Reserve currency was looking for further direction
Last week the U.S. dollar came under pressure from sellers, who in the first days pushed the reserve currency index to its lowest point since April 2018. The dollar later recovered and returned to last month's trading channel.
Data in the world's largest economy remained positive. The preliminary manufacturing PMI index showed an increase from 50.9 to 53.6 points, which suggests that the recovery is continuing and the participants' expectations are improving. The services segment index also showed a rapid recovery. In the secondary real estate market, the number of home sales in July recorded a record rise of 24.7%, compared to June, or 8.7%, compared to the same period a year ago. Interestingly, the median price of homes sold was 304 thousand nationwide, crossing the 300 thousand mark for the first time. A decline in interest rates has also contributed to a change in the market. Interest rates fell by about 0.5% over the past half-year. The number of new jobless claims rose unexpectedly from 0.96 to 1.1 million a week.
The minutes of the last meeting of the U.S. Federal Reserve were also announced. Members were concerned about the negative impact of the pandemic on the economy, which could have a significant impact on growth rates, the general state of the financial system, and the labour market.
Coronavirus data showed a further moderate slowdown globally. The average number of cases in the U.S. dropped from 55,000 to 45,000 per day. Brazil has also seen a slowdown from 50 to 45 thousand a day. In India, the number of cases rose to 70 thousand, while in Russia there were about 4.8 thousand cases per day.
The main currency pair EUR/USD started the week by storming the 1,195 level, but buyers did not hold up and the pair later adjusted to below 1,180. Among the economic data was Europe's July inflation rate, which showed a 0.4% annual rise in prices. The preliminary manufacturing PMI index was 51.7, which fell very slightly from 51.8 points. To everyone's surprise, however, the services sector adjusted significantly and fell from 54.7 to 50.1 points. The EUR/USD pair closed the week with a fall of -0.4%.
The main Asian pair, USD/JPY, adjusted slightly below the 106.0 level. Among the data was a change in the economy in the second quarter, which fell -27.8% year-on-year. Industrial production fell as much as -18.2% in June, reflecting declining global demand due to the pandemic. Exports fell by -19.2% year on year in July. Annual inflation stood at 0.3% in July. USD/JPY ended the week dropping -0.7%.
The GBP/USD pair consolidated between the 1.31 and 1.32 level. Among the economic indicators in the country were annual inflation of 1.0%, retail sales grew by 1.4% year on year in July, and the preliminary manufacturing PMI index rose to 55.3 points. GBP/USD ended the week unchanged.
This week will start quietly and important data is not scheduled for Monday. The results of the German Ifo index and data for the change in the economy in the second quarter will be expected on Tuesday, along with the data of the consumer confidence index and the sales volumes of new homes being monitored in the U.S. The durable goods orders from the U.S. will be monitored on Wednesday, and the Jackson Hole Symposium and Jerome Powell press conference will be observed on Thursday. No important data is scheduled for Friday.
According to Admiral Markets market sentiment data, 43% of investors have long positions in the EUR/USD pair (which increased +8 percentage points from last week). In the main Asian pair USD/JPY, 53% of investors have long positions (up +15 percentage points). In the GBP/USD pair, 40% of participants expect a rise (down -3 percentage points). Such market data is interpreted as contraindicative, therefore EUR/USD and GBP/USD are expected to rise while USD/JPY is expected to fall. 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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