Articles

GBP/USD Forecast: Dead cat bounce, UK coronavirus curve set to pressure pound

August 4, 2020 17:26   FXStreet   Market News  

  • GBP/USD has been attempting a recovery amid some dollar weakness.
  • Rising UK COVID-19 cases, lack of improvement in international relations set to send sterling down. 
  • Tuesday’s four-hour chart is showing a dead-cat bounce, implying further falls.

Eat out to help out – the scheme that gives Brits a boost to have a meal out on weekdays has kicked off – and the economy needs any help it can get. After depressing the coronavirus curve and settling for a localized lockdown in Leicester, the picture has changed.

Thursday’s announcement of new restrictions affecting around 4.3 million people, talk of a lockdown in London remains prevalent. Whitehall officials claim it is only a worst-case scenario, but the mere idea of slapping new limitations on one of the world’s financial capitals is weighing on the pound.

Prime Minister Boris Johnson’s comments on slowing down the reopening have come in response to the broad rise in infections:

Source: WorldInfoMeter

While coronavirus statistics dropped on Monday, investors know it is due to the “weekend effect” and that increases are due on Tuesday.

Sterling is also suffering from the lack of progress in Brexit talks, nor in trade negotiations with the US. International Trade Secretary Liz Truss is in America, for talks with Robert Lighthizer, the US Trade Representative. Expectations remain low. 

Sino-American relations are also tense, with the recent row focusing on TikTok and its potential for holding sensitive information. ByteDance, the owner of the popular Chinese social media firm will likely be forced to sell TikTok, potentially to Microsoft. 

The world’s largest economies are also at loggerheads over Hong Kong, where Britain has an interest as well. Any further worsening of relations between Beijing and London could weigh on the pound. 

Later in the day, US factory orders for June are of interest, yet investors are already eyeing Friday’s Non-Farm Payrolls figures. While the ISM Manufacturing Purchasing Managers’ Index beat estimates, the employment component remained depressed, pointing to a weak labor market.

See US Manufacturing PMI Rebounds to 16 Month High in July:  Employment trails general improvement

Speculation about the NFP and an update on US COVID-19 cases and deaths have the potential to down the dollar, countering pound weakness.

All in all, both sterling and the greenback have their issues, with the dollar probably looking better at this point.

GBP/USD Technical Analysis

Pound/dollar has risen from the lows near 1.30 but failed to stage a meaningful recovery. This “dead cat bounce” pattern – as well as setting lower highs – is pointing to weakness. Moreover, GBP/USD has failed to recapture the uptrend channel that characterized it last week.

On the other hand, momentum remains positive and the currency pair is holding above the 50, 100, and 200 Simple Moving Average. Overall, the bears are in the lead, but bulls have not thrown the towel.

Resistance awaits at 1.3110, the daily high, followed by 1.3170, last week’s peak. The next lines to watch are 1.32 and 1.3270.

Support is at the daily low of 1.3050, then Monday’s trough of 1.3005. It is followed by 1.2975, 1.29, and 1.2845. 

More Where next for the dollar, stocks and the US economy after downbeat data and the Fed

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USD/BRL: Brazilian market provides reasons to sustain a move to 5.10 by end-2020 – MUFG

August 4, 2020 17:21   FXStreet   Market News  

In July, the Brazilian real, benefitted by the improvement of external and domestic markets, appreciated against the US dollar from 5.4394 to 5.1851. The improved political and economic outlook may lead the USD/BRL to the 5.10 level by year-end, according to economists at MUFG Bank. 

Key quotes

“A kind of truce among the branches of power as the lack of polemic statements coming from the Executive didn’t reverberate negatively either at the Congress or Supreme Court.” 

“One of the reasons for the economic recovery is the re-opening of the economy in several parts of Brazil, although the pandemic is still far from control, but it has stabilized at a high level.”

