London 20/07/2022

After the previous week’s heavy bullish trend of the US dollar against the EUR, the EUR recovered mainly due to Nord Stream 1 news that Russia will resume the gas supply after the completion of the gas pipeline developments. It’s crucial to understand that Russia supplies 40% of EU gas imports, and this figure is as high as 60% in nations such as Germany. Also, the rumors that tomorrow, ECB will raise the interest rates by more than 0.25% helped EUR to achieve a bullish trend and come close to 1.02. We had two major inflation announcements this week for June: the Eurozone reached the level of 8.6%, while the UK’s Consumer Price Index was announced at 9.4%, slightly above the consensus estimate.On Wednesday, the improved investing sentiment terminated the recent sell-off, and the US dollar Index is in a pullback after having lost more than 1% so far this week. In addition, the bond yields are in consolidation mode and the US 10-year bond yield is slightly below 3%. Another important market news is that the oil reversed the intraday dip amid concerns of limited global supplies, while gold remained in sideways movements with no clear direction. Yesterday, stock indices were bullish with Dow Jones at +2.43%, S&P500 at 2.76%, and NASDAQ at 3.11%. However, on Friday it will be clearer whether this bullish trend will continue as we are waiting for the PMIs announcements and the markets’ sentiment will become more clear.
EURUSD (current price at 1.0226) is recovering this week. After the pullback move on Tuesday from a low of 1.0119, the EURUSD price has turned sideways. The expected interest rates increase on Thursday which may hide surprises of a rise above 0.25% and the positive news about the gas supply coming from Nord Stream 1 gave help and thus the EUR pullback was achieved. Amid the better market sentiment, the US dollar is under pressure. The EURUSD has managed to move away from the 1:1 exchange rate and above 1.0350 it may perform a further recovery. The sentiment of the markets and the risk mood along with the expected interest rate decision by the ECB are the most critical factors.

GBPUSD (current price at 1.1990) is bullish this week but remains around 1.20. The very high rate of the UK’s inflation, which reached the level of 9.4% (YoY) in June failed to convince the investing community that the Bank of England will be more aggressive with its policy of interest rates. The other macroeconomic announcements were neutral and the unemployment rate remained unchanged in June at 3.8%. It takes a solid bullish breakout above 1.2050 for the pair to start developing a mini uptrend but below 1.1920, the bears may return stronger.

USDJPY (current price at 138.11) is mildly bearish this week but still has not moved far away from the major target for the buyers which is the price area of 140. Tomorrow’s interest rates decision by the BoJ will be business as usual as everybody waits that the interest rates will remain at -0.1% and the ultra-loose monetary policy will carry on. This is what the markets expect but any possible hawkish hints from the Bank of Japan may cause important movements in the yen because it has been pressed a lot during the last months. Above 139.40, which is the last resistance before the 140 milestone price, the uptrend becomes heavy.

DISCLAIMER: The information produced by a-Quant is of a general nature only. It is not personal financial advice. It does not take into account your objectives, financial situation, and personal needs.

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