FXStreet suggests that EUR/USD would establish a “double top” below 1.1697 with support then at 1.1630/27. Resistance is seen at 1.1808, as economists at Credit Suisse note. The pair is trading around 1.1770, up 0.25% on the day, after briefly testing the vicinity of the key support in the 1.17 neighbourhood.

“EUR/USD has completed a bearish ‘outside day’ and with daily MACD crossing lower and with support from the 13-day average removed the threat of a ‘double top’ has grown sharply.”

“Key support remains seen at the 1.1699/97 recent lows, below which would see a ‘double top’ confirmed to warn of a more concerted setback with support then seen next and initially at 1.1630/22 – the 38.2% retracement of the rally from late June. Whilst this should be allowed to hold at first, below in due course can see support next at 1.1541 and then the March high at 1.1495, with the ‘measured top objective’ seen just below here at 1.1478.” 

“A break above 1.1801 is needed to ease the pressure off 1.1697 to clear the way for strength back to 1.1851, then a retest of 1.1916/26.”

The Mortgage Bankers Association (MBA) reported on Wednesday the mortgage application volume in the U.S. surged 6.8 percent in the week ended August 7, following a 5.1 percent fall in the previous week.

According to the report, refinance applications climbed 9.1 percent, while. applications to purchase a home rose 2.0 percent.

Meanwhile, the average fixed 30-year mortgage rate decreased from 3.14 percent to a new record low of 3.06 percent.

“Mortgage rates fell across the board last week, as investors grew less optimistic of the economic rebound given the resurgence of virus cases. Loan types such as the 30-year fixed, 15-year fixed, and jumbo all reached survey lows,” noted Joel Kan, an MBA economist. “… the gradual slowdown in the improvement in the job market and tight housing inventory remain a concern for the coming months, even as low mortgage rates continue to provide support,” he added.

FXStreet notes that Brent Crude Oil is struggling to extend its rally. The black gold is trading around the $45 level and could see a rise towards the 200-DMA at $47.05 which is expected to cap. On the flip side, support is seen at $41.38, strategists at Credit Suisse apprise.

“Brent Crude rally continues to struggle to extend but we continue to give the upside the benefit of the doubt for now though with resistance seen next at the 200-day average at $47.05, which we look to then cap. A direct and closing break can see resistance next at the 61.8% retracement of the Q1 fall at $50.45.”

“Key support remains seen at $41.38/32, removal of which would see a near-term top established to warn of a fall back to $37.01, potentially $33.62.”

“Weekly RSI momentum continues to hold key support for now. Below though would mark an important top.”

FXStreet notes that gold has surged around $60 during the early European session and spiked to fresh daily tops, near the $1935-37 region after an early slide to the $1862-63 region, or three-week lows. Bart Melek, Head of Commodity Strategy at TD Securities, believes the correction represents a second opportunity to get on the precious metal bandwagon.

“Real rates are now rising along with nominal yields due to stimulus optimism and risk appetite, with the USD also off its lows. Given that the US economy will continue to positively respond to an additional trillion dollars worth of fiscal stimulus and continued Fed measures, it is quite likely that rates and the dollar may see some better days into 2020. This, along with profit-taking by the very active retail investors and COMEX margin increases should see gold consolidate lower.” 

“Given the technicals and the fundamentals, it would not be surprising to see spot gold trend down to around $1890/oz and silver at around $22/oz, before hitting new records.” 

“Before the complex hits new highs ($2,100+, $30+), there will need to be confirmation that the Fed will indeed suppress yields, consider average inflation targeting and there are signs that inflation may move higher. At the same time, markets will want to see if monetization of debt is in the cards, before talk of these levels becoming sustained is credible. TD securities projects an average gold price of $2,100/oz in Q4-2021 and $30/oz silver price during the same period.”

FXStreet notes that so far in Q3, the Aussie’s performance has been quite mixed, with the euro among the G10 currencies gaining on A$. The EUR/AUD pair is trading near 1.65 and economists at Westpac forecast the cross at 1.67 by September.

“Euro outperformance appears to be at least partly inspired by the July agreement on the EU Recovery Fund, with the ‘frugal’ minority willing to compromise with the majority who notably were led by Germany. The EU is keen to talk up the scale of the fiscal support compared to the US and China, though ratification will take months.”

“Europe’s Covid-19 trends are mostly encouraging, allowing for some resumption of travel. Australia’s economic recovery, in contrast, will be slowed notably by the Victorian virus resurgence and resultant Stage 4 restrictions.”

“We assume that the optimism over European cooperation persists for now, leaving EUR/AUD trending towards 1.67 by September, but with the Aussie then grinding higher in Q4 and in 2021.”

