On the news side, eyes will remain on the German Business Climate, and the U.S. durable good as these have the potential to drive movement in the market gold and US-related pairs. Check out the trading plans below.
Economic Events to Watch Today
EUR/USD – Daily Analysis
The EUR/USD pair was closed at 1.16543 after placing a high of 1.16579 and a low of 1.15810. The EUR/USD pair extended its 6th-day bullish rally and rose above 1.16500 level on Friday amid the broad-based U.S. dollar weakness. The declines in greenback boosted the currency pair EUR/USD as the marginal gains in the U.S. dollar failed to retain their position.
The U.S. Dollar Index raised to 94.80 level but turned to the downside after dropping to 94.40 level, the lowest since September 2018. The U.S. dollar currency was unable to stabilize as its weakness remained in place.
The main driver behind Friday’s rally in the EUR/USD pair was the U.S. dollar’s weakness. However, the economic data also supported this upside movement in currency pair.
At, 12:15 GMT, the French Flash Services PMI for July rose to 57.8 against the expectations of 52.3 and supported EUR. The French Flash Manufacturing PMI for July dropped to 52.0 from the projected 53.1. At12:30 GM, the German Flash Manufacturing PMI raised to 50.0 from the 48.0 of expectations, and Flash Services PMI also raised to 56.7 from the anticipated 50.4.
At 13:00 GMT, the Flash Manufacturing PMI for whole bloc also rose to 51.1 from the anticipated 50.0, and the Flash Services PMI for whole bloc reached 55.1 in July from the expected 51.0. At 17:55 GMT, the Belgian NBB Business Climate dropped by 13.9 points against the expected drop by 14.3 points, and it also supported Euro as the business climate showed improvement.
On the flip side, the Flash Manufacturing PMI from the U.S. was released at 18:45 GMT. The figure dropped to 51.3 from the anticipated 52.0. The Flash Services PMI from the U.S. also declined to 49.6 from the expected 51.0 in July. The better than expected PMI data from Europe indicated that manufacturing and services activities were improved in Europe, giving strength to EUR. Whereas, the poor than expected data from the U.S. weakened the U.S. dollar when its PMI dropped in July.
The better economic condition and business climate of the European Union could be attributed to the latest approval of a massive stimulus package by the European Union. And the U.S.’s poor economic condition indicated that the U.S. was still suffering and struggling against coronavirus.
The U.S. marked the second day with 70,000 plus new cases of coronavirus and deaths more than 1000 in 24 hours on Saturday. The total number of infections in the U.S. reached 4.1 M, and the fatalities reached 145,324.
The mounting numbers in infected people will likely weigh on the U.S. economy and its currency for a longer period, and the weakness in gold is likely to remain persistent. So, another rally in EUR/USD on Monday is expected unless news suggested otherwise.
Daily Technical Levels
Pivot point: 1.1648
EUR/USD– Trading Tip
The EUR/USD traded sharply bullish amid weaker dollar to trade at 1.1704 level, and closing below 1.1730 resistance level can trigger selling until 1.1685 level today. On the lower side, the pair may gain support at 1.1686 level. A bullish breakout of the 1.1730 level can extend the buying trend until the 1.1788 level. While the violation of 1.1685 can lead to EURUSD prices towards 1.1589 level.
GBP/USD – Daily Analysis
The GBP/USD closed at 1.27945 after placing a high of 1.28034 and a low of1.27168. Besides, the trading of the GBP/USD pair remained bullish throughout the day. The GBP/USD pair gained on Friday and extended its bullish streak of the 6th consecutive day on Friday amid better than expected U.K. data and broad-based U.S. dollar weakness.
Despite U.K. data coming in favor of local currency, the other factor involved in the rally of GBP/USD pair was the U.S. dollar’s weakness. The greenback has failed to recover as U.S. yields were low and looking for support. Since March, the U.S. Dollar Index fell and posted the fifth weekly decline in a row with the worst performance. The index dropped below 94.5 level that is lowest since September 2018.
Sterling was high on the board as the macroeconomic data related to PMI for July from the U.K. rose from expectations. AT 13:30 GMT, the Flash manufacturing PMI for July rose to 53.6 against the expectations of 52.0 and supported GBP. The Flash Services PMI for July also raised to 56.6 from the expected 51.4 and supported GBP. At 11:00 GMT, the Retail Sales from the U.K. was raised by 13.9% from the expected 8.3% and supported GBP. The better than expected PMI and Retail Sales data from Great Britain helped GBP/USD to post gains and trade higher.
