Varengold Bank Research Team
Varengold Wertpapierhandelsbank AG
Good morning from Hamburg and welcome to our latest Daily FX Report of this week. Wall Street ended flat on Thursday as investors digested ho-hum corporate earnings and new data showed that the economy grew more quickly in the second quarter. Procter & Gamble, Facebook and Whole Foods Market all fell after quarterly reports that left investors wanting more. U.S. economic growth accelerated in the June quarter as solid consumer spending offset a drag from weak business spending on equipment, suggesting steady momentum that could bring the Federal Reserve closer to hiking interest rates this year. With a mixed bag of corporate earnings over halfway through second-quarter reporting season and a sharp focus on when the Federal Reserve will begin raising interest rates from near zero, investors on Thursday saw few reasons to pay more for shares.
Anyway, we wish you a successful trading day and a relaxing weekend!
Market Review – Fundamental Perspective
The dollar rose to a one-week high against a basket of currencies on Thursday as news of faster U.S. economic growth in the second quarter supported expectations that the U.S. Federal Reserve will raise interest rates as early as September. The dollar index was up 0.5 percent at 97.496 after touching 97.773, its highest in a week. The USD rose to a seven-week peak of 124.58 yen before retreating to 124.12 yen, up 0.2 percent on the day. The euro shed 0.5 percent to $1.0925 after hitting an one-week low at $1.0894. The euro faced further selling pressure on a Financial Times report that said the International Monetary Fund could not officially join bailout talks with Greece until the debt-burdened nation agrees to comprehensive reforms. While recent economic data has raised the chances of a U.S. rate increase, some analysts caution that Greece's unresolved debt woes and turmoil in China's financial markets may worsen, forcing the Fed to postpone a rate hike in September.
The dollar's renewed strength put pressure on commodities prices and currencies closely linked to them. As a result the Canadian dollar was down 0.5 percent at $1.3005, and Australian dollar dipped 0.1 percent at $0.7291. The New Zealand dollar fell 0.9 percent to $0.6601 The strong U.S. dollar also pushed the price of crude oil, a major Canadian export, lower, which put further pressure on the CAD. The Canadian dollar finished at C$1.3010 to the USD, or 76.86 U.S. cents, weaker than the Bank of Canada's official close of C$1.2944, or 77.26 U.S. cents, on Wednesday.
Daily Technical Analysis
EUR/USD (Daily)
A quick glimpse on the chart reveals that investors are unsure these days regarding the future direction of this currency pair. For months this currency pair is already traded in a very narrow sideward channel leaving no room for any significant course corrections. According to the indicators and regarding the fundamentals there are no major signs for a significant movement at the moment. The trend remains stable between $1.08 and $1.11.
Support & Resistance (Daily)
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Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
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Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.