Forex Today: Dollar bulls trying their luck amid cautious optimism

Here is what you need to know on Tuesday, July 26:

Tepid optimism remains the main underlying theme in Tuesday’s trading so far, with the US dollar finding some demand and equity futures losing about 0.30% on the day. Pre-Fed anxiety dominates but the rally in the Chinese tech stocks helped ease off some pressure on the market. Alibaba Group Holding Ltd. led the advance in China tech stocks. The e-commerce giant plans to seek a primary listing in Hong Kong, per Bloomberg.

However, China’s covid concerns are here to stay, as the country’s tech hub, Shenzhen ordered 100 major companies including iPhone maker Foxconn to set up "closed-loop" systems as it battles the latest covid flare-up. Investors also digested reports that US President Joe Biden and his Chinese counterpart Xi Jinping will speak over a call later this week.

Among other news, Moody’s Investors Service lowered its GDP growth forecasts for the US and Europe for 2022 as well as 2023. The Bank of Japan (BOJ) June meeting minutes revealed that the board saw price rises broadening and agreed economic uncertainty was 'extremely high'.

Risk sentiment also remains in a weaker spot, as recession now appears inevitable with the worsening European gas crisis. Russia’s Gazprom announced on Monday it will slow flows on its Nord Stream 1 pipeline. The company will halt another turbine in the pipeline to Germany, which will reduce the flow to just 20% of capacity (currently at 40%) from July 27.

EUR/USD is trading sideways around 1.0220, having failed to find acceptance once again above 1.0250. The euro remains vulnerable amid a disappointing German IFO Business Survey and intensifying tensions over the Russian gas deliveries to Germany.

GBP/USD is retreating from a new three-week high of 1.2091, in absence of any encouraging news from the UK political scenario. USD/JPY is staging a solid comeback, recapturing 136.50 despite the unimpressive BOJ minutes and the renewed downtick in the US Treasury yields. US CB Consumer Confidence is next of note. 

Gold is keeping its consolidative mode intact at around $1,720, defending minor bids amid cautious optimism.

Bitcoin remains pressured around the $21,000 mark while Ethereum tests the $1,400 demand area. “Coinbase Global Inc. is facing a US probe into whether it improperly let Americans trade digital assets that should have been registered as securities,” Reuters reports, citing three people familiar with the matter.