Forex and Currency News

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Murrey Math Lines 18.07.2022 (EURUSD, GBPUSD)

EURUSD, “Euro vs US Dollar”

As we can see in the H4 chart, EURUSD is trading below the 200-day Moving Average, thus indicating a descending tendency. In this case, the price is expected to test 3/8, rebound from it, and then resume falling to reach the support at 1/8. Still, this scenario may no longer be valid if the price breaks 3/8 to the upside. After that, the instrument may reverse and correct towards the resistance at 5/8.

In the M15 chart, the pair may break the downside line of the VoltyChannel indicator and, as a result, continue trading downwards.

GBPUSD, “Great Britain Pound vs US Dollar”

In the H4 chart, GBPUSD is also trading below the 200-day Moving Average to indicate a possible descending tendency. In this case, the price is expected to test 2/8, rebound from it, and then resume falling to reach the support at 0/8. However, this scenario may no longer be valid if the price breaks the resistance 2/8 to the upside. After that, the instrument may reverse and grow towards 3/8.

As we can see in the M15 chart, the downside line of the VoltyChannel indicator is pretty far away from the price, that’s why the pair may resume trading downwards only after rebounding from 2/8 in the H4 chart.

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Financial News Forex and Currency News

18 Jul

The Analytical Overview of the Main Currency Pairs on 2022.07.18

By JustForex

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.0012
Prev Close: 1.0087
% chg. over the last day: +0.75%

Fundamentally, the strategists of the analytical houses see no reason for the reversal of the EUR/USD quotes. The difference between the US and EU interest rates is considerable and it will increase even more this month. Moreover, there is a political crisis brewing in Europe in addition to the energy crisis. After the resignation of British Prime Minister Boris Johnson last week, and Italian Prime Minister Mario Draghi’s attempted resignation, the clouds are now gathering over German Chancellor Scholz. High inflation, falling German economic indicators, and rumors of “rape drugs” are all taking a toll on the rating of the German chancellor, who came to power just a few months ago. The European Central Bank urgently needs to get involved in the fight against inflation, otherwise, the situation in Europe may only get worse by the fall. New inflation data will be released on Tuesday this week and the ECB will hold a monetary policy meeting on Thursday where it is expected to see a 0.25% rate hike.

Trading recommendations

Support levels: 1.0000, 1.0035
Resistance levels: 1.0147, 1.0221, 1.0284, 1.0365, 1.0415, 1.050

From the technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is bearish. The price increased above the psychological level of 1.00 and is now trading between the moving averages. The MACD indicator became positive, and there is slight buying pressure. Under such market conditions, sell deals can be considered from the resistance level of 1.0147, but only after the additional confirmation. Buy trades are best to look for on intraday time frames from the support level of 1.0035, but only with confirmation and short targets.

Alternative scenario: if the price breaks out through the 1.0221 resistance level and fixes above, the uptrend will likely resume.

There is no news feed for today.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.1816
Prev Close: 1.1868
% chg. over the last day: +0.44%

The difference in interest rates between the US Fed and the Bank of England is not significant, but it could change a lot by the end of this month. At the moment the US Fed is holding rates at 1.75% and the Bank of England is holding rates at 1.25%. However, the US Fed is going to raise the rate by another 0.75-1% at the next meeting, while the Bank of England intends to raise the rate by only 0.25%. Such differentiation does not play in favor of the British pound. Right now the GBP/USD currency pair is trading at a 13-month low and many analysts expect a technical correction. However, fundamentally, after a small correction, traders should again expect a sell-off of the British currency amid problems in the economy of the United Kingdom, as well as due to the widening interest rate differential.

Trading recommendations

Support levels: 1.1803
Resistance levels: 1.1916, 1.2002, 1.2065, 1.2137

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The situation is similar to the euro. The price is trading now between the moving averages, the MACD indicator is in the positive zone, and there is slight buying pressure. Under such market conditions, sell deals can be considered from the resistance level of 1.1916, but only after the additional confirmation. Buy trades are best to look for on intraday time frames from the support level of 1.1803, but only with confirmation and short targets.

Alternative scenario: if the price breaks out through the 1.2003 resistance level and fixes above, the uptrend will likely resume.

There is no news feed for today.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 138.93
Prev Close: 138.45
% chg. over the last day: -0.34%

It’s a bank holiday in Japan today, so the volatility on the USD/JPY currency pair will be less than usual. There are no fundamental changes here at the moment. The Bank of Japan keeps its soft monetary policy, while the US Federal Reserve is on the way to aggressive interest rate hikes. Such a diametrically opposite policy has already pushed USD/JPY up to 24-year highs. And at least until the end of summer, the monetary policy of the Central Banks in Japan and the US will remain unchanged.

Trading recommendations

Support levels: 138.12, 137.70, 137.12, 136.48, 135.92, 135.40, 134.64, 134.11
Resistance levels: 138.71, 140.29

From the technical point of view, the medium-term trend on the USD/JPY currency pair is bullish. Indicator MACD has become negative, the buyers’ pressure has decreased, and the price has corrected to the average values. Under such market conditions, it is best to look for buy deals within a day from the support level of 138.12 or 137.70, but with confirmation. A resistance level of 138.71 may be considered for sell deals, but only with additional confirmation and short targets.

Alternative scenario: If the price fixes below 136.48, the downtrend will likely resume.

There is no news feed for today.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.3115
Prev Close: 1.3019
% chg. over the last day: -0.73%

Wholesale sales in Canada increased by 1.6% in May to $81.1 billion, the eighth increase in the last ten months. Sales increased in five of the seven wholesale sub-sectors, accounting for 70% of wholesale sales. This is good data for the economy and the Canadian dollar, in general. But keep in mind that the Canadian dollar is a commodity currency and is also dependent on the US Dollar Index, and oil prices. On Friday, the US Dollar Index decreased, while oil prices went up, which added some confidence to the Canadian currency.

Trading recommendations

Support levels: 1.2987, 1.2959, 1.2934
Resistance levels: 1.3106, 1.3154, 1.3236

In terms of technical analysis, the trend on the USD/CAD currency pair is bullish. But on Friday the price corrected to the average values, and the MACD indicator became negative. Under such market conditions, it is best to look for buy trades on the lower time frames after a slight pullback to the support level of 1.2987 or 1.2959, but with confirmation. For sell deals, it is best to consider the resistance level of 1.3106, but it is also better with confirmation and short targets.

