EUR/USD is struggling to extend the advance beyond the 1.10 mark.
Immediately to the upside emerges the later March tops near 1.1150.
EUR/USD has so far met resistance in the 1.1030/35 band, just above the critical 200-day SMA.
A close above this area is needed to allow for a potential visit to the mid-1.1100s, area last seen in late March.
Above the 200-day SMA, the pair is expected to regain the constructive outlook.
EUR/USD daily chart
GBP/USD has been on the back amid the Cummings’ scandal and the Brexit impasse. The cable is trading at 1.2272 with little space for the upside, according to FXStreet’s analyst Yohay Elam.
“The Conservative Party and a majority in the British public want Dominic Cummings – the PM’s powerful adviser – out. The affair cannot be seen as yet another political scandal, as it affects the willingness of the people to cooperate with lockdown measures.”
“Britain reiterated its refusal to prolong the transition period, raising the chances of trading at World Trade Organization terms in January. Talks with the EU have hit an impasse.”
“Andrew Bailey, Governor of the BoE, wrote an op-ed for the Guardian in which he kept the door open to setting negative interest rates. However, his tone showed that such a move is not imminent. That is somewhat supporting sterling.”
“Investors are shrugging off Sino-American tensions – ranging from Xinjiang to Vancouver, where the CFO of Huawei faces extradition to the US. The reason for the lack of grave concern is that the world’s largest economies want to keep the trade deal intact.”
EUR/GBP has held key support at 0.8875 as expected to maintain its base and economists at Credit Suisse stay biased higher with the “measured base objective” at 0.9057.
“We look for a clear break above a cluster of key resistances at 0.8976/94 (including the 38.2% retracement of the March/April fall and ‘neckline’ to the March top) with the ‘measured base objective’ then at 0.9057. Although a pullback from here should be allowed for, we look for a break in due course with resistance next at the 50% retracement of the fall from March at 0.9086 and eventually the 61.8% retracement at 0.9184.”
“Support moves to 0.8931 initially, then the 13-day average at 0.8916. Beneath 0.8888/78 is now needed to warn of a potentially more important topside failure with support then seen next at 0.8826 ahead of the uptrend from March at 0.8821.”
Brexit hopes, the scandal around Dominic Cummings, and Sino-American relations are in the mix. Yohay Elam, an analyst at FXStreet, thinks the cable has potential to extend the gains seen yesterday.
“While Brits are closely following the latest developments around Dominic Cummings – the special adviser at Downing Street who violated the lockdown – an EU concession around fisheries helped propel the pound higher.”
“The topic of negative rates is refusing to return to the shadows. Andy Haldane, Chief Economist at the BoE, said that sub-zero rates are not that close. The pound received some support from Haldane’s comments.”
“Sino-American tensions are intensifying with Washington moving toward decertifying Hong Kong as an autonomous region in response to China’s proposed security law. The US and China are also at odds about technology but continue upholding the trade deal.”
The momentous scale of monetary and fiscal countermeasures to support the global economic recovery are likely to extend the duration of the gold bull market, according to analysts at Deutsche Bank.
“The date of policy tightening is pushed out indefinitely, and policymakers will be careful to avoid triggering a second taper tantrum.”
“The growing consensus that the pandemic will be largely deflationary with weaker consumption outweighing lower productivity, suggests policymakers will not have to choose between supporting growth and controlling inflation. If policymakers indeed face no such difficult choices, then the prominence of central bank support for asset markets reduces the probability of a repeated ‘March-madness’ sell-off, in the event of subsequent waves of infection depressing growth.”
“With prolonged downward pressure on growth, asset purchase programs are more likely to be extended to provide a counterweight to lost income, higher propensity to save, and a weak investment climate into 2021. We believe this also extends gold upside potential.”
WTI bounces-off lows, as risk sentiment gets a further boost.
US-China worries negated by hopes of EU recovery fund compromise.
All eyes on risk trends ahead of the API weekly crude stocks data.
WTI (July futures on Nymex) witnessed a quick bounce from daily lows of 33.52 and regained the 34 handle in the last hour, now consolidating above the latter. The focus now turns towards the American Petroleum Institute’s (API) weekly crude stocks data for a fresh trading impetus.
