U.S. dollar has remained in consolidation range
The U.S. dollar started positively last week and tried to break through the upper range of the consolidation trade channel in the early days, but with no success. Later, sentiment in all markets improved, optimism returned, which led to a correction of the U.S. dollar.
U.S. economic data were positive and significantly exceeded forecasts. Retail sales rose 2.7% year-on-year and surprised investors who did not expect such a rapid recovery. According to June data, inflation was +1.0% and increased moderately. In July, industrial production contracted by -8.2% compared to the previous year. The number of new jobless claims continued to decline from 1.2 to 0.96 million per week.
Coronavirus data has suggested further stabilization worldwide, with about 250,000 new infections recorded each day. The average number of cases in the U.S. remained stable at about 55,000, as in Brazil, where it fluctuated around 50,000. India is still experiencing moderate growth, with around 65,000 new cases confirmed daily in the last week. In Russia, about 5,000 infections were recorded, less than 5,200 last week.
The main currency pair EUR/USD adjusted to 1,175-level at the beginning of the week, which acted as a support level, but later recovered and rose to 1,185-point level. Among the economic data was the ZEW index in Germany, which stood at 71.5 points in the part of the sentiment that largely reflects market participants' expectations for the future, while the current economic conditions component remained strongly negative at -81.3 points, the lowest point since 2009, suggesting significant divergence between the real situation and future expectations. European industrial production in June was -12.3% lower than a year ago. According to preliminary data, the European economy fell by -12.1% in the second quarter compared to the first quarter. The EUR/USD pair closed the week appreciating +0.5%.
The most important Asian pair, USD/JPY, rose slightly to 107.0-point level, which acted as a resistance level, and was at the bottom of the trading range in the last half of the year. No relevant economic data was published. USD/JPY ended the week appreciating +0.6%.
The British pound fluctuated insignificantly and remained below 1.31-level against the U.S. dollar. Among the economic data were labour market results, where an increase of 94 thousand unemployed was recorded in July, while the average wage decreased by -1.2%. According to preliminary data, the country's economy shrank by -20.4% in the second quarter compared to the first quarter of this year, which is the largest quarterly decline in history. Industrial production fell by -12.5% year on year in June. GBP/USD ended the week appreciating +0.3%.
This week will begin with a change in the Japanese economy in the second quarter and the results of industrial production in June. No major data is scheduled for Tuesday, with Japan releasing international trade data on Wednesday, followed by inflation in Britain and Europe, and minutes of the last U.S. Federal Reserve meeting in the evening where investors will look for clues to further quantitative easing decisions. Thursday will be calmer, and on Friday, UK retail sales and preliminary manufacturing PMI indices are expected.
According to Admiral Markets market sentiment data, 35% of investors have long positions in the EUR/USD pair (down -5 percentage points from last week's data). In the main Asian pair USD/JPY, 38% of investors have long positions (fell by -11 percentage points). In the GBP/USD pair, 43% of participants expect a rise (increased +11 percentage points). Such market data is interpreted as contraindicative, so all three pairs - EUR/USD, GBP/USD and USD/JPY are likely to appreciate. The analysis of positioning data needs to be combined with fundamental projections and technical analysis.
Sources: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com
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