“The better political/economic environment improved the popularity of the president as around 30% assess the government positively. Altogether, the political noise and odds for the presidential impeachment almost vanished. Last but not least, Congress resumed the economic agenda prioritizing at this moment two bills: a tax reform and new natural gas sector regulation. The tax reform is very complex and it will take several months of discussion, but the important point is that Congress is still prone to advance the economic agenda after the Covid-19 crisis and the several tensions with the Executive.”

“Taking into consideration all these issues and considering the pandemic under gradual control along the second half, there is room for BRL appreciation to our forecast of 5.1000 by the end of 2020.”

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Silver Price Analysis: XAG/USD’s path of least resistance is to the upside

August 4, 2020 17:09   FXStreet   Market News  

  • Silver is teasing a symmetrical triangle breakout on hourly chart.
  • Upside appears more compelling amid a lack of healthy resistance levels.
  • Hourly RSI trades above 50.00, supporting the bullish case.

Silver (XAG/USD) is on the verge of a range breakout after it consolidated above $24, within a symmetrical triangle formation on the one-hour chart this Tuesday.

A break above the falling trendline resistance at $24.37 will validate the pattern, opening doors for a test of the upside target at $25.57.

Ahead of that level, the spot could test the psychological resistance of $24.50. The next hurdle awaits at $24.95, the intersection of July 29 and August 3 high.

The hourly Relative Strength Index (RSI) holds steady above the midline, backing the case for the upside.

While to the downside, the $24.28 level offers strong support, which the convergence of the rising trendline support, 21 and 50-HMAs.

Selling pressure will intensify on a break below the latter, calling for a test of the horizontal 100-HMA at $24.06.

The next cushion is placed near $23.80, where the 200-HMA and the triangle lowest point.

Silver: XAG/USD hourly chart

fxsoriginal

Silver additional levels

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Eurozone June PPI +0.7% vs +0.6% m/m expected

August 4, 2020 17:02   Forexlive Latest News   Market News  


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European Monetary Union Producer Price Index (MoM) above forecasts (0.5%) in June: Actual (0.7%)

August 4, 2020 17:02   FXStreet   Market News  

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Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

Opinions expressed at FXStreet are those of the individual authors and do not necessarily represent the opinion of FXStreet or its management. FXStreet has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website, by FXStreet, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXStreet will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

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European Monetary Union Producer Price Index (YoY) registered at -3.7% above expectations (-3.9%) in June

August 4, 2020 17:02   FXStreet   Market News  

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

Opinions expressed at FXStreet are those of the individual authors and do not necessarily represent the opinion of FXStreet or its management. FXStreet has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website, by FXStreet, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXStreet will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

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Brent Oil to end third quarter at $36 – MUFG

August 4, 2020 17:02   FXStreet   Market News  

During July, oil prices oscillated in a remarkably narrow range, ending the month slightly higher (Brent +5.2% MoM; WTI +2.5% MoM) with the pulse of global oil markets stuck in a range bound environment, given the push-and-pull between the virus and the reopen. Strategists at MUFG Bank see oil price risks skewed to the downside this summer and forecast Brent trading at $36/b and $46 by end-Q3 and Q4, respectively.

Key quotes

“Macro vulnerabilities stemming from a resurgence of the virus in the US, lagging global jet fuel growth, an expected slowdown in Chinese oil imports, headwinds to normalising activity in countries where the virus remains under control and heightened geopolitical animosities between the US and China, all amalgamated together, signals a likely lid on prices with broadly range bound activity expected in the third quarter, with oil price risks skewed to the downside.” 

“We expect the amalgamation of more tepid demand growth and the clearance of the large inventory overhang, to induce an upside cap in oil prices for the rest of 2020 – we forecast Brent ending Q3 and Q4 at $36/b and $46/b, respectively.”

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Indonesia: Weak demand keeps inflation subdued – UOB

August 4, 2020 16:49   FXStreet   Market News  

UOB Group’s Economist Enrico Tanuwidjaja and Haris Handy reviewed the latest inflation figures in Indonesia.

