End of week currency markets review

DISCLAIMER: The information produced by aQuant 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.
Jerome Powell, chairman of Fed, testified during the last two days in Congress. Markets were very curious about some possible reactions, after the higher than expected inflation price in June, which was announced at 5.4%. Powell repeated that the high inflation comes from the country’s reopening from the pandemic and that Fed won’t take any premature actions, risking the US growth and the Unemployment Rate which still has not met the predefined targets. This dovish statement caused the rise of USD which continues today as well. More specifically, the USD Index managed to move higher from its low price of 92.25, to 92.67 currently. The USD Index has major resistance at 92.82 and this should be taken under consideration. USD is also helped by the risk-off mood that has dominated the markets lately as a result of the continuous and rising fears about the Delta variation and its impact on the global economy.
EURUSD (current price 1.1801) is trying to hold on to its strong support of 1.18, as it is falling during the last 2 days, mostly due to Powell’s statements. Eurozone released earlier, the inflation results in June with no divergence from the estimations, so EUR did not get affected. Delta covid variant is a very important issue in Europe with a rising number of cases in many countries, creating a risk aversion to most of the investors. The price area of 1.17 is more important because it is a multi-month low price.
GBPUSD (current price 1.3815) has dropped since Thursday and after Powell’s speech in Congress, as the dovish approach helped USD. The UK also had bad results in the job market as the Unemployment Rate was announced at 4.8% vs expectations for 4.7%. On Wednesday, the rising UK inflation had created hopes for a tighter Monetary Policy but the strength of the USD carried the pair lower. GBPUSD applies a technical bullish reaction above 1.38 but the major support of 1.3730 remains as the major target for the sellers.
USDJPY (current price 110.17) has had higher volatility this week, not only due to the speculation on the US Monetary Policy but due to the Interest Rates decision from the Bank of Japan earlier, even if no big surprises occurred (rates stayed unchanged at -0.1%). The Bank of Japan did not also change the Monetary Policy but the revision for growth in 2021 and 2022 was down. The pair seems to depend totally on USD lately and the recovery above 110 seems that a downtrend channel has not been developed yet. Below 109.50 there may be a case for prices like 109 or 108 but for the time being, buyers ask for a bullish breakout above 110.70.
AUDUSD (current price 0.7417) turned very bearish yesterday and took back the attempt of Wednesday’s recovery. The pair has lost about 60 pips since the beginning of the week as a result of the risk-off mood (see Delta variant) and the bad results released by Australia and China. Australia had 29.1K new job positions in June vs 30K expected and China failed to meet the GDP 2021 Q2 target of 8.1% as it was announced at 7.9%. The pair is very close to the critical price zone of 0.74 and below that level, there’s no obvious resistance to hold on.


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