Thursday July 22nd, 2021

The US$ consolidates, oil prices strengthen, equities rallies, and US futures strengthen as investors shrug off covid worries. Market volatility remains elevated as investors balance their risk appetite as covid cases rise across the US and Europe. Markets continue to focus on the bipartisan infrastructure bill negotiations, the US Jobless data and the ECB’s Monetary Policy Decision Statement. In Washington, President Biden remains confident the bipartisan US$1T infrastructure deal is within reach despite vote setback. In other news, Moody’s Analytics said that President Biden’s US$3.5T infrastructure proposal is unlikely to cause high inflation. China rejects the WHO plan for study of covid-19 origin. Senior US diplomat to visit China amid strained relationship. In currency markets, EUR & GBP bounce of multi-month lows, ZAR strengthens ahead of its rate decision & CNY holds near 1-week highs on capital inflows. CNY is flat, while Asian currencies strengthen 0.2% on average. Trading currencies are mixed with MXN, JPY & NZD are flat, while AUD & ZAR strengthen 0.3%, NOK rallies 0.85% on stronger oil prices vs US$. Today US Jobless claims, Covid & Infrastructure updates will dictate intraday direction.

Oil prices rebound for a 3rd day supported by signs of demand outstripping supply, with the trend anticipated to continue through to the end of 2021. Morgan Stanley said in a note “some soft spots have emerged in the oil demand recovery, but this is unlikely to change the outlook fundamentally. C$ rallied aggressively up 1% on Wednesday against the US supported by oil which rallied almost 5%. Today focus will remain on oil prices, US Jobless Claims and CAD employment Insurance Benefits Change for intraday direction. Support sits at 1.2497, a break could see a retest of 1.2425 while resistance resets at 1.2605, if breached look for 1.2730.

Euro stalls near 1.1800 as markets await the ECB rate decision. Markets will be monitoring the ECB’s first policy announcement after unveiling its dovish strategic review. Markets are wondering if the ECB President Lagarde will make changes to the banks communication or possibly even its policy. The rapid spread of the delta variant is threatening to derail the EU’s recovery, with the tourist dependent countries being the most vulnerable. With the weaker economic outlook, markets are expecting a dovish message, euro-negative tone from the ECB president today. Support holds at 1.1750, if breached look for a move to 1.17, while resistance remains at 1.1870.

EURGBP falls as markets await the ECB monetary policy statement. Support holds at .8550 (1.1695) if breached look for .8495 Apr 5th (1.1770) with resistance remaining at .8665 (1.1540).

GBP extends its rally and retests 1.3750 vs US$. The pound rebounds from its 5-month lows shrugging off ongoing Brexit issues and ongoing covid concerns. The EU rejected the UK’s offer to rewrite the Northern Ireland protocol, this could become a larger issue and could impact the Good Friday agreement. UK covid cases remain high with +40k daily cases, but death rates have not spiked which remains a positive. Intraday covid updates, US Jobless claims and US Infrastructure developments will provide intraday direction. Support resets to 1.3685 while resistance rises 1.3825.