On the news front, the U.S. will be releasing C.B. Consumer Confidence during the New York session. C.B. Consumer Confidence is expected to drop from 98 to 94, and it can weigh dollar prices. Simultaneously, the Spanish Unemployment Rate will be in focus during the European session to determine price action in the Euro pairs today.
Economic Events to Watch Today
EUR/USD – Daily Analysis
The EUR/USD pair was closed at 1.17511 after placing a high of 1.17812 and a low of 1.17447. Overall the movement of the EUR/USD pair remained bullish throughout the day. The EUR/USD pair extended its gains and raised for the 7th consecutive session on Monday to reach 22 months’ top level. The EUR/USD [air even crossed the 1.1700 marks and touched the high of 1.17812 on Monday, the highest since September 2018.
The move was attributed to the U.S. dollar’s weakness as a combination of the sentiment in the risk complex plus the persistent selling of the U.S. dollar in favor of other safe have assets kept the greenback under heavy pressure.
The U.S. Dollar Index fell to 2 years low near 93.60 level and weighed heavily on greenback that ultimately helped EUR/USD pair to grow on the chart for the 7th consecutive session.
On data front at 13:00 GMT, the M3 Money Supply for the year dropped in June to 9.2% from the expected 9.5% and weighed on Euro. The Private Loans for the year also fell in June to 3.0% from the anticipated 3.2% and weighed on Euro. The German Ifo Business Climate, however, was improved to 90.5 points from the expected 89.2 points in July.
In July, the improvement in German Ifo Business Climate could be attributed to the new stimulus package by E.U. commission that was agreed by all E.U. states in 4 days E.U. Summit with some alterations. This improvement in Business Climate for the largest economy of Europe gave strength to local currency and added in the EUR/USD currency pair’s gains.
The sharp surge in EUR/USD pair towards levels last seen in September 2018 above 1.1700 level, confirmed that both single currencies had a solid momentum. USD has a negative momentum triggered by the strong selling bias after the fears of U.S. economic recovery and mounting coronavirus cases. At the same time, EUR has a positive momentum after the E.U. states agreed on a Europe Recovery Fund worth 750 Billion euros. On Wednesday, the Federal Reserve will announce its decision about the monetary policy. Though no change is expected, the comments about the growing concerns on U.S. economic recovery would be key.
Daily Technical Levels
Pivot Point: 1.1733
EUR/USD– Trading Tip
The EUR/USD is trading at 1.1728 level, holding above resistance to become a support level of 1.1715. On the hourly timeframe, the EUR/USD was previously forming highers high and highers low pattern, but now the recent cycle seems to change the trend. A bearish breakout of 1.1715 can drive more sales until the 1.1683 level. On the higher side, the resistance can stay at 1.1780.
GBP/USD – Daily Analysis
The GBP/USD pair was closed at 1.28793 after placing a high of 1.29025 and a low of 1.27755. Overall the movement of GBP/USD remained bullish throughout the day. The GBP/USD pair extended its gains and maintained its bullish streak for the 7th day amid broad-based U.S. dollar selling bias.
The pound surged to nearly five months high level against the U.S. dollar and reached above 1.2900 marks on Monday, but the signs that Brexit negotiations have delayed could prompt bearish bias to rise further.
The decline in the U.S. dollar continuously supported the rally in the GBP/USD pair. The greenback continued to decline that started last week. It was unable to find support because of worries about the economic recovery in the U.S. and rising expectations about more stimulus from the Federal Reserve.
Furthermore, the macroeconomic data on Monday from the U.S. showed that Core Durable Goods Orders in June dropped to 3.3% from the 3.5% of expectations and weighed on the U.S. dollar. However, the Durable Goods Orders for June raised to 7.3% against the expected 7.0% and supported the U.S. dollar.
On Brexit front, the E.U. and U.K. wrapped up their last round of negotiations in London last Thursday but failed to find a solution on key sticking points, including access of E.U. vessels to fish British waters that have so far muted the progress. The E.U. chief negotiator Michel Barnier has emphasized that talks between E.U. & U.K. needed to be completed by October to ratify a potential deal would be lengthy.
On Monday, the strength in Sterling was largely driven by a sharp fall in the dollar as investors bet that an average inflation targeting mechanism will be introduced by the Federal Reserve in its next meeting this week, and that would likely keep interest rate lower for longer.
The Federal Open market Committee will kick off its 2-day meeting on Tuesday. The interest rates are expected to remain the same within the range of 0% t0 0.25%. However, the comments from FOMC members will be key to watch to take fresh clues about the economic condition of the U.S.
Daily Technical Levels
Pivot Point: 1.2855
GBP/USD– Trading Tip
On the 4 hour chart, the GBP/USD has closed with a bearish engulfing candle, which suggests odds of more selling the in Cable. On the lower side, GBP/USD can find support at 1.2810 and 1.2765 level. Conversely, the resistance stays at 1.2900 and 1.2975. Let’s consider taking buying trade over 1.2760 until 1.2860 level today.
USD/JPY – Daily Analysis
The USD/JPY pair was closed at 105.378 after placing a high of 106.105 and a low of 105.114. Overall the movement of the USD/JPY pair remained bearish throughout the day. On Monday, the USD/JPY pair fell sharply and reached 105 level as the JPY capitalized on the risk-off flows at the start of the week. The broad-based U.S. dollar weakness and Japanese Yen’s strength as safe-haven currency caused the pair to decline for the 3rd consecutive session.
The U.S. Dollar Index was down 0.83% on Monday at 93.56 level, which, combined with the decreased Core Durable Goods Orders in June data, weighed on the U.S. dollar. As in result, greenback suffered further and pushed USD/JPY currency pair towards fresh multi-month low.
At 17:30 GMT, the Core Durable Goods Orders were declined to3.3% from the 3.5% of expectations and weighed on the U.S. dollar that ultimately pulled the USD/JPY pair towards the lowest level. At 17:30 GMT, the Durable Goods Orders for June increased to 7.3% against the expected 7.0%
On Monday, the Bank of Japan released the summary of opinions at a July rate review. BOJ’s policymakers debated how the COVID-19 pandemic could reshape monetary policy and its impact on the economy. Many in the nine-member board warned any domestic recovery from the pandemic’s disturbing economic impact would be uncertain and could be delayed depending on how long it takes to contain the outbreak.
Several board members cautioned that any further economic stress would require policymakers to pay close attention to Japan’s banking system and its long-term expectations of inflation. One member suggested that further action was needed with close cooperation with the government and other central banks.
At the July rate review, the Bank of Japan kept the monetary policy steady and gradually maintained its view that the economy would gradually recover from the crisis. In short, the Bank of Japan’s July meeting summary of opinion suggested that the nation’s economy is likely to improve in the latter half of this year, but the impact of a pandemic on inflation and growth expectations must be watched.
On the other hand, US-China tensions escalated after China took over the U.S. consulate locations in the southwest city of Chengdu on Monday. The move came in after the facility was ordered to be vacated in revenge for the closure of China’s consulate in Houston last week.
U.S. Secretary of State Mike Pompeo said that Washington and its allies must use “more creative and assertive ways” to press the Chinese Communist party to change its ways.
The increased tensions between both nations kept the Japanese Yen stronger due to its safe-haven status. The strong Japanese Yen then pushed the USD/JPY pair lower towards multi month’s low level.
Daily Technical Levels
Pivot Point: 105.56
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 0. Today, let’s look for buying trade above 105.200. Good luck!