Mid week currency markets review

This week so far, USD is bullish as every day was clearly bullish. The USD Index opened the week at 91.77, closed on Monday at 91.88, closed on Tuesday at 92.07 and it is currently at 92.14. The currency markets are driven by the echo of the previous weeks of the Central Banks and the dovish/hawkish atmosphere that has been developed but during the last days, the Delta variant of COVID-19 has created a risk-off mood to the investors. The risk-off mood most of the time favors the currencies that are considered to be safe-haven assets, such as the USD and the JPY. There are a few economic announcements so far that were rather ignored by the markets but the next few days are more interesting on this, mostly because of the PMI announcements on Thursday and because of the NFPs on Friday. A few hours ago, the ADP Employment Change in the USA showed that 692,000 new job positions were created in June vs 600,000 expected.

EURUSD (current price 1.1877) had three bearish days in a row, following the strength of USD. Eurozone, Germany and France had decent to good economic results and the most important is that the June Inflation in Eurozone was announced exactly upon the expectations at 1.9% YoY. This fact means that most likely the ECB will continue the loose Monetary Policy that makes EUR weaker. EURUSD has room to extend its bearish direction, down to the major support of 1.17. NFPs on Friday may increase the volatility and may even change the trend of the pair in case of exotic results.

GBPUSD (current price 1.3845) is trying to apply a bullish reaction today against the bearish trend that has been developed since the beginning of the week. This reaction is mainly caused by the Andy Haldane (Bank of England) statement that high Inflation projections (4% expected in 2021 vs 3% last expectations) may cause decisions for a tighter Monetary Policy but it does not seem to carry any super strength. Especially after the US ADP Employment Change, GBPUSD has reversed this mini uptrend movement and the short-term sellers of the pair have put their eyes on the 2.5 months low, below 1.3785.

USDJPY (current price 110.66), started the week bearishly but today the pair is trying to gain back the weekly losses. The falling bond yields (10-year US bond yield dropped from 1.52% to 1.45%) have caused this movement but today the strength of USD is obvious and overrides everything else. Japan had mixed emotioned announcements (positive Retail Sales & Industrial Production and negative Unemployment Rate) so JPY was practically neutral. The key price area of the pair is at 110.80 – 110.90 and a solid bullish breakout above 111 will put the pair on a bullish trend.

AUDUSD (current price 0.7499) has a strong bearish trend this week, losing more than 90 pips so far. China has positive PMIs but the pair is dropping but the main issue of the last hours is that Australia announced a series of lockdowns in many popular areas (including Sydney, Brisbane and Perth) as the Delta variant because only the 5.8% of the population is fully vaccinated and this creates concerns for a new and very strong wave. Moreover, the pair has dropped below 0.75 which is a milestone price and it is ready to drop below the major support at 0.7475 which may accelerate more bears and to cause a free-falling effect. Strong USD helps in this direction unless the NFPs on Friday change the mood.

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