Alternative scenario: if the price breaks through and consolidates below the 1.2934 support level, the downtrend will likely resume.

There is no news feed for today.

By JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Financial News Forex and Currency News

18 Jul

Trade Of The Week: EURUSD Poised To Settle Below Parity?

By ForexTime

– If you are not already keeping a close eye on the euro, then what are you waiting for?

The currency hijacked market headlines last week after hitting parity for the first time in 20 years!

After dipping as low as 0.9952, it looks like euro bulls are making a desperate attempt to drive prices out of the parity zone where bears prowl. Nevertheless, the euro remains under the mercy of various fundamental forces with the widening policy divergence between the Fed and ECB fuelling the downside momentum. When factoring how the daily, weekly, and monthly timeframe favour bears – EURUSD bulls certainly have a steep hill to climb.

Briefly looking at the fundamentals, the growth picture for Europe looks bleak. Inflation continues to soar while the war in Ukraine has created political and economic uncertainty – further dampening the outlook. With the euro shedding almost 12% against the dollar year-to-date, this will push up the relative price of oil which is trading in dollars – ultimately feeding the inflation beast.

With prices rebounding from parity, the key question is whether the current move is a solid rally to higher levels or just a dead cat bounce?

A dead cat bounce is a short-term recovery in a declining trend that does not indicate a reversal of a bearish trend.

The low-down…

Last week, the euro was attacked from all directions.

Political drama in Italy, a broadly stronger dollar, and rising geopolitical risks among other key themes haunted investor attraction towards the currency.

The widening policy divergence between the Fed and ECB was the cherry on the cake for EURUSD bears, making the parity dream reality. However, bulls and bears were entangled in a fierce tug of war around this level with strong support around 1.000. Even though prices traded as low as 0.9952, the EURUSD concluded the week above parity.

Without digging too deep into the derivative markets, the reason why the EURUSD was initially hesitant to break 1.000 was based on options. To add more colour, imagine the EURUSD being defended at parity by traders doing everything in their power from having to pay on financial contracts if the level is crossed. For more information on options please click here.

What to expect in the week ahead…

Investors will direct their attention toward the final annual inflation rate in the Euro Area scheduled to be released on Tuesday. The report should confirm that inflation increased to a record high of 8.6% in June, topping market expectations of 8.4% and reinforcing the case for the ECB’s first rate hike in 11 years.

All eyes will be on the European Central Bank (ECB) rate decision and ECB President Christine Lagarde’s press conference on Thursday. The ECB is expected to raise interest rates for the first time since 2011 with markets pricing in a 25-basis point move. However, this would keep rates in the Eurozone still in negative territory despite inflation soaring to a record high of 8.6% according to preliminary estimates.

Given how the 25-basis point rate hike is unlikely to turn the euro’s fortunes around anytime soon, much attention will be directed towards Christine Lagarde and the ECB’s anti-fragmentation policy tool plans. If the ECB’s anti-fragmentation policy tool plans disappoint, Lagarde’s press conference underwhelms and/or political uncertainty in Italy intensifies – the euro could weaken back towards parity and lower. Alternatively, a surprise 50bps rate hike, firmly hawkish Lagarde and a positive reaction to the bloc’s new tool to keep bond yields from soaring too high could support euro bulls.

Regardless of what decision is made by the ECB, it remains in a tricky position. If the central bank lets the euro weaken further – this could fuel inflationary pressures but fighting back by raising interest rates may punish an economy already facing a possible recession. Whatever happens on Thursday, it could have a lasting impact on the euro.

EURUSD to settle below parity?

The fundamentals and technicals remain in favour of euro bears. Prices are under pressure on the monthly, weekly, and daily timeframe.

On the monthly timeframe, the path of least resistance points south as there have been consistently lower lows and lower highs. The candlesticks are trading below the 50, 100, and 200-month Simple Moving Average while the MACD trades to the downside. However, the RSI has hit oversold regions – signalling a potential rebound before bears return to the scene.

On the weekly charts, it’s the same story. There have been consistently lower lows and lower highs while the MACD is trading below zero. Prices are approaching the 1.0200 level which could act as a firm resistance. Should this level defend against bulls, prices could sink back towards parity. A breakout above 1.0200 may signal a move back towards 1.0400.

Things are looking interesting on the daily charts with 1.0200 acting as the first level of interest. Above this point, the next checkpoint can be found at 1.0350 and 1.0480. If the upside momentum fizzles out below 1.0200, a decline back towards 1.0000 and 0.9900 could be on the cards.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Forex and Currency News Opinions

16 Jul

Euro, Mexican Peso & Brazilian Real lead Currency Speculators bets lower

Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC).

The latest COT data is updated through Tuesday July 12th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar.

Weekly Speculator Changes

COT currency market speculator bets were mostly lower this week as just three out of the eleven currency markets we cover had higher positioning while the other eight markets had lower speculator contracts.

Leading the gains for the currency markets was the Australian dollar with a weekly gain of 6,021 contracts while the New Zealand dollar (1,773 contracts) and the Swiss franc (1,411 contracts) also had positive weeks.

The currencies leading the declines in speculator bets this week were the Mexican peso (-8,820 contracts) and the Euro (-8,392 contracts) with the Brazilian real (-6,128 contracts), Japanese yen (-5,553 contracts), British pound sterling (-2,881 contracts), US Dollar Index (-897 contracts), Canadian dollar (-788 contracts) and Bitcoin(-591 contracts) also registering lower bets on the week.

Highlighting this week’s COT currency data is the continued decline in the Euro speculator positions which fell for a second straight week and for the fifth time in the past six weeks. Euro bets have now dropped by -77,516 contracts in just the past six weeks, going from +52,272 contracts on May 31st to -25,244 contracts this week. This weakness put the current speculator position at the lowest level since March of 2020 but it is nowhere near the extremely bearish levels of years past (for example: -114,021 contracts in 2020 or -182,845 contracts in 2015). There seems to be a lot of room for the speculator position to fall further. Will this bring the Euro price even lower? That is a fascinating question as the largest currency news story of the past few weeks has been the EURUSD reaching parity for the first time in over twenty years. The EURUSD actually hit 0.9952 on Thursday before closing the week near the 1.0080 exchange rate and with the US Federal Reserve poised to raise interest rates further soon – the EURUSD will likely remain under pressure but how low can it go?

