Market Analysis

USD Remains At 3 ½ Month Highs

July 26, 2021

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The dollar remained near three-and-a-half-month highs against the common currency in a tight move as financial markets ’attention focused on issuing the Fed’s interest rate decision on Wednesday. The pound weakened against the USD and the EUR on Friday as previous July PMI readings showed an unexpected slowdown in economic activity for the month of July spreading disappointment, despite retail sales for June accelerating. The AUD weakened on Friday despite global risk sentiment improving somewhat as sustained blockchain measures applied to almost half of Australia’s population tended to weigh on the Australian currency, while Iron Ore prices also fell sharply adding to the concerns of Australian traders. U.S. stocks rebounded and ended the week higher on Friday with all three major stock indices reaching new record highs also supported by the earnings season particularly in the tee sector. Gold prices remained fairly stable although slightly higher on Monday, perhaps with some help buying down U.S. fiscal yields and growing concerns for Covid’s Delta variant.

EUR / USD remained in a somewhat tight limited movement just below the resistance line 1.1785 (R1). We tend to maintain a bias for sideways movement, considering the pair’s movement since the 19th of the month as well as the RSI indicator, which remains close to the reading of 50, implying a fairly undecided market. If selling interest is shown by the market, we may see the pair break the support line 1.1695 (S1) and target low terrain. On the other hand, if buyers take over the initiative above the pair direction, we may see the pair break the resistance line 1.1785 (R1) and aim if not break the resistance level 1.1885 (R2).

AUD / USD retreated on Friday targeting the support line 0.7335 (S1). We tend to keep a bearish outlook for the pair as long as it stays below the downward trend line as of July 6th. Note also that the RSI indicator below our 4-hour chart is between the 50 and 30 reading, which may imply that the bears may have a slight advantage. If the bears actually continue to guide the direction of the pair, we may see it break the line 0.7335 (S1) and target the support level 0.7265 (S2). If the bulls take over, we may see the pair break the downtrend line, the resistance line 0.7400 (R1) and target the level 0.7465 (R2).

Other economic highlights today and the next Asian session:

Today we receive during the European session the Ifo indicators of Germany for July, while in the US session we receive the US new sales number for June. On the monetary front we note Vlieghe’s planned speech by the BoE near the end of the European session.

As for the rest of the week

On Tuesday we receive the UK CBI distributions for July, UK the US durable goods ordered for June and the US consumer confidence for July. On Wednesday, the BoJ will release the summary of views on its last meeting and we will receive the Australian CPI rates for Q2, Germany’s GfK Consumer Sentiment for August, Canada’s inflation rates, while in the US the Fed will publish its interesting decision. On Thursday we get the UK’s nationwide house prices for July, the Swedish GDP tax for Q2, the eurozone economic sentiment for July, Germany’s previous HICP rate for July, and from the US the GDP advance rate and the weekly start-up unemployment assert. On Friday we get Japan’s previous industrial output for June, France’s previous GDP index for Q2, Germany’s previous GDP index for Q2, France’s previous rate of CPI (EU Standardized) for July, Switzerland’s KOF- indicator for July, and the previous rates of EICZ and Eurozone GDP. respectively for July and MEP.

EUR / USD H4 chart