29-Jul-2021

1) EUR/USD Refreshes Daily High Above 1.1850 Ahead Of EU Data
2) XAU/USD Remains On Track To Test 200-DMA, US GDP Awaited
3) GBP/USD Renews Monthly Top Above 1.3900 On Softer USD, Brexit Optimism
4) AUD/USD Holds Steady Near Weekly Tops, Bulls Await A Move Beyond 0.7400 Mark

 

 

1) EUR/USD Refreshes Daily High Above 1.1850 Ahead Of EU Data

EUR/USD is trading above 1.1850, as it continues to notch higher on Thursday. Dovish Fed downs the US Treasury yields alongside the US dollar. Rebound in Chinese stocks lifts the overall market mood, weighing further on the safe-haven dollar. Eurozone data and US GDP in focus.

Euro/dollar is benefiting from upside momentum on the four-hour chart and has convincingly broken above the 100 Simple Moving Average. It is now tackling the 200 SMA, which is just above the daily high of 1.1863. The Relative Strength Index is nearing 70 and another upswing could put it in overbought territory.

Above 1.1863 mentioned earlier, the next significant barrier is 1.1880, which held the pair down in mid-July. It is followed by 1.19 and then by 1.1945.

Support awaits at 1.1840, the daily low, and then by 1.1820, 1.1770, and the July trough of 1.1750.

“We’re not there” these words by Federal Reserve Chair Jerome Powell on tapering its bond-buying scheme have been weighing on the dollar, and there may be more in store. The world’s most powerful central bank has only taken a baby step toward reducing its $120 billion/month program in July, and August’s Jackson Hole meeting is not necessarily the time to pre-announce such a move.

Powell said that the economy made progress but there is still “ground to cover.” He insisted that inflation is only transitory and that millions of Americans have yet to return to work. The Fed took its “first deep dive” into the timing of tapering, but decisions will have to wait.

After an initial dollar gain, the currency was sold off as prospects of additional greenbacks flowing to markets sent the dollar down.

The Fed expressed concern by the rapid spread of the Delta variant and counts it as a significant risk to its outlook. However, Powell stressed that with every wave, the economic impact is diminishing.

COVID-19 cases have hit a daily average of 66,000, up from roughly 15,000 in June but below the near 300,000 peak in January. Infections are still on the rise in Europe and bumped up in the UK on Thursday, but hopes from Britain show that the Delta variant can retreat fast.

There are reasons to expect a positive mood in markets that would be unfavorable for the greenback.

A bipartisan group of senators reached an agreement on a $1 trillion infrastructure bill. While the legislation has additional hurdles to pass, additional spending by Uncle Sam is positive for the entire world. The risk-on mood may weigh on the safe-haven dollar.

In the shorter term, the focus is on America’s first release of Gross Domestic Product figures for the second quarter. Economists expect a blockbuster figure of 8.6% annualized after 6.4% in the first three months of the year. Investors will eye consumption, investment, and also inventories.

Strong growth in the world’s largest economy could also provide hope for the global economy, benefiting the euro among other currencies.

In the old continent, preliminary German inflation figures are set to show an increase while employment figures are forecast to show a reduction in those out of work. The focus is on the US.

 

2) XAU/USD Remains On Track To Test 200-DMA, US GDP Awaited

Gold price found solid support once again near $1792 levels and initiated a strong uptrend on Thursday, reaching as high as $1810 before settling the day around $1807. Gold bulls got that much-needed boost from the Fed monetary policy announcement, which disappointed the hawks big time. The Fed maintained its monetary policy settings in its July meeting, in line with expectations. However, Fed Chair Jerome Powell said that the central bank is in no rush to begin rolling back the bond-buying, as the post-pandemic economic recovery is not there yet. The Fed’s dovish take smashed the Treasury yields and dragged the US dollar lower alongside, benefiting gold price. The precious metal also cheered the optimism around the US infrastructure stimulus deal, with the Wall Street Journal (WSJ) reporting that “negotiators of roughly $1 trillion package are confident they have locked down enough Republican and Democratic support to advance bill later Wednesday.” Meanwhile, the ongoing surge in coronavirus cases globally also continues to bode well for the traditional safe-haven gold.

In the aftermath of the Fed decision, the gold price is extending its recent run higher, looking to recapture the critical 200-Daily Moving Average (DMA) at $1821. The market mood has improved amid a rebound in the Chinese stocks, as the People’s Bank of China (PBOC) came to the rescue and calmed the nerves after the recent crash. The recovery in the risk sentiment exerts additional downside pressure on the US dollar, which bears the brunt of the Fed’s dovishness. The weakness in the US rates combined with looming covid concerns also keeps the gold bulls afloat.

Looking forward, the main risk to the gold price rally could come from the US advance Q2 GDP report. The US economy is expected to expand 8.6% in Q2 vs. a 6.4% growth recorded in the previous quarter. Upbeat growth numbers could lift the pressure off the greenback, offering a headwind to gold’s bullish potential.

As observed on the daily chart, the gold price is approaching the horizontal 200-DMA barrier, as the fundamental factors appear supportive of a move higher.

Acceptance above that level could call for a test of the mildly bearish 50-DMA at $1830.

Meanwhile, the 21-DMA at $1805 guards the immediate downside, below which the 100-DMA at $1800 could be back in play.

Further south, the range lows of $1792 could offer some support to gold bulls.

However, with the 14-day Relative Strength Index (RSI) holding firmer above the midline, the path of least resistance appears to the upside in the near term.