The other side of the COT data this week is the continued strength of the US Dollar Index speculator positions. The USD Index speculator bets fell this week for a third straight week but remain very much near their recent highs. Speculative positions recently had three straight weeks of over at least +40,000 net contracts for the first time since 2019 while the speculator position also topped +45,000 contracts (on June 21st) for the first time since March 21st of 2017, a span of 274 weeks. The strong sentiment for the dollar has helped boost the US Dollar Index price to a high over 109.00 this week, reaching the highest level since 2002. With the two largest components of the US Dollar Index, the Euro at 57.6 percent of the index and the Japanese yen at 13.6 percent, so weak at the moment, the DXY might challenge the 110 exchange rate in the weeks to come.

Data Snapshot of Forex Market Traders | Columns Legend

Jul-12-2022	OI	OI-Index	Spec-Net	Spec-Index	Com-Net	COM-Index	Smalls-Net	Smalls-Index
USD Index	59,565	88	38,354	89	-40,895	11	2,541	44
EUR	682,031	75	-25,244	27	5,760	78	19,484	7
GBP	231,945	59	-59,089	31	75,405	74	-16,316	22
JPY	223,539	71	-59,998	32	75,067	72	-15,069	23
CHF	41,255	23	-8,724	34	19,882	75	-11,158	20
CAD	139,297	23	3,505	43	-4,653	65	1,148	32
AUD	158,263	51	-41,600	46	52,490	58	-10,890	26
NZD	45,837	36	-5,283	62	8,979	44	-3,696	9
MXN	195,611	47	-23,238	17	20,317	81	2,921	55
RUB	20,930	4	7,543	31	-7,150	69	-393	24
BRL	41,034	28	10,205	60	-10,868	41	663	73
Bitcoin	13,505	77	-171	77	-201	0	372	21

Strength Scores

Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is extreme bullish and below 20 is extreme bearish) show that the US Dollar Index (88.9 percent) leads the currency markets near the top of its 3-year range and in a bullish extreme position (above 80 percent). Bitcoin (77.2 percent) comes in as the next highest in the currency markets strength scores with the New Zealand Dollar (62.4 percent) and the Brazilian Real (60.4 percent) rounding out the only other markets above 50 percent or above their midpoint for the past 3 years . On the downside, the Mexican Peso (17.4 percent) comes in at the lowest strength level currently and the only one in a bearish extreme level. The EuroFX (27.3 percent) continues to fall and is the second lowest strength score this week.

Strength Statistics:
US Dollar Index (88.9 percent) vs US Dollar Index previous week (90.4 percent)
EuroFX (27.3 percent) vs EuroFX previous week (29.8 percent)
British Pound Sterling (31.4 percent) vs British Pound Sterling previous week (33.5 percent)
Japanese Yen (31.9 percent) vs Japanese Yen previous week (35.3 percent)
Swiss Franc (34.4 percent) vs Swiss Franc previous week (30.8 percent)
Canadian Dollar (43.3 percent) vs Canadian Dollar previous week (44.2 percent)
Australian Dollar (46.3 percent) vs Australian Dollar previous week (40.7 percent)
New Zealand Dollar (62.4 percent) vs New Zealand Dollar previous week (59.4 percent)
Mexican Peso (17.4 percent) vs Mexican Peso previous week (21.2 percent)
Brazil Real (60.4 percent) vs Brazil Real previous week (66.4 percent)
Russian Ruble (31.2 percent) vs Russian Ruble previous week (31.9 percent)
Bitcoin (77.2 percent) vs Bitcoin previous week (87.9 percent)

Strength Trends

Strength Score Trends (or move index, calculates the 6-week changes in strength scores) show that the Swiss Franc (29.7 percent) leads the past six weeks trends for the currency markets this week. The New Zealand Dollar (22.6 percent) and the Japanese Yen (21.2 percent) round out the next highest movers in the latest trends data as the CHF, NZD and the JPY have seen improving sentiment from speculators. The Brazilian Real (-34.5 percent) leads the downside trend scores this week while the next markets with lower trend scores were the Mexican Peso (-25.0 percent) followed by the Euro (-23.8 percent).

Strength Trend Statistics:
US Dollar Index (1.4 percent) vs US Dollar Index previous week (2.0 percent)
EuroFX (-23.8 percent) vs EuroFX previous week (-17.1 percent)
British Pound Sterling (10.8 percent) vs British Pound Sterling previous week (17.4 percent)
Japanese Yen (21.2 percent) vs Japanese Yen previous week (27.7 percent)
Swiss Franc (29.7 percent) vs Swiss Franc previous week (24.2 percent)
Canadian Dollar (11.8 percent) vs Canadian Dollar previous week (19.1 percent)
Australian Dollar (6.6 percent) vs Australian Dollar previous week (-2.0 percent)
New Zealand Dollar (22.6 percent) vs New Zealand Dollar previous week (20.6 percent)
Mexican Peso (-25.0 percent) vs Mexican Peso previous week (-18.9 percent)
Brazil Real (-34.5 percent) vs Brazil Real previous week (-22.0 percent)
Russian Ruble (-15.6 percent) vs Russian Ruble previous week (9.1 percent)
Bitcoin (-10.4 percent) vs Bitcoin previous week (-7.8 percent)

Individual Markets:

US Dollar Index Futures:

The US Dollar Index large speculator standing this week totaled a net position of 38,354 contracts in the data reported through Tuesday. This was a weekly fall of -897 contracts from the previous week which had a total of 39,251 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 88.9 percent. The commercials are Bearish-Extreme with a score of 10.9 percent and the small traders (not shown in chart) are Bearish with a score of 44.3 percent.

