London 26/08/2022
The US dollar has applied a significant correction as the current week is closing in. There is an attempt for the investing community and market analysts to interpret the latest economic news and what should we wait for from the central banks. The durable goods orders in the US were announced much better than the market estimations. The same happened with the US GDP for the 2nd quarter of 2022 which was announced at -0.6% (annualized rate) vs -0.8% which was the markets’ consensus. Finally, earlier today the US personal consumption expenditures were released at 6.3%, significantly lower than the 7.4% that the markets expected. Ahead of the very important speech of Jerome Powell at the Jackson Hole Symposium, the markets consider that the Fed may calm down the aggressive interest rate hike policy as the inflation starts deescalating and the macros are in a good shape. That is why the US dollar index has moved away from the weekly high price of 109.19 and it is currently below 108.
Regarding the stock markets, the US indices have fully recovered from the losses that they performed earlier this week and the European ones are in a stronger correction. Gold is in a sideways movement this week and oil performs profits. Finally, as we’re close to the end of the week, the bond yields increase and the US 10-year bond yield has climbed above 3.04%.
EURUSD (current price at 1.0039) is practically neutral this week although it dropped below 0.99 on Tuesday. On the very first days of the week, the US dollar was bullish but then we saw a correction and a significant recovery of the EURUSD. It is important to mention that the pair have managed to rise above parity which is always an important price zone and a psychological level that affects the markets. Also, besides the dollar’s latest weakness, the euro had some reasons to recover as the German announcements were impressively positive. The Q2 2002 YoY GDP was announced at 1.7% vs 1.4% which markets expected and the German business climate was announced at 88.5 while the markets estimated a price of 86.8. Although Europe is going to have a very difficult winter due to the energy crisis, the shared currency took some helpful breaths after this news. Above 1.01 the bullish recovery may carry on but every solid bearish breakout below the parity may sink the pair to a heavy downtrend.
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GBPUSD (current price at 1.1859) is slightly bullish this week, mostly based on the dollar’s weakness over the last few days. As the UK had no important economic news to release in the last 3 days, the dollar is the absolute dominator of the pair. The macros that were announced in the US, as we saw above, have weakened the dollar because the perception of the markets is that the Fed will not continue very aggressively regarding the monetary policy and the interest rates. The biggest obstacle to the pair’s uptrend is the milestone price of 1.20 while the GBPUSD is still vulnerable to a bearish trend, especially below 1.1760.
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USDJPY (current price at 136.66) is a bit bearish this week as the two major factors that affect the pair are in an opposite course this week. More specifically, the US dollar is in a correction mode in the last 3 days but the bond yields keep on rising as the US 10-year has managed to stay above 3%. Japan, more or less, stays in the same situation because the inflation that was announced earlier today at 2.9% does not seem able to change the monetary policy of the Bank of Japan, which will remain ultra-loose, most likely. The local resistance for the pair’s bullish trend is the price area of 137. The weekly low price of the USDJPY is 135.80 and it seems that this is the most important support.
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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.
