USD, EUR/USD, AUD/USD Analysis and Talking Points
USD: The USD stays on the backfoot following final week’s shock contraction in the latest US PMI report. As such, whereas this has fuelled an unwind of the US Dollar’s latest energy, it’s up to now a case of a tactical pullback versus a significant pullback. Despite the ECB’s shock with a 50bps hike to finish the period of damaging rates of interest, the present narrative surrounding Europe stays bleak. For now, the expansion story trumps the normalisation outlook, that means that choice for Euro publicity is on the quick facet.
This week, we’ll get a primary have a look at the US Q2 GDP report, consensus appears to be like for a tepid rise of 0.4%. However, there’s a heightened danger in line with the Atlanta Fed GDPNow Model that the determine might present a contraction, which if realised would mark a technical recession following the 1.6% drop in Q1. Over the weekend, US Treasury Secretary Yellen weighed in on the upcoming GDP report, stating that even when the quantity is damaging, the US will not be in a recession now, referencing the truth that the labour market is “extremely strong”. I feel that is noteworthy coming from a former Fed Chair, as this offers some perception into maybe the considering among the many FOMC. Suggesting that the Fed will stay steadfast in tightening coverage aggressively as they lean towards the energy of the labour market.
The pattern is the US Dollar has usually been outlined by the 21 and 55DMA. While softer yields and a pick-up in danger sentiment have additionally weighed on the buck, the latter is probably going a bear market rally as the trail of least resistance stays decrease within the present backdrop.
US Dollar Chart: Daily Time Frame
EUR: The worst-case state of affairs had been averted final week as Russia resumed gasoline flows by way of the Nord Stream 1 pipeline after annual upkeep. Although, gasoline flows are solely again to pre-maintenance ranges of 40%, which is able to stay a drag on the Euro Area within the months forward. As such, this makes it troublesome to get on board with the view that the Euro could make a notable reversal and thus the bias stays to fade rallies, significantly with EUR/USD beneath key resistance at 1.0340-60 and its 55DMA (circa 1.0450). While hawkish feedback from ECB’s Kazaks in addition to the Kremlin stating they don’t have any want to chop off gasoline provide to Europe has helped carry the Euro above 1.0200, near-term resistance is located at 1.0280, a degree that noticed a number of failures final week.
EUR/USD Chart: Daily Time Frame
Top Q3 Trade Idea – Euro May Break Parity
AUD: For Aussie merchants’ eyes will probably be on native knowledge with the Q2 Australian Inflation report launched on Wednesday. As it stands, money markets are pricing in 50bps on the upcoming assembly, which might take the money price to 1.85%. Should we see a sizeable upside shock in headline inflation, this might see markets worth in a bigger sized hike. Although, as proven within the desk beneath, the preliminary affect on AUD/USD has typically been unwound. Subsequently, danger sentiment and the USD would be the greater issue for the pair this week. Resistance located at 0.6965-70 and above at 0.7000.
Source: Refinitiv, DailyFx
AUD/USD Chart: Daily Time Frame