US DOLLAR INDEX Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	85.8	3.9	9.0
– Percent of Open Interest Shorts:	21.4	72.5	4.7
– Net Position:	38,354	-40,895	2,541
– Gross Longs:	51,109	2,305	5,365
– Gross Shorts:	12,755	43,200	2,824
– Long to Short Ratio:	4.0 to 1	0.1 to 1	1.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	88.9	10.9	44.3
– Strength Index Reading (3 Year Range):	Bullish-Extreme	Bearish-Extreme	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	1.4	0.7	-13.7

Euro Currency Futures:

The Euro Currency large speculator standing this week totaled a net position of -25,244 contracts in the data reported through Tuesday. This was a weekly reduction of -8,392 contracts from the previous week which had a total of -16,852 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 27.3 percent. The commercials are Bullish with a score of 77.7 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 6.7 percent.

EURO Currency Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	28.9	56.5	12.2
– Percent of Open Interest Shorts:	32.6	55.6	9.4
– Net Position:	-25,244	5,760	19,484
– Gross Longs:	197,240	385,039	83,394
– Gross Shorts:	222,484	379,279	63,910
– Long to Short Ratio:	0.9 to 1	1.0 to 1	1.3 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	27.3	77.7	6.7
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-23.8	25.8	-22.2

British Pound Sterling Futures:

The British Pound Sterling large speculator standing this week totaled a net position of -59,089 contracts in the data reported through Tuesday. This was a weekly reduction of -2,881 contracts from the previous week which had a total of -56,208 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.4 percent. The commercials are Bullish with a score of 74.3 percent and the small traders (not shown in chart) are Bearish with a score of 21.8 percent.

BRITISH POUND Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	14.6	75.3	8.2
– Percent of Open Interest Shorts:	40.1	42.8	15.2
– Net Position:	-59,089	75,405	-16,316
– Gross Longs:	33,850	174,748	18,999
– Gross Shorts:	92,939	99,343	35,315
– Long to Short Ratio:	0.4 to 1	1.8 to 1	0.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	31.4	74.3	21.8
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	10.8	-7.0	-6.7

Japanese Yen Futures:

The Japanese Yen large speculator standing this week totaled a net position of -59,998 contracts in the data reported through Tuesday. This was a weekly decline of -5,553 contracts from the previous week which had a total of -54,445 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.9 percent. The commercials are Bullish with a score of 72.3 percent and the small traders (not shown in chart) are Bearish with a score of 22.8 percent.

JAPANESE YEN Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	15.9	71.8	10.4
– Percent of Open Interest Shorts:	42.7	38.3	17.1
– Net Position:	-59,998	75,067	-15,069
– Gross Longs:	35,533	160,589	23,147
– Gross Shorts:	95,531	85,522	38,216
– Long to Short Ratio:	0.4 to 1	1.9 to 1	0.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	31.9	72.3	22.8
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	21.2	-14.6	-9.1

Swiss Franc Futures:

The Swiss Franc large speculator standing this week totaled a net position of -8,724 contracts in the data reported through Tuesday. This was a weekly rise of 1,411 contracts from the previous week which had a total of -10,135 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 34.4 percent. The commercials are Bullish with a score of 75.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 19.8 percent.

SWISS FRANC Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	17.0	63.5	19.4
– Percent of Open Interest Shorts:	38.2	15.4	46.4
– Net Position:	-8,724	19,882	-11,158
– Gross Longs:	7,017	26,217	7,984
– Gross Shorts:	15,741	6,335	19,142
– Long to Short Ratio:	0.4 to 1	4.1 to 1	0.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	34.4	75.2	19.8
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	29.7	-15.9	-6.0

Canadian Dollar Futures:

The Canadian Dollar large speculator standing this week totaled a net position of 3,505 contracts in the data reported through Tuesday. This was a weekly decrease of -788 contracts from the previous week which had a total of 4,293 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 43.3 percent. The commercials are Bullish with a score of 64.9 percent and the small traders (not shown in chart) are Bearish with a score of 32.4 percent.

CANADIAN DOLLAR Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	29.9	46.4	22.9
– Percent of Open Interest Shorts:	27.4	49.8	22.0
– Net Position:	3,505	-4,653	1,148
– Gross Longs:	41,613	64,673	31,834
– Gross Shorts:	38,108	69,326	30,686
– Long to Short Ratio:	1.1 to 1	0.9 to 1	1.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	43.3	64.9	32.4
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	11.8	-3.6	-12.4

Australian Dollar Futures:

The Australian Dollar large speculator standing this week totaled a net position of -41,600 contracts in the data reported through Tuesday. This was a weekly gain of 6,021 contracts from the previous week which had a total of -47,621 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 46.3 percent. The commercials are Bullish with a score of 58.0 percent and the small traders (not shown in chart) are Bearish with a score of 25.9 percent.

AUSTRALIAN DOLLAR Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	19.3	67.0	10.5
– Percent of Open Interest Shorts:	45.6	33.9	17.4
– Net Position:	-41,600	52,490	-10,890
– Gross Longs:	30,527	106,112	16,570
– Gross Shorts:	72,127	53,622	27,460
– Long to Short Ratio:	0.4 to 1	2.0 to 1	0.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	46.3	58.0	25.9
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	6.6	1.0	-20.6

New Zealand Dollar Futures:

The New Zealand Dollar large speculator standing this week totaled a net position of -5,283 contracts in the data reported through Tuesday. This was a weekly gain of 1,773 contracts from the previous week which had a total of -7,056 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 62.4 percent. The commercials are Bearish with a score of 44.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 9.2 percent.

NEW ZEALAND DOLLAR Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	32.6	61.7	5.3
– Percent of Open Interest Shorts:	44.1	42.1	13.4
– Net Position:	-5,283	8,979	-3,696
– Gross Longs:	14,926	28,261	2,436
– Gross Shorts:	20,209	19,282	6,132
– Long to Short Ratio:	0.7 to 1	1.5 to 1	0.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	62.4	44.2	9.2
– Strength Index Reading (3 Year Range):	Bullish	Bearish	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	22.6	-19.1	-12.0

Mexican Peso Futures:

The Mexican Peso large speculator standing this week totaled a net position of -23,238 contracts in the data reported through Tuesday. This was a weekly lowering of -8,820 contracts from the previous week which had a total of -14,418 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 17.4 percent. The commercials are Bullish-Extreme with a score of 81.3 percent and the small traders (not shown in chart) are Bullish with a score of 55.4 percent.