Reuters reports that Britain said its latest round of trade talks with the United States made positive progress in many areas, and that both sides agreed negotiations should continue at pace in the coming months.

After leaving the European Union earlier this year Britain is trying to tie up swift trade deals with major partners like the United States to capitalise on its new freedom to strike bilateral deals rather than EU-wide ones.

"Positive progress continues to be made in many of the areas covered by an agreement," the British trade department said in a statement.

"Both sides reaffirmed their commitment to negotiating a comprehensive and ambitious agreement. In terms of the timeline of negotiations, it was agreed that they should continue at pace throughout the Autumn."

Nevertheless, the government said international trade minister Liz Truss had told her U.S. counterparts that retaliatory tariffs imposed on EU goods - which still impact British goods like Scotch Whisky - were unacceptable and should be removed.

Total trade between the two countries was valued at 232.7 billion pounds in 2019, according to British statistics.

The next round of talks is in early September, and will see both sides exchange their first market access offers. Britain says that while it wants a quick deal, it is not willing to set a target date for one because it does not want time pressure used against it.

The most recent round of negotiations saw texts exchanged on rules of origin - the criteria used to determine the source of a good, and therefore which duties and regulation should apply. There was also detailed discussion of intellectual property rules.

FXStreet reports that the S&P 500 is already approaching its 3394 record high from February. The Credit Suisse analyst team sees scope for an overshoot to 3432/36 but with the 3432/36 capping at first for a consolidation phase. What’s more, the VIX has finally removed a cluster of key supports around 24 and look for a return to more “normal” conditions.

“S&P 500 has extended its defence of high-level support at 3200/3198 for a break with ease above the top of the February gap at 3328/38, and is on course for a challenge on the 3394 record high. We see scope for an overshoot to Fibonacci projection resistance at 3432/36, but with the market already at the beginning of its ‘typical’ extreme (10% above the 200-day average), we would look for 3432/36 to then ideally cap for a consolidation phase. Should strength directly extend, the upper end of the ‘typical’ extreme is currently at 3517.”

“Support at 3271 needs to hold to keep the immediate risk higher. A break would suggest a corrective/consolidation phase is underway, with support next at 3204/00 and more importantly at the 200-day average at 3056.”

“80% of S&P 500 stocks are above their medium-term 63-day average, still well below the extreme seen earlier this year. Only 58% of S&P 500 stocks are above their long-term 200-day average still highlighting a neutral condition.”

“The VIX has removed key support from the top of its 2019 range at 24.81/23.54, opening the door to more ‘normal’ conditions with support seen at 20 next, then 18.21.”

According to the report from Eurostat, in June 2020, a month marked by some relaxation of COVID-19 containment measures in many Member States, the seasonally adjusted industrial production rose by 9.1% in both euro area and EU, compared with May 2020. Economists had expected a 10.0% increase in euro area. In May 2020, industrial production rose by 12.3% in the euro area and by 11.6% in the EU. In June 2020 compared with June 2019, industrial production decreased by 12.3% in the euro area and by 11.6% in the EU. Economists had expected a 11.5% decrease.

In the euro area in June 2020, compared with May 2020, production of durable consumer goods rose by 20.2%, capital goods by 14.2%, intermediate goods by 6.7%, non-durable consumer goods by 4.8% and energy by 2.6%.

In the EU, production of durable consumer goods rose by 20.2%, capital goods by 14.2%, intermediate goods by 6.5%, non-durable consumer goods by 5.6% and energy by 1.7%.

The highest increases were registered in Slovakia (+21.7%), Hungary (+17.1%) and Romania (+16.3%). Decreases were observed in Belgium (-1.4%) and Finland (-0.8%).

FXStreet reports that according to FX Strategists at UOB Group, USD/CNH is expected to keep navigating between the 6.9300/6.9800 band in the next weeks.

24-hour view: “Our expectation for USD to ‘trade sideways’ yesterday was incorrect as it dropped to 6.9370 before rebounding. The recovery appears to have room to extend higher but any advance is unlikely to move above yesterday’s peak at 6.9662 (6.9580 is already quite a strong level). Support is at 6.9380 but the stronger level is at 6.9300.”

Next 1-3 weeks: “Our view from last Thursday (06 Aug, spot at 6.9400) wherein USD ‘is in a negative phase and break of 6.9300 critical support could lead to a quick move to 6.9050’ was proven wrong it breached the ‘strong resistance’ level at 6.9730 last Friday (high of 6.9763). While USD could still weaken further out, for the next 1 to 2 weeks, USD is likely to consolidate and trade sideways within a 6.9300/6.9800 range.”

