Daily F.X. Analysis, July 16 – Top Trade Setups In Forex – ECB Policy Decision In Highlights! 

It’s going to be a busy day from a fundamental’s viewpoint, as the European Central Bank is due to release its rate decision. Furthermore, the U.S. will be releasing a series of high impact events like Retail Sales m/m, Philly Fed Manufacturing Index, and Unemployment Claims. Although ECB isn’t expected to hike the interest rate, the ECB press conference can drive movement in the EUR/USD pair today. Besides, U.S. events are expected to perform adversely for the U.S. dollar.

Economic Events to Watch Today 

 

 

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EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.14114 after placing a high of 1.14473 and a low of 1.13900. Overall the tendency of the EUR/USD pair remained bullish throughout the day. The EUR/USD pair continued its bullish streak for the 4th consecutive day and reached a multi-month high level near 1.14500 level on Wednesday. The pair rose to the highest level since March 10 in the early Wednesday trading session. Nevertheless, it did not live there for long and was pulled back in the American session.

The upward movement of EUR/USD towards a multi-month high level was caused by the European Central Bank’s monetary policy meeting on Thursday. The lower move was triggered by a recovery of the U.S. dollar across the board. The U.S. Dollar Index (DXY) erased most of its losses and recovered from weekly lows, rose above 96.00 level, and gave strength to the U.S. dollar that eventually weighed on EUR/USD pair.

The risk sentiment was also up in the market by the optimism about the potential vaccine for COVID-19. As a result, the Dow Jones was up by 0.80%, and NASDAQ was up by 0.35%.

On the data front, the U.S. dollar was strong due to better than expected data released on Wednesday. The Empire State Manufacturing Index was published at 17:30 GMT, which showed that the index rose to 17.2 from the expectations of 10.0 in July and supported the U.S. dollar.

The Import Prices from the U.S. in June rose to 1.4% from the expected 1.0% and supported the U.S. dollar. The Industrial Production data was announced at 18:15 GMT, which showed an expansion in activity by 5.4% against the forecasted 4.5% and supported the U.S. dollar. The Capacity Utilization rate from the U.S. Roseto 68.6%from the predicted 67.9% and supported the U.S. dollar. It eventually weighed on EUR/USD pair in late trading session and forced it to lose its early daily gains.

In Europe, the key event ahead is the European Central Bank meeting on Thursday, in its last meeting, ECB made its biggest decision in June and left the rates unchanged and provided no stance to change further. The focus will be on the press conference, where traders will keep an eye on Lagarde’s speech to find fresh clues about the economic outlook. However, the tone is estimated to be positive, and Lagarde’s firm commitment to the full 1.35tn euros PEPP is also expected.

Daily Technical Levels

Support Resistance

1.1384    1.1445

1.1356    1.1480

1.1322    1.1507

Pivot point: 1.1418

EUR/USD– Trading Tip

The EUR/USD is taking a bearish turn after placing a high around 1.1446 level. The closing of candles below 1.1446 level can extend selling until the 1.1390 level. Closing of candles above 1.1390 level can drive buying in the EUR/USD pair, but in case, the bearish breakout occurs, we may see EUR/USD prices dropping towards 1.1365 level.

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GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.25879 after placing a high of 1.26467 and a low of 1.25417. Overall the movement of GP/USD pair remained bullish throughout the day. The GBP/USD pair edged higher on Wednesday on the back of increased risk-appetite that made the U.S. dollar weak due to weakened appeal for the safe-haven currency. The risk sentiment was bolstered by many factors, including reports suggesting China’s economy was rebounding despite the COVID-19 pandemic.

As in result, Investors shifted towards riskier assets like GBP/USD currency pair as the world’s second-largest economy was continuously showing improvement while America was lagging. The latest US CPI data that edged higher by 0.6% was also not enough to boost the U.S. economy’s confidence.

The soft demand for the U.S. dollar due to an extended period of weak growth and the prevailing second wave of coronavirus induced economic downturn, helped the GBP/USD to move upward on Wednesday.

The Pound rose on Wednesday following the release of the latest U.K. Consumer Price Index for June that exceeded the forecasted 0.5% and came in as 0.6%. As in result, investors became more optimistic about Britain’s economic recovery.

The policymaker of Bank of England, Silvana Tenreyro, said on Wednesday that Britain’s economic recovery from the coronavirus lockdown would probably be delayed by the consumer’s caution towards viruses, decreased activity due to social distancing and rising unemployment. She added that behavioral responses mean that the U.K. economic outlook will continue to depend on the global and domestic spread of COVID-19.

She also said that she was prepared to push for fresh stimulus measures to aid the U.K.’s struggling economy. She said that a V-shaped economic recovery was unlikely.

On the data front, the Consumer Price Index for the year from the U.K. was released at 11:00 GMT, which showed an increase to 0.6% from the forecasted 0.4% and supported British Pound. The year’s Core CPI also increased to 1.4% from the expected 1.2% and supported GBP.