 

3) GBP/USD Renews Monthly Top Above 1.3900 On Softer USD, Brexit Optimism

GBP/USD picks up bids to refresh multi-day high above 1.3900. US dollar tracks Treasury yields to the south amid Fed’s dovish tilt. EU softens legal threat over NI protocol on demand of UK’s Frost. UK scraps quarantine rules for fully vaccinated EU, US travelers.

From a technical perspective, the momentum beyond the 1.3900 mark confirmed a near-term bullish breakout through a resistance marked by the 50% Fibonacci level of the 1.4249-1.3572 downfall. Given those technical indicators on the daily chart have been gaining positive traction, the stage seems all set for a move towards reclaiming the key 1.4000 psychological mark. The latter coincides with the 61.8% Fibo. level, which if cleared decisively should pave the way for a further near-term appreciating move. The next relevant hurdle is pegged near mid-1.4000s, above which bulls are likely to aim back to reclaim the 1.4100 round-figure mark.

On the flip side, the 1.3900 mark now seems to protect the immediate downside ahead of the overnight swing lows, around the 1.3840 region, just ahead of the 38.2% Fibo. level. Some follow-through selling has the potential to drag the pair further towards the 1.3800 mark, which if broken might prompt some technical selling. The pair might then accelerate the fall towards the 1.3730 confluence support, comprising 23.6% Fibo. level and the very important 200-day SMA. Sustained weakness below the mentioned confluence support will shift the bias back in favor of bearish traders.

The GBP/USD pair prolonged its recent strong rebound from the lowest level since early February and climbed back above the 1.3900 mark on Wednesday. The pair did witness some intraday selling and dropped to the 1.3840 region, though a combination of factors helped limit any further losses. The British pound was supported by the declining trend in Delta variant infections and comments by the UK’s top epidemiologist, Neil Ferguson, saying that the end of the pandemic could be just months away. Apart from this, the emergence of some fresh selling around the US dollar assisted the pair to attract some dip-buying.

The greenback struggled to capitalize/preserve its early modest gains, instead met with aggressive supply in reaction to the Fed Chair Jerome Powell’s dovish turn at the post-meeting press conference. The US central bank announced its monetary policy decision and sounded optimistic about the economy, acknowledging that the economy has made progress towards the maximum employment and price stability goals. Powell, however, emphasized that they were some ways away from substantial progress on jobs and was also cautious about tapering. He said that policymakers discussed some details but it will take a few more meetings to get into it.

The difference in tone between the policy statement and Powell’s remarks, along with a sharp decline in the US Treasury bond yields weighed heavily on the greenback. In fact, the yield on the benchmark 10-year US government bond dropped back closer to five-month lows and kept the USD bulls on the defensive through the Asian session on Thursday. This, in turn, allowed the pair to gain some follow-through traction for the fourth consecutive session – also marking the sixth day of a positive move in the previous seven. The pair was last seen trading near one-month tops as the focus now shifts to the Advance second-quarter US GDP print.

The first estimate is expected to show that growth in the world’s largest economy accelerated by a robust 8.6% annualized pace during the April-June quarter. The release will be accompanied by the usual Initial Weekly Jobless Claims and followed by Pending Home Sales data from the US. Apart from this, the US bond yields will play a key role in influencing the USD price dynamic dynamics and produce some meaningful trading opportunities around the major.

 

4) AUD/USD Holds Steady Near Weekly Tops, Bulls Await A Move Beyond 0.7400 Mark

The AUSD/USD pair bounced around 30 pips from the Asian session lows and was last seen hovering near the top end of its daily trading range, just below the 0.7400 mark.

The pair attracted some dip-buying on Thursday and is now looking to build on the overnight goodish bounce from the 0.7315 region, or one-week lows amid the prevalent US dollar selling bias. This, along with signs of stability in the equity markets, extended some support to the perceived riskier Aussie and pushed the AUD/USD pair higher for the second straight day.

The FOMC announced its monetary policy decision on Wednesday and sounded optimistic, acknowledging that the economy has made progress towards the maximum employment and price stability goals. However, the Fed Chair Jerome Powell took a dovish turn at the post-meeting press conference and emphasized that they were some ways away from substantial progress on jobs.

Powell was also cautious about tapering and said that policymakers discussed some details but it will take a few more meetings to get into it. The difference in tone between the statement and Powell’s remarks weighed heavily on the greenback. Apart from this, a further decline in the US Treasury bond yields dragged the USD Index to the 92.00 neighborhood or two-week lows.

That said, concerns about the economic fallout from the fast-spreading Delta variant of the coronavirus acted as a headwind for the Australian dollar and capped gains for the AUD/USD pair. In fact, New South Wales reported 239 news cases on Wednesday, the highest in 16 months. The authorities have said they want that number near zero before lifting restrictions on July 30 target date.

Even from a technical perspective, the AUD/USD pair, so far, has been struggling to make it through the 0.7400 round figure. This further makes it prudent to wait for some strong follow-through buying before confirming that the pair has bottomed out in the near term and positioning for any meaningful appreciating move.

Market participants now look forward to the US economic docket highlighting the releases of the Advance second-quarter US GDP print, Initial Weekly Jobless Claims, and Pending Home Sales. The first estimate is expected to show that growth in the world’s largest economy accelerated by a robust 8.6% annualized pace during the April-June quarter.

The data, along with the US bond yields, might influence the USD price dynamics and provide some impetus to the AUD/USD pair. Traders will further take cues from the broader market risk sentiment and development surrounding the coronavirus saga to grab some short-term opportunities around the major.