Thursday July 30th, 2020

Ongoing US Fed Reserve support, US Stimulus progress stalled, and surging US coronavirus concerns dominate the headlines. The US Fed Chief says that the coronavirus surge is slowing the US’s economic recovery efforts and promises the Fed’s continued support. The total US coronavirus cases hit +4.5mio (26% of global cases) and the related death toll in the US passed 150k, as 21 states are declared “Red Zones” of severe outbreaks of coronavirus. The Fed unemployment benefits are set to expire at the end of July and the Dems/Reps still appear to have substantial disagreements over the next stimulus package. US$ rebounds as “risk-off” sentiment returns, with trade related currencies down ½%, ZAR & Nok are down 1% and RUB down over 1 ½% hitting a fresh 3-month low vs US$. Focus shifts to US Stimulus updates & US GDP, Initial Jobless Claims, Core Personal Consumption Expenditure data releases for intraday direction.

Oil prices fall 1.5% as the coronavirus surge weighs on the global demand outlook. C$ weakened on the falling oil prices and the rallying US$. The impact of coronavirus on the US and its slowing economic growth will impact Canada, as the US is Canada’s largest trading partner. US Stimulus news and US GDP will dictate intraday direction. Support holds at 1.3365 with resistance at 1.3480.

Euro weakens after testing a fresh 22-month high (1.1805) on disappointing German GDP data which came in below expectations at -10.1%. The dovish Fed message also saw investors take a step back while they digest the comments. Bias remains Euro bullish as investors are encouraged by Europe’s emergence from the coronavirus and new flareups are being contained. Support at 1.1700 with key resistance at 1.1850 (Jun2018).

GBP is the only major currency to strengthen vs US$ today, posting a fresh 4-month high at 1.3018 vs US$. Brexit risk – Sino/UK tensions – Covid19 concerns, none of which appear to matter to investors as GBP continues to strengthen. In the bigger picture GBP has been the weakest performer vs its peers and it appears the currency has decided to play catchup. The Key resistance 1.2976 has been breach, the next milestone is 1.3200 (Mar2020 highs), Support rises to 1.2885.