The Week Ahead: Technology Supremacy

August 10, 2020

USDCAD Rebounds as Sino-US Tensions Brew

The US dollar could see a silver lining in the tensions between the US and China. President Donald Trump’s executive orders to ban popular Chinese apps WeChat and TikTok are the latest escalations in already souring relations between the two powers

While the battle for tech supremacy unfolds, the prospect of Chinese retaliation is likely to drive investors off risky assets, as a reminiscence of previous trade wars. Due to this, the greenback could see more buying interests and rise again as a safe haven currency.

The buck has bounced off the February low of 1.3220. A meaningful rally would need to pierce through the 1.3600 cluster.

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EURCHF Rises as Investors Put Faith in Euro

The euro has been inching up against most pairs thanks to newfound confidence in the union. The massive recovery package was more of a political message that underpinned the EU’s credibility. The bullish turnaround is expected to sustain itself as the European block now seems to be better positioned politically and economically in the crisis.

Friday’s GDP data could stir up some short-term volatility. An upbeat number could only confirm the underlying optimism. The 30-day moving average around 1.0700 is the immediate support. June’s high of 1.0900 is the next target in sight.

GBPAUD Bounces from 12-Month Low

After breaking above July’s consolidation range, the pound is looking for a catalyst to make up lost ground against the Aussie.

The Bank of England maintained its interest rates last week and gave no signal of going sub-zero. Along with less-dovish economic projections, the currency may have found a floor for a rebound. UK’s employment and GDP data could offer ammunition for a rally should it materialize. The downside risk would be a flamboyant Aussie carrying on on its rally.

The pound has retreated from the 1.8400 resistance. The psychological level of 1.8000 near the MAs is the immediate support to monitor.

NZDJPY Looks to Break Out as RBNZ Meets

Despite global risk sentiment, the New Zealand dollar has slowed down its advance against the Japanese yen. The kiwi’s appreciation is a headache for the Reserve Bank of New Zealand (RBNZ) as it hinders the country’s competitiveness during these difficult times. Markets expect the central bank to remain dovish in the upcoming policy meeting. As long as the bank keeps the possibility of negative rates on the table, the currency is likely to see its upside restrained.

The pair is hovering around the MAs after it pulled back from the double top at 71.60. A failure to break out would lead to a test of the key support at 68.20.

By Orbex