End of the week currency analysis
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.
The week is closing in, with USD slightly stronger. The inflation announcement in the USA on Tuesday increased the volatility but most of the bullish movement for the dollar came on Thursday where a series of events took place: The AUKUSD agreement against China, Evergrande one of China’s largest Real-Estate companies is in front of a bankruptcy and the Retail Sales in the USA that performed an impressive come-back in August. All these factors favored the greenback although today it follows a mild correction.
The inflation that was announced in the Eurozone, earlier today, at 3% in August, exactly as expected so there was no turbulence to the markets.
EURUSD (current price 1.1781), most likely will close lower than its weekly opening, mostly due to the strength of the USD. As long as the USD remains strong and the ECB keeps its Monetary Policy loose with no intention of hiking the Interest Rates pretty soon, EURUSD has the potential to move lower. Many analysts think that 1.15 soon, is not a science-fiction scenario although there are some important supports on this journey: 1.17, 1.1660, and 1.16.
GBPUSD (current price 1.3796) is relatively bearish this week and almost all the movement of 40 pips till now came after the US Retail Sales announcement yesterday. The pair tried to recover later because as we have already said, the UK has a better chance to tighten its Monetary Policy after the latest high inflation announcement, but the Retail Sales were released today (-0.9% in August vs +0.5% expected), and pushed GBPUSD lower. Below 1.3720 we think that there may be room for more bears but if the pair manages to surpass 1.38 soon and solidly, the target of 1.40 has a better chance.
USDJPY (current price 109.95) today managed to turn bullish, by overcoming the bearish weekly beginning, with bullish Thursday & Friday but it still has not achieved to exceed above 110 which is the milestone price of the area. The recovery of the bond yields along with the strength of the USD is responsible for this as Japan’s economic calendar was poor during the last few days. There is an obvious oscillation around 110 in the last two months with low volatility but it looks like a squeeze that potentially may lead to an explosion.
USDCHF (current price 0.9269) has outperformed this week the rest of the US currency pairs and it is very close to the very important resistance at 0.9275. A solid breakout above this level, which is the highest price of the last five months, may lead to 0.95. A possible risk-on mood may cause the weakness of the CHF, even more. amplifying our bullish scenario.