Sentiment towards the world’s reserve currency turned negative last week, the currency falling from a 10-month high. Investors sold US dollars and bought riskier alternatives, reflecting the general high demand for risk in the financial markets, and the US S&P500 major index ended the week trading at yet another new all-time high.

USD 

US economic data were strong and pointed to sustained growth, albeit at a slightly slower pace. The preliminary Purchasing Managers’ Index showed a moderate decline, with manufacturing at 61.2 points, down from 63.4, and services at 55.2, down from 59.9 points the previous month. In the secondary real estate market, July existing home sales rose to 5.99 million and showed a moderate increase in activity. The Personal Consumption Expenditure, which is actively monitored by the country’s central bank as an indicator of inflation, showed an annual increase of 4.2%. The number of new jobless claims rose marginally from 0.348 million to 0.353 million during the week.

The coronavirus situation showed a stable situation globally, as the weekly average of new infections rose only marginally from 648,000 to 654,000 per day. In the US, the number of infections showed a further increase and the delta wave continued unabated, with the weekly average of new cases rising from 139,000 to 156,000 per day. The number of vaccinations administered in the country increased from 361 million to 367 million, a change of 6 million. Overall in the US, the number of people vaccinated with at least one dose rose from 60.4% to 61.3% of the population, an increase of 0.9% per week. In England, the number of cases is on the rise again, rising from 31,000 to 34,000 per day.

Euro 

The main currency pair EUR/USD rebounded from the lows and rose to the level of 1.180. Economic data in the Old Continent pointed to growth, albeit at a slower pace than before. Preliminary Purchasing Managers’ Indices pointed to further expansion, but were lower than last month and market expectations: the European manufacturing was 61.5 points and the services one 59.7. EUR/USD pair ended the week’s trading up 0.8%.

JPY

The most important Asian pair USD/JPY was volatile and did not show a directional movement – it started the week depreciated but later rose and recovered its losses. The data included the preliminary Purchasing Managers’ Index: manufacturing 52.4 and services 43.5 points. USD/JPY ended the week unchanged.

GBP 

The British pound and US dollar pair mirrored the general trend of the US dollar and rose to 1.376 points. Economic data included the preliminary Purchasing Managers’ Indices: manufacturing at 60.1 and services at 55.5 points, both indicating growth, albeit at a slightly slower pace. GBP/USD ended the week trading up 1.0%.

Economic Events 

This week will start with Japanese Retail Sales data, the European Consumer Confidence Index and preliminary German inflation. On Tuesday, Japanese industrial production and labour market indicators are due, as well as preliminary European August inflation and the US Consumer Confidence Index. On Wednesday, the actual Purchasing Managers’ Indices for global manufacturing sector will be published. Thursday will be relatively quiet, but on Friday investors’ attention will turn to US labour market data.

According to Admiral Markets market sentiment data, 29% of investors have long positions in the EUR/USD pair (down -18 percentage points compared to last week). In the main Asian pair USD/JPY, 49% of investors have long positions (down -11 percentage points). In GBP/USD, 47% of participants expect a rise (down -28 percentage points). Such market data is interpreted as a contrarian indicator, so EUR/USD and GBP/USD are likely to appreciate, while USD/JPY is in neutral. The analysis of positioning data should be combined with fundamental projections and technical analysis.

Sources: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com

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