MEXICAN PESO Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	53.5	43.1	3.1
– Percent of Open Interest Shorts:	65.4	32.7	1.6
– Net Position:	-23,238	20,317	2,921
– Gross Longs:	104,715	84,247	6,023
– Gross Shorts:	127,953	63,930	3,102
– Long to Short Ratio:	0.8 to 1	1.3 to 1	1.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	17.4	81.3	55.4
– Strength Index Reading (3 Year Range):	Bearish-Extreme	Bullish-Extreme	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-25.0	25.2	-7.5

Brazilian Real Futures:

The Brazilian Real large speculator standing this week totaled a net position of 10,205 contracts in the data reported through Tuesday. This was a weekly decline of -6,128 contracts from the previous week which had a total of 16,333 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 60.4 percent. The commercials are Bearish with a score of 40.7 percent and the small traders (not shown in chart) are Bullish with a score of 72.5 percent.

BRAZIL REAL Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	46.8	46.0	7.2
– Percent of Open Interest Shorts:	21.9	72.5	5.6
– Net Position:	10,205	-10,868	663
– Gross Longs:	19,197	18,878	2,957
– Gross Shorts:	8,992	29,746	2,294
– Long to Short Ratio:	2.1 to 1	0.6 to 1	1.3 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	60.4	40.7	72.5
– Strength Index Reading (3 Year Range):	Bullish	Bearish	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-34.5	35.9	-19.8

Bitcoin Futures:

The Bitcoin large speculator standing this week totaled a net position of -171 contracts in the data reported through Tuesday. This was a weekly decline of -591 contracts from the previous week which had a total of 420 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 77.2 percent. The commercials are Bearish with a score of 46.1 percent and the small traders (not shown in chart) are Bearish with a score of 21.4 percent.

BITCOIN Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	76.5	1.6	9.2
– Percent of Open Interest Shorts:	77.7	3.1	6.5
– Net Position:	-171	-201	372
– Gross Longs:	10,325	216	1,247
– Gross Shorts:	10,496	417	875
– Long to Short Ratio:	1.0 to 1	0.5 to 1	1.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	77.2	46.1	21.4
– Strength Index Reading (3 Year Range):	Bullish	Bearish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-10.4	17.5	6.2

Article By InvestMacro – Receive our weekly COT Reports by Email

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.

CountingPips Forex Blog Forex and Currency News investing Opinions

15 Jul

Japanese Candlesticks Analysis 15.07.2022 (USDCAD, AUDUSD, USDCHF)

Article By RoboForex.com

USDCAD, “US Dollar vs Canadian Dollar”

As we can see in the H4 chart, after forming a Harami reversal pattern close to the support level, USDCAD may reverse in the form of another ascending impulse. In this case, the upside target may be the resistance area at 1.3240. Later, the market may break this level and continue to grow. However, an alternative scenario implies that the asset may correct to reach 1.3070 and continue the uptrend only after the pullback.

AUDUSD, “Australian Dollar vs US Dollar”

As we can see in the H4 chart, AUDUSD has formed a Harami reversal pattern during the pullback. At the moment, the asset is reversing in the form a new descending impulse. In this case, the downside target may be the support level at 0.6655. After testing the level, the price may break it and continue the descending tendency. At the same time, the opposite scenario implies that the price may grow to reach 0.6790 and continue the uptrend after the correction.

USDCHF, “US Dollar vs Swiss Franc”

As we can see in the H4 chart, after testing the support area, the pair has formed several reversal patterns, for example, Hammer. At the moment, USDCHF may reverse in the form of a new rising impulse. In this case, the upside target may be at 0.9920. After testing the resistance level, the price may break it and continue trading upwards. Still, there might be an alternative scenario, according to which the asset may correct to reach 0.9790 first and then resume the ascending tendency.

Article By RoboForex.com

Financial News Forex and Currency News

15 Jul

Ichimoku Cloud Analysis 15.07.2022 (BRENT, AUDUSD, XAUUSD)

Article By RoboForex.com

BRENT

Brent is rebounding from the resistance level. The instrument is currently moving below Ichimoku Cloud, thus indicating a descending tendency. The markets could indicate that the price may test the cloud’s downside border at 104.35 and then resume moving downwards to reach 88.45. Another signal in favour of a further downtrend will be a rebound from the descending channel’s upside border. However, the bearish scenario may no longer be valid if the price breaks the cloud’s upside border and fixes above 111.75. In this case, the pair may continue growing towards 116.55.

AUDUSD, “Australian Dollar vs US Dollar”

AUDUSD is rebounding from Tenkan-Sen and Kijun-Sen. The instrument is currently moving below Ichimoku Cloud, thus indicating a descending tendency. The markets could indicate that the price may test the cloud’s downside border at 0.6780 and then resume moving downwards to reach 0.6510. Another signal in favour of a further downtrend will be a rebound from the descending channel’s upside border. However, the bearish scenario may no longer be valid if the price breaks the cloud’s upside border and fixes above 0.6855. In this case, the pair may continue growing towards 0.6945.

XAUUSD, “Gold vs US Dollar”

XAUUSD has fixed above the resistance level. The instrument is currently moving below Ichimoku Cloud, thus indicating a descending tendency. The markets could indicate that the price may test Tenkan-Sen and Kijun-Sen at 1715.00 and then resume moving downwards to reach 1635.00. Another signal in favour of a further downtrend will be a rebound from the descending channel’s upside border. However, the bearish scenario may no longer be valid if the price breaks the cloud’s upside border and fixes above 1785.00. In this case, the pair may continue growing towards 1825.00.

