Mid week currency markets review

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The big announcement of the week was released yesterday and it had to do with the US Inflation in August. Inflation is one of the hottest issues of the global economies this period as it has climbed to very high levels, mostly as a COVID-19 pandemic result. The Inflation in the US was released at 5.3%, just the same price it had in July, but the Core Inflation (excluding food and energy) dropped to 4% from 4.3% in July. This announcement somehow calmed down the fears and gave more credit to the delayed tapering from the Fed (tapering is the reducing bond-buying program). In other words, Inflation fell, so the Fed can keep on providing high liquidity to the markets without many fears and concerns. The reasonable reaction for this is to see the USD weaker, a fact that is taking place mostly today as yesterday, the currency markets had fluctuations and high volatility, especially just after the news.
EURUSD (current price 1.1824) was slightly bearish until a few hours ago but it seems that the weakness of the USD, after the US Inflation announcement, has turned the pair bullish. The Industrial Production in July was +1.5% vs +0.6% expected and this has given extra fresh air to the EUR. Many analysts claim that EURUSD has the fuel to conquer 1.20 but it takes a bullish breakout of the resistance of 1.19 first.
GBPUSD (current price 1.3827) had a bearish direction yesterday but today it performs a recovery, reaching the weekly price levels. The USD is weak but the sterling has some reasons to be strong. The Unemployment Rate was announced in July at 4.6% but the key fact is the Inflation that was announced in the UK a few hours later at 3.2% vs 2.9% expected. This result opens the green light thoughts about an early reduction of the high liquidity that the Bank of England provides due to high inflationary pressures. Above 1.3913, there’s a good chance for 1.40 pretty soon.
USDJPY (current price 109.34) is very bearish (up to now) this week, not only caused by the weakness of the dollar but due to an important drop in the bond yields as well. The US 10-year bond yield opened the week at 1.34% and it is now at 1.27%. The Japanese economic calendar was poor so far so all the bearish movement is addressed to the USD and its particularities. The next support levels that are critical for USDJPY are 109.10 and 108.70.


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