The US oil caught a fresh bid wave, as the risk sentiment got a boost following reports that the European Commission could likely reach a compromise on the EU coronavirus recovery fund, amounting to EUR750 billion. The European equities extended gains on the report, driving the higher-yielding oil higher in tandem.
The bulls, however, are struggling to extend the recovery gains, as escalating US-China tensions over the Hong Kong security issue continue to dampen investors’ sentiment. US President Donald Trump threatened sanctions on Beijing while the dragon-nation reiterated its commitment to take counter-measures if there is any foreign interference in Hong Kong affairs. Note that China is the world’s top oil consumer.
From a wider perspective, OPEC+ oil output cuts and global economic re-openings will likely keep the sentiment around the black gold underpinned. Also, falling US crude inventories could continue to please the buyers.
WTI technical levels to watch
On a sustained break above 34.50, the immediate resistance is seen at 35.00 (round figure), above which the 100-DMA of 35.52 will be on the buyers’ radar. To the downside, the 33.70 5-DMA could offer immediate support, below which the 33 mark will be eyed.
USD/CAD broke below 1.3856/3793 to suggest a more important move lower, with the support seen initially at 1.3734 being currently tested, the Credit Suisse analyst team apprise.
“We turn our near-term bias to the downside and see support initially at 1.3734. Removal of here would see a move back to 2019 high at 1.3665, just ahead of the 61.8% retracement of the 2020 surge at 1.3609/08, where we would expect an initial attempt to floor the market.”
“Resistance moves initially to 1.3805, then 1.3965, ahead of 1.4048, which needs to cap to keep the downside bias intact. Removal of here though would see a move back to the downtrend from late March at 1.4114/19.”
AUD/USD has pushed higher to test of 0.6659/6706, a pivotal resistance area comprising of the 200-day average, the March high, and 78.6% retracement, which is ideally capping, per Credit Suisse.
“We look for the 0.6659/6706 area to cap and see weakness taking over again in due course. With this in mind, we see support initially at 0.6610, then 0.6538, ahead of the late May lows and 21-day exponential average at 0.6507/06, where we would expect to see fresh buying at first.”
“A closing break above 0.6706 would mark a break of a major barrier and turn the medium-term risks to the upside, with resistance thereafter at 0.6745/50, ahead of the February high at 0.6774. This though is not our base case.”
RBNZ says easier monetary policy cushioned near-term financial impact of coronavirus.
US Dollar Index extends its slide below 99.00.
US Federal Reserve’s Beige Book will be released at 1800 GMT.
The NZD/USD pair gained nearly 100 pips on Tuesday boosted by the risk rally and the selling pressure surrounding the greenback. The pair stretched higher during the first half of the day on Wednesday and touched its best level since March 12 at 0.6233. As of writing, NZD/USD was up 0.52% on the day at 0.6228.
RBNZ supports kiwi
Earlier in the day, the Reserve Bank of New Zealand adopted an upbeat tone in its Financial Stability Report and helped the NZD preserve its strength. RBNZ noted that wage subsidies and easier monetary policy have cushioned the near-term financial impact of the coronavirus outbreak. “Economic stress test analysis suggests banks can continue to lend and prosper through a broad range of adverse scenarios,” the RBNZ added.
Meanwhile, the US Dollar Index, which lost 0.8% on Tuesday, remains on the back foot as global equity indexes continue to climb higher. At the moment, the index is at its lowest level since early May at 98.77, down 0.25% on a daily basis.
The only data featured in the US economic docket will be the Richmond Fed Manufacturing Index. Later in the day, the Federal Reserve will publish its Beige Book at 1800 GMT.
During the Asian session on Thursday, the ANZ’s Business Confidence Index and the Activity Outlook Index from New Zealand will be looked upon for fresh impetus.
EUR/JPY extends the advance to the proximity of the 119.00 mark.
Immediately to the upside emerges the target at 119.24.
EUR/JPY is extending the bounce off recent lows in the 117.00 neighbourhood and is trading at shouting distance from the key barrier at 119.00 the figure.
If buyers keep pushing higher, then there is scope for a potential test of April’s peak around 119.00 ahead of the critical 200-day SMA, today at 119.24.
Further up emerges the March’s highs just beyond the 121.00 yardstick.
EUR/JPY daily chart