Article By RoboForex.com

Financial News Forex and Currency News

15 Jul

The Analytical Overview of the Main Currency Pairs on 2022.07.15

By JustForex

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.0056
Prev Close: 1.0020
% chg. over the last day: -0.36%

Yesterday EUR/USD dropped below 1 for the first time in 20 years after Italian Prime Minister Mario Draghi’s party in the coalition government did not support the parliament’s vote of confidence, following which Draghi announced his resignation. However, the Italian president rejected the resignation. Inflation data will be released in Italy today. Analysts expect to see consumer prices rise by another 1.2%. The Federal Reserve officials Waller and Bullard said yesterday that they favor a 75 basis point hike at the July Central Bank meeting, making a more aggressive move of 100 basis points less likely. Still, analysts believe the US Dollar Index will continue to rise as the dollar benefits from higher rate hike prospects than other global central banks, including the European Central Bank.

Trading recommendations

Support levels: 1.0000
Resistance levels: 1.0074, 1.0147, 1.0221, 1.0284, 1.0365, 1.0415, 1.050

From the technical point of view, the trend on the EUR/USD currency pair on the hourly time frame is bearish. The situation remains the same. At the moment, the price is trading below the moving averages, and the MACD indicator is in the negative zone, but the divergence is already observed on several timeframes. Under such market conditions, sell deals can be considered from the resistance level of 1.0174 or 1.0147, but only after the additional confirmation. Buy trades are best to look for on intraday time frames from the support level of 1.0000, but only with confirmation and short targets.

Alternative scenario: if the price breaks out through the 1.0221 resistance level and fixes above, the uptrend will likely resume.

News feed for 2022.07.15:

– Eurozone Italian Consumer Price Index (m/m) at 11:00 (GMT+3);
– US Retail Sales (m/m) at 15:30 (GMT+3);
– US NY Empire State Manufacturing Index (m/m) at 15:30 (GMT+3);
– US Industrial Production (m/m) at 16:15 (GMT+3);
– US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+3).

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.1889
Prev Close: 1.1822
% chg. over the last day: -0.57%

Despite positive UK GDP data from last month, key indicators of consumer confidence in the country remain low. Household spending is rising, and incomes are not keeping up with this growth. Nevertheless, economists are optimistic and confident that the UK economy will not face a recession this year, despite record levels of inflation, which is expected to peak in the fall. Goldman Sachs predicts that the positive GDP momentum will continue in the coming months and expects a GDP growth of 0.4% in the third quarter.

Trading recommendations

Support levels: 1.1801
Resistance levels: 1.1887, 1.2002, 1.2065, 1.2137

From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The situation is similar to the euro. The MACD indicator is in the negative zone, but there are signs of divergence. Under such market conditions, sell deals can be considered from the resistance level of 1.1887, but only after the additional confirmation. Buy trades are best to look for on intraday time frames from the support level of 1.1801, but only with confirmation and short targets.

Alternative scenario: if the price breaks out through the 1.2003 resistance level and fixes above, the uptrend will likely resume.

There is no news feed for today.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 137.29
Prev Close: 138.94
% chg. over the last day: +1.20%

The dollar has jumped to a 24-year high against the Japanese yen as the Central Bank of Japan maintains a dovish stance. The huge gap between interest rates and the diametrically opposed monetary policy between Japan and the US has already pushed the USD/JPY to multi-year highs. Japan’s government is once again concerned about the yen’s sharp drop and will monitor the currency market with even more urgency, working closely with the Bank of Japan, Chief Cabinet Secretary Hirokazu Matsuno said on Thursday. But Mr. Matsuno would not comment on the issue of currency intervention. The Bank of Japan is expected to keep interest rates ultra-low at its next meeting on July 20-21, highlighting a growing divergence from the global wave of central bank rate hikes.

Trading recommendations

Support levels: 138.12, 137.44, 137.12, 136.48, 135.92, 135.40, 134.64, 134.11
Resistance levels: 139.10

From the technical point of view, the medium-term trend on the USD/JPY currency pair is bullish. The MACD indicator has become positive, the buyer’s pressure has increased, and the price continues an upward trend. Under such market conditions, it is best to wait for a slight pullback, as the price has deviated strongly from the average values. Buy trades can be searched for within a day from the support level of 138.12, but with confirmation. A resistance level of 139.90 may be considered for selling, but only with additional confirmation and short targets.

Alternative scenario: If the price fixes below 136.48, the downtrend will likely resume.

There is no news feed for today.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.2970
Prev Close: 1.3115
% chg. over the last day: +1.17%

The Canadian dollar is a commodity currency and depends not only on the monetary policy of the Bank of Canada but also on the dynamics of the US Dollar Index and oil prices. Yesterday in the morning, the US Dollar Index rose sharply, while oil prices fell by $9. As a result, the price of USD/CAD jumped. But by the end of the day, oil prices leveled off, and the dollar rebounded from its highs, which led to a slight correction in the USD/CAD. At the moment, the central banks in the US and Canada are on a path to raising interest rates, and the size of interest rates is equivalent, so no medium-term trends should be expected here.

Trading recommendations

Support levels: 1.3060, 1.3024, 1.2959
Resistance levels: 1.3154, 1.3236

In terms of technical analysis, the trend on the USD/CAD currency pair is bullish. The price is trading above the moving averages again, but there are weak signs of divergence. Under such market conditions, it is best to look for buy trades on the lower time frames after a slight pullback to the support level of 1.3060 or 1.3024, but with confirmation. For sell deals, it is best to consider the resistance level of 1.3154, but it is also better with confirmation and short targets.

Alternative scenario: if the price breaks through and consolidates below the 1.2934 support level, the downtrend will likely resume.

News feed for 2022.07.15:

– Canada Retail Sales (m/m) at 15:30 (GMT+3).

By JustForex

Financial News Forex and Currency News

15 Jul

Week Ahead: Euro Volatility To Intensify Ahead Of ECB?

By ForexTime

Everybody was talking about the euro after the currency hit its lowest level in nearly two decades, flirting with parity amid the widening policy divergence between the Fed and ECB.

The price action around the psychological 1.000 level felt like a fierce tug of war between bulls and bears with no clear winner in sight. Indeed, various fundamental forces were at play – placing traders on an emotional rollercoaster ride all week!

