a technical perspective, the pair has been confined in a range over the past one week or so, making it prudent to wait for a sustained move in either direction before positioning for the near-term trajectory. Some follow-through weakness below mid-1.3000s will be seen as a fresh trigger for bearish traders and accelerate the slide further towards the key 1.3000 psychological mark. A subsequent break below monthly lows, around the 1.2980 region, will set the stage for an extension of the corrective slide from YTD tops set last week.

On the flip side, sustained strength beyond the overnight swing high, around the 1.3170 region, should lift the pair back to the 1.3200 round-figure mark. The momentum could further get extended toward the 1.3250-60 strong resistance zone, above which bulls might aim to reclaim the 1.3300 round-figure mark.