Markets remain mixed, wanting to rally on economic recover signs, but concerned with the rising covid cases globally and specifically within the US. The US$ index is down ½% since Monday, oil is slightly up since Monday and DJI is up 2% for the week. Lingering high US jobless claims and another record number of coronavirus cases in the US (75k) yesterday continues to overshadow positive signs of US economic recovery. The rising Covid-19 impact on the US and it’s trading partners is being highlighted in the divergence in the currencies performance vs US$, in July Aud, Eur, GBP & CNY have rallied 1%, Nok & Zar rallied +3.5%, but C$ remains flat vs US$. Intraday the EU leaders’ summit is critical for Euro, within the US Building Permits change, Housing starts change and the Key data today the Michigan Consumer Sentiment Index will provide US$ direction.
Oil continues to edge lower amid uncertainty over fuel demand, easing of OPEC+ output cuts and rising US coronavirus cases. C$ followed the same trading pattern for similar reasons with weaker oil prices and concerns its largest trading partner could re-enter lockdown measures again amid spiking coronavirus cases. Bias remains to buy US$ dips for a potential break of current ranges and a test of 1.3800. Support 1.3535, with resistance 1.3690 (Jun30th).
Euro rebounded above 1.14 vs US$ ahead of the critical EU summit, where it is hoped the leaders will be able to compromise for the recovery fund. Optimism is low after the Dutch PM thought the odds of a successful summit was less than 50%. A compromised deal at this point would be seen as a success and positive for Euro. The potential for further Euro strength remains intact, but US rising Covid cases may see safe haven US$ buying over shadowing short term Euro rallies. Support at 1.1350 with resistance sits 1.1450 if breached next 1.1492 (2020 highs)
GBP continues to edge lower vs US$, having its biggest weekly fall in July. The usual anchors, Brexit, high covid-19 cases and ongoing uncertainty for the UK economy with potential negative interest rates is capping any GBP rallies. On a positive note, restrictions in Leicester City are easing with the City returning to a new form of normal. Rising tensions with China over Huawei and now Russia over hacking of vaccine research will have limited impact on GBP. Intraday US$ will continue to drive GBP direction short term. Support should hold at 1.2460 if breached then a retest of 1.2250 (Jun29) as resistance lowers to 1.2595 (1.2670 is a triple top and is now a significant resistance).