The last few days were certainly wild for the EURUSD but this could intensify in the new trading week thanks to key economic reports and risk events. More volatility could be on the cards for the euro but before we cover what to expect from the currency, here are the scheduled economic data releases/events in the coming week:

Monday, 18 July

CAD: Canada housing starts
NZD: New Zealand CPI
USD: US cross-border investment
GBP: BoE MPC member Michael Saunders speaks

Tuesday, 19 July

AUD: RBA meeting minutes
EUR: Eurozone CPI
GBP: UK jobless claims, unemployment, BoE Andrew Bailey speech
USD: US housing starts

Wednesday, 20 July

CNH: China loan prime rates
GBP: UK CPI, PPI
EUR: Consumer confidence
USD: US existing home sales

Thursday, 21 July

JPY: Bank of Japan rate decision
EUR: ECB rate decision
USD: US initial jobless claims

Friday, 22 July

JPY: Japan CPI
EUR: Eurozone S&P PMI
GBP: UK S&P PMI
CAD: Retail sales

Caution is likely to remain the name of the game in the week ahead as inflation fears, recession concerns, and ongoing geopolitical risks drain investor confidence. Given how markets are quite sensitive and reactive to key economic reports, this could spark some action in the FX space with the mighty dollar seen benefiting from safe-haven flows. Over the weekend, the meeting of G20 finance ministers and central bank governors continues in Indonesia. It may be wise to also keep an eye on the final Eurozone CPI figures for July which will be released on Tuesday.

Let’s cut to the chase…

All eyes will be on the European Central Bank meeting on Thursday. The central bank is widely expected to raise interest rates for the first time since 2011! Markets are pricing a 25-basis point move which would keep rates in the Eurozone still in negative territory despite inflation hitting a new record high of 8.6% according to preliminary estimates. When considering how the euro slipped below parity, this could invite more hawks to the table…

It may not hurt to expect the unexpected from the central bank with a surprise 50-basis point hike catching markets off-guard.

Ultimately, if the central bank lets the euro weaken further – this could fuel inflationary pressures but fighting back by hiking rates could punish an economy already facing a possible recession.

Whatever happens during the ECB meeting, it may have a lasting impact on the euro. Taking a quick look at the EURUSD, it’s all about the psychological 1.0 parity level. Watch this space.

S&P 500 bears still in the building

The S&P 500 remains bashed by the risk-off sentiment and lack of appetite for risk. As recession fears and inflation jitters send investors sprinting towards safety, this continues to weigh on riskier assets. Since the start of 2022, the index has shed over 20% with prices trading around 3779. Equity bulls clearly need a lifeline and this could come in the form of US earnings. Nevertheless, the technicals remain bearish with sustained weakness under 3810 opening a path back towards 3700 and lower.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Financial News Forex and Currency News

14 Jul

Five ways that the super-strong US dollar could hurt the world economy

By Alexander Tziamalis, Sheffield Hallam University and Yuan Wang, Sheffield Hallam University

– The US dollar has been on a major surge against major global currencies in the past year, recently hitting levels not seen in 20 years. It has gained 15% against the British pound, 16% against the euro and 23% against the Japanese yen.

The dollar is the world’s reserve currency, which means it is used in most international transactions. As a result, changes in its value have implications for the entire global economy. Below are five of the main ones.

US dollar strength 1977-2022

Chart showing the strength of the dollar since 1980 — The US dollar index or DXY is the US dollar measured against a basket of world currencies.
Trading View

1. Even more inflation

Petrol and most commodities such as metals or timber are usually traded in US dollars (though with exceptions). So when the dollar gets stronger, these items cost more in local currency. For example in British pounds, the cost of US$100-worth of petrol has risen over the past year from £72 to £84. And since the price per litre of petrol in US dollars has risen steeply as well, it is creating a double whammy.

When energy and raw materials cost more, the prices of many products go up for consumers and businesses, causing inflation around the world. The only exception is the US, where a stronger dollar makes it cheaper to import consumer products and therefore could help to tame inflation.

2. Low-income countries under threat

Most developing countries owe their debt in US dollars, so many owe much more now than a year ago. As a result, many will struggle to find an ever increasing amount of local currency to service their debts.

We are already seeing this in Sri Lanka, and other countries may soon follow suit. They will either have to tax their economies more, issue inflationary local money or simply borrow more. The results could be deep recession, hyper-inflation, a sovereign debt crisis or all three together, depending on the path chosen. Developing countries which fall into sovereign debt crises can take years or even decades to recover, causing severe hardship to their people.

3. A bigger US trade deficit

Other countries will buy fewer US products as a result of the strong dollar.
The US trade deficit, which is the difference between the amount of exports and imports, already runs close to a mammoth one trillion dollars per year. President Joe Biden and Donald Trump before him vowed to reduce it, particularly against China. Some economists worry that the trade deficit drives up US borrowing and reflects the fact that many manufacturing jobs have moved overseas.

US trade deficit as a % GDP

Chart showing US trade deficit as a percentage of GDP — Trading Economics

4. De-globalisation to get worse

The most obvious economic policy to prevent a trade deficit from growing is the old game of imposing tariffs, quotas or other barriers on imports. Other countries tend to retaliate against such protectionism, adding their own taxes and other barriers to US products. In an era when “de-globalisation” has already begun thanks to worsening western relations with Russia and China, a stronger dollar adds to the political momentum for protectionism and threatens global trade.

5. Eurozone fears

Weaker EU member states such as Portugal, Ireland, Greece and Cyprus have become somewhat less vulnerable to investors driving up their borrowing costs to crisis levels than during the darkest days of the eurozone crisis. This is because much of their national debt is now in the hands of the the European Stability Mechanism (ESM), which was set up to help rescue them, as well as friendlier investment banks within the eurozone.

However, the stronger dollar is creating pressure for the European Central Bank to raise its own interest rates to prop up the euro and subdue the cost of imports, including energy. This will put more pressure on eurozone countries with high levels of debt. Italy, which is the ninth largest economy in the world and has government debts at a whopping 150% of GDP, would be particularly hard to bail out if the situation got out of control.

Bringing these five points together, the ultra-strong dollar is yet another reason to fear a global recession in the coming period. Higher inflation erodes consumer incomes and reduces consumption. Protectionism can reduce international trade and investment. Sovereign debt crises mean serious trouble for many developing countries and possibly even the eurozone.

Will the dollar keep rising?

