MARKET MOVERS
Wendy Le
Australian CPI q/q – 29 July 11:30am
Australian CPI is forecasted to decrease from 0.3% to -2.0%. This potential decline in inflation could be attributed to the spike in COVID-19 cases in Victoria and NSW. This indicates a movement away from the RBA’s target inflation rate of 2-3% meaning that in the short-term, there will be no interest rate changes.
U.S. Pending Home Sales m/m – 30 July 12:00am
U.S. Pending Home Sales saw a 44.3% increase in May. It is forecasted to rise by 15.6% in June, indicating U.S. economic recovery from COVID-19 impacts.
U.S. Advance GDP q/q – 30 July 10:30pm
Previous advance GDP figures saw a 5.0% decrease and is forecasted to contract even further this quarter by 35.0%. As GDP is the broadest measure of economic activity and an indicator of economic strength, a worse than expected GDP q/q will weaken the USD.
Canada GDP m/m – 31 July 10:30pm
Previous figures show that the economy had contracted by 11.6% in the previous month and is expected to expand by 3.3% this month. If the actual GDP is better than the forecast, the CAD will strengthen.
MAJOR NEWS
Euro News
Will Liu
Over the last week, there was an across the board decline in the USD, falling even in comparison with the JPY. With one of the biggest moving pairs being the EUR/USD currently trading around 1.16, after surpassing 2018’s peak. From a fundamental perspective, the confluence of Eurozone’s better than expected Markit Composite PMI for July (forecasted: 51.1, actual: 54.8), worsening US-China relations (China closed the US consulate in Chengdu, retaliation for America’s move against Beijing’s office in Houston) and increased concern over the second wave of coronavirus infections in the US (mentioned in last weeks newsletter), potentially further delaying America’s economic recovery saw the currency pair rise, whilst still exerting bullish pressure.
TECHNICAL ANALYSIS
EUR/USD
Will Liu
From a technical perspective, short-term outlook remains highly bullish, with technical indicators maintaining their upward slope, with the pair currently being above the 200 SMA. However, with six continuous bull candles on the day chart, there is increased possibility for a bearish corrective move. The pairs inability to maintain a move above the 50% Fibonacci level, exacerbate bearish pressure as it may drive away prospective bulls. When the market opens again, the pair still has possibility for continued upward movement but will quickly hit the 1.1660 resistance level, followed by 1.1730, with room to grow until the September 2018 high of 1.1814. The premise for testing these resistance levels is that the pair is able hold above the psychological resistance of 1.15 when pullbacks occur, otherwise bears are likely to rule the market, with only 1.146 coming in as the next strong support.
ANALYST OUTLOOK
Wendy Le
BCom/Econ
GBPUSD – Bearish Outlook
The GBPUSD currency pair has reached the 1.27725 resistance level which was previously a support level before the huge drop in March. This level is also a fibonacci retracement level meaning that a pullback is highly likely to occur. The currency pair is also approaching overbought conditions according to the RSI.
Will Liu
BCom/Comp Sci
EURUSD – Bullish
Overall the pair still remains bullish in the short term, but the weakening/lack of momentum in bullish indicators coupled with the growing insecurity in the global market which in turn is likely to provoke the USD’s safe haven qualities, create a bullish outlook for the pair in the short to medium term. Therefore, traders in this pair should be extra cautious in coming week, with long position being opened only after key resistance levels have been breached and stop losses set close below supports. However, traders also shouldn’t be too hasty to short as factors such as the continued usage of quantitative easing in the EU and possibility for more Covid-19 cases in America can attract bulls to the pair.
