USD was on the retreat yesterday as Fed officials strengthened expectations for the Fed to cut rates in its July meeting. NY Fed President John Williams held an argumentation about the Fed taking pre-emptive measures, which was interpreted as a dovish signal. Similar comments were made by Fed’s Clarida who stated to media that the bank may have to act early and not wait “until things get so bad. Analysts were quick to note that despite there being an effort to revise William’s statements later on, no such effort was made for Clarida’s statements, which were at the same tone. We could see the USD remaining under pressure and Fed driven, while today’s financial releases could take a back seat for today. EUR/USD rallied yesterday, breaking the 1.1260 (S1) resistance line (now turned to support), yet relented some of its gains during today’s Asian session. The pair seems to have stabilized somewhat later on, yet we could see it rising further should Fed officials sound dovish once again. Should the pair come under selling interest of the market, we could see it breaking the 1.1260 (S1) support line and aim for the 1.1220 (S2) support barrier. Should the pair’s long positions be favored by the market, we could see it aiming if not breaking the 1.1300 (R1) resistance line.
GBP strengthens on Brexit prospects
The GBP strengthened yesterday as Michel Barnier stated that the he is ready to work on alternative arrangements for the Irish border. The comments made early during the European session spurred optimism among pound traders, that a solution to the issue may be found. Pound bulls were also supported by strong retain sales growth rates which outperformed expectations and passed on into the positives. Additional to that, the UK Parliament voted to block the possibility that the new PM would close the UK Parliament to pass a no deal Brexit. It should be noted that at least 30 Tory MP’s revolted, including Finance minister Philip Hammond either by voting the motion or abstaining. Should there be further positive headlines about Brexit we could see the GBP strengthening further. Cable rose yesterday, as the pound strengthened against the USD, breaking the 1.2475 (S1) resistance line (now turned to support and continued its rally in the American session, aiming for the 1.2560 (R1) resistance level. The pair could be correcting lower today, especially should there be negative headlines for Brexit. On the flip side should the dovish statements of Fed officials continue today, we could see the pair rising. Should the bulls dictate the pair’s direction, we could see it breaking the 1.2560 (R1) resistance line and aim for the 1.2665 (R2) resistance hurdle. Should the bears take over, we could see the pair aiming if not breaking the 1.2475 (S1) support line and move on to lower grounds.
Other economic highlights, today and early tomorrow
Today, during the European session, we get Germany’s PPI rate for June. In the American session, we get Canada’s retail sales growth rates for May and from the US the preliminary University of Michigan consumer sentiment for July, as well as the Baker Hughes active oil rig count. Please note that today, St Louis Fed President Bullard, Boston Fed President Rosengren and BoJ Governor Kuroda are scheduled to speak. Given the recent volatility, we expect market participants to be closely watching the scheduled speeches.
EUR/USD H4
Support: 1.1260 (S1), 1.1220 (S2), 1.1180 (S3)
Resistance: 1.1300 (R1), 1.1340 (R2), 1.1390 (R3)
GBP/USD H4
Support: 1.2475 (S1), 1.2375 (S2), 1.2280 (S3)
Resistance: 1.2560 (R1), 1.2665 (R2), 1.2765 (R3)