Key Quotes

“Inflation print for July 2020 eased to 1.54% y/y vis-à-vis June’s 1.96%, as consumption remained sluggish amidst the COVID-19 pandemic. This also marked the first monthly deflation (at -0.1% m/m) seen in 2020. Core inflation slowed to 2.07% y/y in July vs. June’s 2.26%, while volatile inflation dipped to 0.35% y/y in July vs. 2.32% a month earlier.”

“Although large scale social restriction (“Pembatasan Sosial Berskala Besar” – PSBB) has eased in July, consumer spending remains low. Out of 90 cities, 61 cities experienced monthly deflation, which occured mostly in Java and Sumatera region.”

“Going forward, we expect the headline inflation to remain under control. Basic needs remain as top priority as consumers are still hesitant to purchase non-essential goods. The central government and regional administrations are expected to maintain the price stability. Overall, with inflation likely to stay around the lower end of the government’s 2.0-4.0% inflation target.”

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EUR/JPY: Above 124.44 opens up resistance at 125.94 – Credit Suisse

August 4, 2020 16:49   FXStreet   Market News  

EUR/JPY weakness has been well supported as the pair has maintained its break above 124.44 June high, trading currently around the 124.85 level. Therefore, the core trend stays seen higher with analysts at Credit Suisse looking at the 125.94 mark.

Key quotes

“Although daily RSI momentum has as yet been unable to confirm the new high we maintain our upward bias and look for strength back to the 125.22/23 recent high. Above here can see trend resistance from January 2019 at 125.43 next, then what should be tougher initial resistance at 125.94 – the 50% retracement of the 2018/2020 downtrend. Whilst we would look for this to cap at first, a break in due course should see resistance at 126.84 next.” 

“Support moves to 124.61 initially, with a move below 124.32 needed to warn of a move back to 124.00 and then the 13 -day average and price support at 123.84/73, which we look to ideally hold. A break though would warn of a more concerted setback with support seen next at 123.33/27.”

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ECB’s Lane: Committed to providing stimulus needed to support the economic recovery

August 4, 2020 16:40   FXStreet   Market News  

The European Central Bank (ECB) is committed to providing the support needed to boost the economic recovery, said Chief Economist Philip Lane on Tuesday.

Additional quotes

“Overall PEPP envelope is a core determinant of ECB’s policy stance.”

“There is some rebound in economic activity.”

“But level of economic slack remains extraordinarily high.”

“The outlook remains highly uncertain.”

“Inflation outlook plays the central role in determining appropriate policy stance.”

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China: PMIs sustain the recovery – UOB

August 4, 2020 16:29   FXStreet   Market News  

Ho Woei Chen, CFA, Economist at UOB Group assessed the latest PMI readings in the Chinese economy.

Key Quotes

“China Caixin manufacturing Purchasing Manager’s Index (PMI) surged 1.6 points to 52.8 in July compared to 51.2 in June (Bloomberg est: 51.1). This was the third straight month of expansion (above-50 reading). The headline PMI, production and new orders sub-indexes were all at their highest levels since January 2011.”

“Similarly, the official manufacturing PMI had also improved, edging up to a 4-month high as it rose 0.2 point to 51.1 in July (Bloomberg est: 50.8). This was the fifth straight month of expansion and comes on the back of a strong rebound from record low in February.”

“Overall, the improvements in both the official and Caixin manufacturing PMIs as well as the robust reading in the non-manufacturing PMI suggest that China’s economy will continue to recover in 3Q20. Our GDP forecast for China remains at 1.8% for 2020 with 3Q20 growth likely to accelerate to 4.9% y/y and around 5.7% in 4Q20. The key risks remain centred on the pandemic recovery globally, US-China relations as well as the impact from floods in China.”

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Turkey Exports: $15.01B (July) vs $12.73B

August 4, 2020 16:12   FXStreet   Market News  

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

Opinions expressed at FXStreet are those of the individual authors and do not necessarily represent the opinion of FXStreet or its management. FXStreet has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website, by FXStreet, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXStreet will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

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