The EURUSD just had another look above 1.1900
Bank of England retains ammunition, GBP retains a bid
Aussie trades back below the 0.7200 level
The US dollar continues to flirt with critical levels after getting hammered yesterday. The greenback is trading mildly higher against the euro and all commodity currencies, while cable got a bid after the Bank of England retained that its current monetary policy support plan doesn’t include negative rates.
Early after trading in London kicked off, the EURUSD glimpsed above 1.1900 for a third time since last Friday - only to get rejected once more as offers materialised and knocked the pair back down below 1.1850. Assuming bears remain in control the 1.1800 figure is the next hurdle before another test of the double bottom at 1.1700 can materialise.
On the topside the 1.1900-20 area appears to be taking shape as a critical resistance. Upcoming non-farm payrolls data tomorrow could be the catalyst for the next move higher or lower. For the time being the EURUSD remains a range play.
The Bank of England’s commitment to remain ready to act with further monetary support didn’t come as a surprise this morning. That said, the Governor of the BoE stressed that negative interest rates are not considered by the UK central bank under its current view of the economy.
Early European trading saw a spike in the GBPUSD towards the 1.3170-80 area. The pair continued to trade in a tight range since the London open and is presently only 10 pips lower than the daily high at 1.3185. On the topside a key resistance level stands at 1.3200, which is where the pair got capped in early March. The first key support level on the downside is in the 1.3100-1.3110 area.
The USDJPY pair is drifting lower as broader risk appetite is impacting stock markets this morning. The lack of a follow up higher across major indices before the US open is pressuring risk assets across the boards - including commodity currency pairs.
A downside trend line contained an earlier attempt by the USD to cross above the 105.70 area with offers hammering the pair lower to current levels around 105.50. Support stands in the 105.30-40 where bids materialised on Wednesday and around the London open today.
Looking at the AUDUSD pair, the broader risk sentiment is once again playing a role - the pair was sold off earlier during the Asian session and hasn’t been able to recover above the 0.7200 area despite multiple attempts.
The broader market’s direction should be the next major trigger for commodity currencies including the US dollar.
Fundamental News Recap
Coronavirus relief bill talks continue to drag on as the White House and Congress Democrats continue to be locked in negotiations. The goal of exiting the deadlock this weeks appears to be slipping away as both sides remain strongly committed to their arguments.
US President Trump stated that he is seeking options to use executive orders to prevent evictions and secure unemployment relief. The White House Chief of Staff, Mark Meadows is set to meet with Nancy Pelosi later today to discuss supportive measures for the economy.
Meanwhile Fed’s Mester commented that the recovery’s pace appears to be slowing down, as the economy’s reopening proved to be more difficult and protracted than expected. Friday’s non-farm payrolls jobs report is expected to be the next major catalyst for the FX markets this week, with expectations set to just above 2.2 million.
The 4.8 million jobs added in July have increased hopes for a V-shaped recovery, a narrative that is unlikely to stand the test of time especially as talks about additional stimulus measures continue to drag on. Coronavirus resurgence is a major risk across both sides of the Atlantic as new cases figures increase in Europe with a second wave starting to materialise in Spain, France, and Belgium.
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