The PPI (Producer price index) Input for June from the U.K. decreased to 2.4% from the expected 3.0% and weighed on GBP. However, the PPI Output for June increased to .3% from the anticipated 0.2% and supported GBP. The RPI (Raw-material price index) for the year came in line with the 1.1% expectations. Most of the data came in better than expected and supported British Pound that gave strength to GBP/USD pair and made it move on the upside.

Besides, the Empire State Manufacturing Index rose from 10.0 of the forecast to 17.2 and supported the U.S. dollar. The Import Prices for June came in as 1.4% against the 1.0% of expectations and supported the U.S. dollar.

At 18:15 GMT, the closely watched Industrial Production for June rose to 5.4% against the expectations of 4.5% and supported the U.S. dollar. The Capacity Utilization Rate increased to 68.6% from the forecasted 67.9% and supported the U.S. dollar. The strong U.S. dollar failed to reverse the bullish momentum; however, it managed to limit the additional gains in GBP/USD pair on Wednesday.

Looking forward, GBP investors will be waiting for the release of the UK ILO Unemployment rate for May on Thursday. If unemployment rises, the U.K.’s GBP will show signs of losses. Meanwhile, U.S. traders will await the U.S. Retail Sales data. Any sign of fall in Retail Sales will undermine the U.S. dollar.


Daily Technical Levels

Support Resistance

1.2535   1.2638

1.2490   1.2696

1.2432   1.2742

Pivot point: 1.2593

GBP/USD– Trading Tip

The GBP/USD is trading with a selling bias at 1.2550 level, holding right above the support level of 1.2548 level. Downward breakout of 1.2548 level can extend selling until 1.2506 and 1.2479 support. The MACD and RSI both are supporting a bearish bias. On the higher side, the GBP/USD pair can face resistance at 1.2575 and 1.2595. Let’s consider taking Sell trades below 1.2533 level today. 

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USD/JPY – Daily Analysis

The USD/JPY pair was closed at 107.233 after placing a high of 107.432 and a low of 107.116. Overall the movement of the USD/JPY pair remained bearish throughout the day. At 9:30 GMT, the Revised Industrial production for May from Japan came in as -8.9% against the expected -8.4% and weighed on Japanese Yen.

At 15:00 GMT, the NFIB Small Business Index for June raised to 100.6 from the expected 97.5 and supported the U.S. dollar. At 17:30 GMT, the Consumer Price Index for June increased to 0.6 % from the expected 0.5% and supported the U.S. dollar. For June, the Core CPI also rose to 0.2% against the expected 0.1% and supported the U.S. dollar.

On Tuesday, Federal Reserve Governor Lael Brainard offered a downbeat assessment of risk ahead. She said that the path ahead for the U.S. economy was under the clouds of high uncertainty, and the Federal Reserve should use forward guidance and large scale asset purchases for a sustained period to help the recovery.

In a virtual event hosted by the National Association for Business Economics, Brainard said that the pandemic was the key driver of the economy’s course. A thick fog of uncertainty still surrounded the U.S. and downside risks predominated.

The calls for further stimulus accommodation from the Federal Reserve by Brainard weighed on the U.S. dollar that dragged USD/JPY with it.

However, the uncontrolled rise in the numbers of coronavirus cases from the U.S. made investors cautious about holding the greenback, and hence, USD lost its traction and weighed on the USD/JPY pair.

The losses in the U.S. dollar were extended after many countries reported renewed lockdown measures to help control the virus’s spread. The California State, which is considered the most populous state of America, also imposed renewed restrictions and weighed on the U.S. dollar as its economic recovery would be difficult.

The cities and states imposed lockdown measures on the back of warning given by the World Health Organization that pandemic could only worsen if countries failed to follow strict precautions. In response to this, Hong Kong, Philippines, Hungary, Australia, and California announced lockdown measures. These restrictions imposed negative pressure on market sentiment as it will affect the global economic recovery.

Meanwhile, Beijing announced sanctions on Lockheed Martin for his involvement in the latest U.S. arms sale to Chinese-claimed Taiwan. This raised the ongoing tensions between the U.S. & China that were already heightened due to the South China Sea issue. The lockdown mentioned above restrictions and ongoing US-China tensions raised a safe-haven appeal that supported Japanese Yen and weighed on USD/JPY pair.


Daily Technical Levels

Support Resistance

107.10    107.43

106.94    107.60

106.77    107.75

Pivot point: 107.27

 USD/JPY – Trading Tips

The USD/JPY is trading with a bearish bias at 106.997 to consolidate within a wide trading range of 107.350 to 106.950. Recently the USD/JPY pair has crossed below 50 EMA, which extended support at 107.100 level, including now the same level is going to work as a resistance. The bearish breakout of the 106.900 level can extend the selling trend until 107.620 and 106.37 level. The MACD and RSI support bearish bias, and we may take a selling trade below 107.27 today. Good luck!