Forex Today: Dollar has no reasons to recover, for now

FXStreet Team FXStreet

Here is what you need to know on Monday, July 6:

A holiday in the US kept majors lifeless on Friday, exacerbating the previous range trading. The greenback finished the week with a soft tone, weighed by concerns about the future of the economy as coronavirus cases continue to rise, particularly in the Southern states. The dollar maintained its week tone across the board.

Coronavirus expansion remains as the primary market concern. The US has reported over 57,000 new cases in just one day by the end of the week, with the epicentre in the Southern States. The number of new contagions eased during the weekend, but the country is still reporting over 45,000 new cases per day. The total number of new contagions worldwide on Saturday reached roughly 189,600, while there are over 4.4 million active cases reported globally. Progress in vaccines continues to be to slow for the market to shift its focus to economic recoveries.

On Saturday, ECB President Christine Lagarde said that the EU would likely face two years of downward pressure on prices, amid a transformation of the economy as a result of the coronavirus pandemic. Lagarde said that the economy is facing a transition period to new economic models, with greater digitization and automation, affecting employment and production. In the meantime, the central bank will need to keep its monetary policy exceptionally loose.

After Brexit talks ended earlier than anticipated on Thursday amid serious divergences between both parts, the EU and the UK committed to another round of talks this week in London. There are three main issues that remain unsolved: EU access to UK fishing waters, the EU’s demand for a “level playing field,” and the position of the European Court of Justice to resolve disputes.

Last Friday, Asian equities posted modest gains, but European indexes closed in the red, reflecting the cautious mood. The dismal market’s sentiment will likely continue at the beginning of the new week.

Gold prices hit a fresh 8-year high last week, ending it pretty much unchanged at 1,774.60. Central bank’s pledge to keep stimulating the economy and concerns related to the coronavirus pandemic will likely continue to support the bright metal.

Crude oil prices finished the week with gains, although within familiar levels. WTI continues to hover around $40.00 a barrel.

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EUR/USD flirts with weekly lows near 1.1770

EUR/USD now comes under further selling pressure, breaking below the 1.1800 support to challenge the area of weekly throughs near 1.1770 on Thursday. The pair’s decline comes in response to marked gains in the US Dollar amid steady geopolitical tensions. Ealier in the day, the ECB’s Lagarde delivered cautious remarks, although the currency remained apathetic.

GBP/USD threatens the 200-day SMA near 1.3440

GBP/USD rapidly leaves behind Wednesday’s strong advance, coming under heavy pressure and retesting the 1.3440 zone, where the critical 200-day SMA is located. Cable’s deep pullback follows the strong gains in the Greenback, while investors continue to pencil in a potential BoE rate cut in March.

Gold trims gains, slips back to around $5,170

Gold is now facing some downside pressure, hovering around the $5,170 region on Thursday. The yellow metal surrenders part of its earlier gains on the back of the resurgence of the buying interest in the Greenback. In the meantime, geopolitical tensions in the Middle East continue to limit the downside potential for now.