Daily Market Report: EURUSD, GBPUSD, AUDUSD
USD continues to lag ahead of Fed speak tonight, AUDUSD technical overview on the verge of shifting
EURUSD: Bull trend initializes on the back of USD weakness
Four consecutive trading days of USD weakness have helped take USD-denominated pairs higher, and even though the euro didn’t outperform yesterday amongst the FX majors, it did manage to secure another day of gains.
While the technical overview is an initializing bull trend whereby nearly all its main technical indicators are flashing green, the catalyst for the recent moves has more to do with USD weakness than with euro strength. The case that an expected drop in Fed rates will reduce the attractiveness of the greenback is strong, but with nearly half of European government bonds in negative yielding territory, the readjustment here may be limited.
US Fed Chair Powell will be speaking today, with a dovish tone likely to affirm recent USD retracement, and with some US data released prior.
GBPUSD: Technicals continue to stall at short-term resistance level
Both pound and greenback were the main underperformers yesterday amongst the FX majors, limiting the cable’s gains and keeping its bear trend technical overview intact as it struggles to breach a short-term resistance level.
USD weakness has helped lift this pair’s price off the lows over the past four trading days, but any retracement in the greenback or a less-than-dovish Powell could easily reverse those gains. Tonight’s Fed Powell speech followed by tomorrow’s BoE Carney’s testimony will likely keep both aspects of this pair more volatile.
Meanwhile, retail bias has dropped by 4% to a majority long 72%, exact opposite the heavy short 72% bias held by institutional traders.
AUDUSD: RBA Lowe’s comments helped give the commodity currency the top performance award
The Australian dollar was the top performer yesterday following comments by the RBA’s Lowe, and with the greenback lagging significantly it was an easier finish higher and another dent in its current bear trend technical overview that continues to stall heavily, with little needed at this stage to shift its overview and take its price above its 50-day moving average.
A brief look at the long-term chart however, and it remains bearish with its bear trend line still intact. Commodity currencies have been outperforming, and Lowe’s comments aside, if fiscal policy globally increases then infrastructure projects will likely be the target, increasing the need for commodities.
From a monetary policy standpoint, further easing usually translates into more inflationary pressures, and some investors may want to hedge against it with some commodities.
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