The dollar has been rising for both economic and geopolitical reasons. The central bank of the US – the Federal Reserve – has been hiking interest rates aggressively and also reversing its policy of creating money via quantitative easing (QE). This is with a view to curbing inflation caused by COVID supply issues, the war in Ukraine and also QE.

The stronger US dollar is a side effect of these higher interest rates. Because the dollar now offers a higher yield when deposited in a US bank, it encourages foreign investors to sell their local currency and buy US dollars.

Of course, central banks in other jurisdictions such as the UK have also been raising interest rates, and the eurozone is planning to do likewise. But they are not acting as aggressively as the US. Meanwhile Japan is not tightening at all, so the net result is still greater overseas demand for greenbacks.

The other reason for the surging US dollar is because it is a classic safe haven when the world is worried about a recession – and the current geopolitical situation is arguably making it still more appealing. The euro has suffered from the EU’s proximity to the war in Ukraine, its exposure to Russian energy and the prospect of another eurozone crisis. It is close to dollar parity for the first time since its early years.

The British pound has been hit by Brexit and is also facing the prospect of a second Scottish independence referendum and a potential trade war with the EU over the Northern Ireland protocol. Finally, the yen belongs to an economy that seems to be slowly losing ground. Japan is ageing and is still not comfortable with migration to boost its production capabilities. A weaker yen is also the price that Japan pays for continuing QE to keep the interest rates low on its government debt.

It is difficult to predict the future direction of the US dollar when there are so many moving parts in the world economy. But we suspect that persistent inflation will force US interest rates to keep rising, and that together with geopolitical shocks from war and sovereign debt defaults, it will probably keep the dollar high. A strong US dollar is a response to troubled times.

About the Author:

Alexander Tziamalis, Senior Lecturer in Economics, Sheffield Hallam University and Yuan Wang, Seinor Lecturer in Economics, Sheffield Hallam University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Forex and Currency News Opinions

14 Jul

Why isn’t EURUSD below parity … yet?

By ForexTime

First, allow me to confess: I wasn’t expecting to write this article about EURUSD parity so soon.

When I published my Q3 outlook a couple of weeks ago, there was a 72.5% chance that EURUSD would hit 1.000 sometime this quarter.

Even with such elevated odds back then, I still thought this post-parity article wouldn’t be due for another few weeks.

But here we are.

Just as a quick reminder, the stunning decline in the world’s most popular currency pair, sinking to levels not seen in two decades, only underscores the divergence between the Eurozone and the US.

Here’s a recap from the June 30th article:

The US economy’s healthier outlook relative to the Eurozone’s.
After all, there’s still the Russia-Ukraine war raging off to the latter’s eastern borders.
UPDATE: The June US nonfarm payrolls report released last Friday (July 8th) showed a still-resilient jobs market in the world’s largest economy.

The Fed’s plans for more incoming rate hikes appears to be less risky than the European Central Bank’s.
The ECB is just only getting started, with two rate hikes slated for Q3.
But markets fear that the incoming ECB hikes could inadvertently result in a sovereign debt crisis/fragmentation risks.
UPDATE: Following yesterday’s higher-than-expected June US CPI print of 9.1% (its highest in over 40 years, since November 1981) markets have since begun to expect a historic 100 basis point hike by the Fed at its upcoming policy decision due July 27th.

But why hasn’t EURUSD broken below parity, yet?

One word: options.

At least that’s what market chatter is pointing to.

Without getting into the weeds of the derivatives market and what “options” are, the idea is that EURUSD is being “defended” at the psychologically-important 1.0000 mark by traders who are trying their utmost best from having to pay up on financial contracts if that proverbial line in the sand is crossed.

Also, it’s tough to get a true headline figure as to how many billions worth of such options are in play at present, given the OTC (over the counter) nature of such contracts, yet they appear to have done the job so far in defending EURUSD parity over recent sessions, at least at the time of writing.

Still, such a defence can only be mounted for so long, given the fundamentally-driven selling pressures on the euro listed above.

So where to next for EURUSD?

If the 1.000 mark gives way, the next notable area of “defense” (i.e. support level) for EURUSD may arrive at 0.985, where another large chunk of options are congregated.

After that, euro bears could then send EURUSD towards the 0.950 mark.

Overall, given that there are multiple tranches of such options that may need to be defended between parity and 0.95, EURUSD may only see a grinding path towards lower levels, as opposed to the rapid declines from 1.15 to 1.000 that we’ve witnessed so far this year.

Still, EURUSD could be due for an immediate technical rebound, given that its 14-day relative strength index has gone below the 30 threshold that signals oversold conditions, .

Key event to look out for:

Beside the upcoming ECB and Fed respective July policy meetings due in the next couple of weeks, a major immediate risk for the euro pertains to the Nordstream 1 pipeline.

As noted in our Week Ahead article posted last Friday, this underwater gas pipeline from Russia to Germany is undergoing maintenance since last Monday through July 21st.

Markets fear that Russia may not restart this pipeline once maintenance has been completed.

Already, the likes of French Finance Minister Bruno Le Maire has warned of such a scenario, should Russia retaliate against sanctions, warning that the continent must prepare contingency plans (such as rationing).

Such a apocalyptic event would spark an energy crisis in Europe, and further darken its economic outlook by making a recession all but certain. That could even send EURUSD careening past 0.95!

If that happens, even a hawkish-sounding ECB later this month may not be able to significantly support the ailing bloc currency, barring direct interventions to support the currency like it did back in 2000 (when EURUSD fell to the depths of 0.823 in October 2020).

Can EURUSD stage a rebound?

From a fundamental perspective, hopes for a sustained rebound in the euro would have to be underpinned by:

inflation having peaked and is turning over
Russia-Ukraine war abating
recovering Eurozone economy

It’s hard imaging the above-mentioned factors materialising anytime soon.

Hence, the euro is expected to maintain a downward bias against the US dollar (with the latter benefitting from its safe haven status and its higher yields versus Eurozone bond yields).

As things stand, here’s what markets are forecasting for EURUSD:

0.985 = 75% chance of that level reached sometime this quarter (Q3 2022)
0.950 = 55% chance of that level reached within the next 12 months

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

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