The U.S. Manufacturing PMI dropped to 51.3 from the expected 52.0, and the Flash Services PMI from the U.S. also dropped to 49.6 from the expected 51.0 in July. This added in the U.S. dollar weakness on board and supported the gains in GBP/USD pair on Friday.
Meanwhile, the U.S. dollar weakness was further bolstered by the rising coronavirus cases across the states. The U.S. marked the second day with 70,000 plus new instances of coronavirus and deaths more than 1000 in 24 hours on Saturday. The total number of infections in the U.S. touched 4.1 M, and the death toll reached 145,324.
The hopes that the U.S. economy will take a long period to recover from the coronavirus crisis as it hit hardest the U.S. States kept weighing on the U.S. dollar. The U.S. Dollar drops across the board pushed the pair above the 1.2800 level, and analysts believe that if the dollar’s weakness remained still, the GBP/USD pair could reach the 1.3000 level.
The British Pound was also backed by the decreasing number of coronavirus cases in the U.K. It means that restrictions will be gradually removed, and these hopes supported Pound.
On Brexit front, the latest round of negotiations ended on Thursday without significant progress on the post-Brexit trade deal. Britain’s chief Brexit negotiator David Frost said that they would not reach a preliminary agreement by the UK PM Boris Johnson’s July deadline. However, although the expectations for striking a deal are very less, it could not lose attention. Next week, the Brexit talks, U.S. stimulus package, and the infection cases in the U.S. will be key to watch.
Daily Technical Levels
GBP/USD– Trading Tip
The GBPUSD is also trading in an overbought region, and now it can drop until 1.2825 level, which marks 23.6% Fibonacci retracement below this the next support will be found around 1.2770. At the same time, resistance stays at 1.2860 and 1.2930. The RSI and MACD are in the bullish region, but they are forming smaller histograms that suggest odds of selling bias. Let’s consider taking buying trade over 1.2760 until 1.2860 level today.
USD/JPY – Daily Analysis
The USD/JPY was closed at 106.124 after placing a high of 106.902 and a low of 105.679. The USD/JPY pair extended its bearish streak for the second day towards the lowest of 2 years amid broad-based U.S. dollar weakness. The strong bearish pressure on the day came in after the souring market sentiment that helped JPY gather strength as a safe haven. The currency pair dropped below 106 level and extended its slide and reached its lowest since mid-March at 105.67.
The risk-averse market sentiment was boosted by the escalating tensions between the U.S. & China. Last week the U.S. sent a short notice to China to halt its consulate in Houston. In retaliation, China closed the U.S. consulate in Chengdu, and the tensions between the U.S. & China escalated. Besides, U.S. Secretary of State Michael Pompeo asked for an end of “engagement,” a policy that has defined US-China relations for nearly five decades. The policy is considered as the most important foreign policy achievement by China in recent history.
The safe-haven Japanese yen gained traction due to its safe-haven status, causing the USD/JPY pair to move in a downward direction. The U.S. Dollar Index dropped by 0.36% to its lowest level since September 2018 at 94.41 level and made the greenback weak across the board. The weak U.S. dollar weighed on the USD/JPY pair and pushed the pair to its two years lowest level.
Furthermore, the macroeconomic data released on Friday also weighed on the USD/JPY pair when Flash Manufacturing PMI from the U.S. dropped to 51.3 level from the anticipated 52.0 in July. The Flash Services PMI also fell to 49.6 level from the projected 51.0 and weighed on the U.S. dollar. At 19:00 GMT, the New Home Sales in June from the U.S. increased to 776K from the expected 700K.
The decreased PMI data from the U.S. could be attributed to the increased number of coronavirus cases from across the U.S. On Saturday, the U.S. marked the second day with 70,000 plus new instances of coronavirus and deaths more than 1000 in 24 hours. The total number of infections in the U.S. rose to 4.1 M, and the death number reached 145,324.
Next week, the FOMC meeting will remain dovish, and the scope for U.S. Dollars will remain on the downside. This will make investors to short USD positions that will cause further decline in the USD/JPY pair.
Daily Technical Levels
Pivot Point: 106.03
USD/JPY – Trading Tips
The USD/JPY trades with a selling bias around 105.526 level, trading within a downward channel that provides an immediate resistance at 106.120. On the lower side, the USD/JPY may find support at 105.375 level, and closing of candles below 105.375 can open further selling bias until 104.850. Overall the pair is forming lowers low and lowers high pattern, which signifies selling sentiment among traders. The RSI and MACD suggest selling signals; for instance, the RSI is holding below 50, and the MACD is staying below 104.866. Today, let’s look for sell trade below 105.800. Good luck!