Mid week currency markets review

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The core event of the week, released earlier today and it had to do with the Inflation in the USA. It was announced at 5.4% in July, very close to the markets’ expectations of 5.3%. The anticipation after the announcement was that the inflation in the USA did not rise higher than the previous month, so the Fed has no serious reasons for early tapering. The immediate impact was the weakening of the USD. Earlier this week, the US Senate passed a $1 trillion bipartisan infrastructure bill, sending the key part of Biden’s economic agenda to the House.
EURUSD (current price 1.1730) had reached the strong support of 1.17 earlier today but after the US inflation announcement earlier, it performed a bullish reaction but not in a sense of a trend reversal. The trend is still bearish and below the support of 1.17, there is the support of 1.16. The Economic Sentiment in Germany & Eurozone was below expectations and the inflation in Germany was announced just as the markets anticipated so EUR looks neutral to bearish. USD is stronger this period.
GBPUSD (current price 1.3851) is slightly bearish during the current week (so far) and just 20 pips below the weekly open price. The US inflation announcement lifted the pair a bit higher as the only important economic news so far was the like-for-like Retail Sales which disappointed the markets. The pair is in a balance, around 1.3850 during the last days as both USD and GBP appear strong due to the anticipation of the market that both Fed and BoE may apply early tapering. The bullish trend requires a breakout above 1.3980 and the bearish trend may take place below 1.3570.
USDJPY (current price 110.49) tried to escape above the strong resistance of 110.70 – 110.80 with no success and returned lower after the US inflation announcement. The bond yields keep on rising (the US 10-year bond yield climbed to 1.36%) but the pair is not able to take advantage of it, in terms of an uptrend. JPY is also getting stronger because Japan had some positive economic results so the bullish reaction of the pair could not carry on. Above 110.80 there is hope for more bulls but we can not exclude the case of prices below 110 again.


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