USD Weakens From The Improved Market Sentiment

Jul 12 21, 11:17 GMT

USD weakened on Friday against a number of its counterparts as worries tended to subside and the market’s focus turns towards the US CPI rates on Tuesday to see whether the inflationary pressures in the US economy are to be confirmed. US stockmarkets tended to benefit from the risk on appetite of the markets with Nasdaq and S&P 500 closing at record highs, while Dow Jones was at similar territories. Gold prices tended to benefit from a weaker greenback on Friday for an eighth day in a row, yet today during the Asian session gold prices tended to ease somewhat with investors focusing on the US inflation rates and Fed Chairman Powell’s testimony this week. The Loonie gained against the greenback on Friday, as Canada’s employment data for June provided support given that the employment change figure outperformed market expectations and the unemployment rate dropped, implying a tightening of the Canadian employment market. The pound gained and investors seemed quite optimistic, given that the UK government reaffirmed this week plans to end social and economic COVID-19 restrictions in England on July 19, yet at the same time warned that the number of coronavirus cases could climb. Oil prices rose on Friday yet rising number of COVID-19 cases and unequal access to vaccines threaten the global economic recovery.

EUR/USD benefitted from USD’s weakening on Friday yet seems to have reached a ceiling at the 1.1885 (R1) resistance line. We tend to maintain a bias for a sideways motion between the 1.1885 (R1) and the 1.1785 (S1) support level. Also please note that the RSI indicator below our 4-hour chart is just above the reading of 50, which may imply a slight advantage of the bulls. Should the bulls actually take over we may see the pair breaking the 1.1885 (R1) resistance line which was tested on Friday and aim for the 1.1995 (R2) level. Should the bears prevail, we may see EUR/USD breaking the 1.1785 (S1) support line and start aiming for lower grounds, which could signal a return to low levels not seen for the pair since the early days of April.

On the other hand, the Japanese currency also tended to experience safe haven outflows as it weakened even more than the USD breaking the 109.90 (S1) resistance line, now turned to support. As the pair seems to have broken the downward trendline guiding it since the 2nd of July, we switch our bearish outlook in favour of a sideways motion bias initially. Should buyers be in control of the pair’s direction, we may see it breaking the 110.90 (R1) resistance line and aim for higher grounds. Should the market display a selling interest for the pair, we may see it breaking the 109.90 (S1) support line and aim for the 109.25 (S2) level.

Other economic highlights today and the following Asian session:

Today we have a rather empty calendar yet we highlight for Aussie traders the release of China’s trade data for June, as Australian exporters of raw material are expected to keep a close eye on the import growth rate.

As for the rest of the week

On Tuesday, we note Germany’s and France’s final HICP rate for June and the US CPI rates for June. On Wednesday, we get New Zealand’s RBNZ interest rate decision, UK’s and Sweden’s CPI rates for June, Eurozone’s industrial production for May, Turkey’s CBRT interest rate decision and from Canada BoC’s interest rate decision. On Thursday, we get Australia’s employment data for June, China’s industrial output and for June and GDP growth rate for Q2, UK’s employment data for May, the US New York Fed manufacturing for July, the weekly initial jobless claims figure, the Philly Fed business index for July and the US industrial production for June. On Friday, we highlight New Zealand’s CPI rates for Q2, Japan’s BoJ interest rate decision, Eurozone’s final HICP rate for June and from the US the retail sales for June and the preliminary University of Michigan consumer sentiment for July.

EUR/USD H4 Chart