Wednesday July 29th, 2020

US$ index tests a fresh 2-year low, equity markets are mixed and Oil & Gold markets strengthen ahead of the US FOMC rate decision today. The US FED is expected to keep interest rates on hold, while expected to give a more pessimistic assessment for economic growth in the US in their statement. US consumer confidence fell more than expected in July, a clear sign that rising COVID-19 cases are impacting consumption. Asian & major currencies have rallied about ¼%, with NZD the obvious exception which is down 0.1%. The US will dictate direction as markets await US Pending Home Sales, US Fiscal Stimulus updates, as well as the FED rate decision and statement later today. 

Oil prices strengthen slightly after a surprise drop in US inventories, but further strength appears capped with ongoing demand concerns related to rising coronavirus cases. C$ strengthened slightly on firming oil prices but remains within 1.3310=90 range, holding shy of its 2-month highs. Fears of rising covid-19 cases in Canada caused Canada’s chief public health office to warn of possible tighter health restrictions. US$ will dictate intraday direction as markets await FOMC decision and statement. Support holds at 1.3310 (June 10th) with resistance at 1.3415.

Euro is retesting 1.1750 levels vs US$ and is expected to remain relatively stable as investors sit on the sidelined ahead of the FOMC decision today. Euro continues to be supported from the EU coronavirus recovery fund and ongoing QE support from the ECB. Surging US coronavirus cases are seeing investors favour Euro as a medium-term investment which has the potential to test towards 1.21 vs US$. Support at 1.1650 with key resistance at 1.1850 (Jun2018).

GBP continues to defy gravity and strengthen vs the US$ despite Brexit uncertainty, Sino/UK tensions and ahead of the FOMC decision today. GBP also got a boost from better than expected UK CBI realized sales which rose to 4 in July vs -25 previously. Mortgage approvals and Net lending to individuals also rose greater than expected. The weaker US$ helped the GBP rally for its 8th consecutive day and is looking at 1.2976 as the next key level to breach. Support level 1.2780 with resistance holding 1.2976, if breached then 1.3200 (9 Mar2020).