According to the report from Istat, in July 2020 the rate of change of Italian consumer price index for the whole nation (NIC) was -0.2% on monthly basis and -0.4% with respect to July 2019 (from -0.2% in June); the flash estimate was -0.3%.

The third consecutive month of decrease on annual basis of All items index was mainly due to the confirmation of the drop (even if less large) of prices of both Regulated (from -14.1% in June to -13.6%) and Non-regulated energy products (from -11.2% to -9.0%) and the widening of the decrease to the slowdown of prices of Processed food including alcohol (from + 1.2% to + 0.6%) and of Unprocessed food (from +4.1% to +2.5%) and to prices of Services related to transport (from -0.1% to -0.9%).

Core inflation (excluding energy and unprocessed food) was +0.4% (down from +0.7% in the previous month) and inflation excluding energy was +0.6% (down from +0.9% in the previous month).

Prices of Grocery and unprocessed food decreased by 1.1% on monthly basis and increased by 1.2% on annual basis (down from +2.1% in the previous month).

In July 2020 the rate of change of the Italian harmonized index of consumer prices (HICP) was -0.7% with respect to the previous month and +0.8% on annual basis (reversing the trend from -0.4% in June).

Reuters reports that british finance minister Rishi Sunak said there were some "promising signs" that the country's economy was recovering from its record economic crash during the coronavirus lockdown which was announced earlier on Wednesday.

Sunak said growth of 8.7% in gross domestic product in June was encouraging, even as official data showed the economy contracted by 20.4% in the second quarter as a whole.

Sunak told broadcasters there was too much uncertainty to know if Britain would have a swift, V-shaped economic recovery.

"What we do know is that there are promising signs," he said. "There's still work to do and even as we recover many people are going to lose their jobs, already have lost their jobs, and we need to make sure that we are constantly focused on providing new opportunities for those people."

Sunak reiterated his opposition to extending the government's huge job retention scheme which is due to expire at the end of October. Economists expect a sharp rise in unemployment as the state-funded jobs subsidies end.

Sunak also said he expected to see more people returning to their workplace in the coming weeks after the government recently changed its guidance.

On Brexit, he said good progress had been made in several areas of the negotiations for a trade deal with the European Union but there were gaps on "a couple of big issues."

FXStreet reports that the New Zealand dollar has underperformed overnight following the RBNZ’s dovish policy update. The NZD/USD pair hit an intra-day low of 0.6525 where it has found support from its 55-day moving average, economists at MUFG reports. The kiwi is now trading just below the 0.6550 mark.

“Market participants had been expecting a dovish policy outcome, and the RBNZ delivered by announcing an increase to their Large Scale Asset Purchases (LSAP) cap to NZD 100 billion from NZD 60 billion. The duration of the asset purchase programme will also be extended from June 2021 to June 2022. The RBNZ noted that the purchases could be front-loaded in an attempt to further reduce lending rates. The size of weekly asset purchases will increase modestly from next week.”

“The RBNZ discussed alternative policy instruments. The clear signal from the discussions is that the RBNZ favours implementing negative rates combined with a funding for lending programme is further easing is required. The RBNZ still sees the policy rate remaining at 0.25% until the end of March 2021 but the door has opened further to negative rates beyond.” 

“The RBNZ did discuss the option of purchasing foreign assets which would be a form of intervention to weaken the NZD. However, Governor Orr downplayed the likelihood of this happening anytime soon by saying it would be at the bottom of the list of policy options. Overall, the RBNZ’s dovish policy stance will continue to put a dampener on the kiwi. Downward pressure could build on the kiwi as the RBNZ moves closer to implementing negative rates early next year.”

During today's Asian trading, the US dollar rose against the main world currencies.

The U.S. Dollar index, which shows the value of the US dollar against six major world currencies, rose 0.11% from the previous day.

Support for the US currency is provided by investors hopes for the recovery of the US economy after the crisis caused by the COVID-19 coronavirus pandemic, analysts say. At the same time, uncertainty around the new stimulus package in the US limits the growth of the dollar.

White house officials and representatives of Democrats in Congress on Monday signaled their readiness to resume negotiations on a new stimulus package after US President Donald Trump over the weekend signed executive orders to extend economic support measures bypassing Congress.

The head of the Federal reserve bank of Richmond, Thomas Barkin, on Tuesday warned that a recession of "historic proportions" could take an even worse turn if Washington does not accept another package of financial assistance to workers and companies affected by the coronavirus pandemic.

The New Zealand dollar fell against the US dollar. The Reserve Bank of New Zealand on Wednesday announced an expansion of its massive asset repurchase program to NZ $ 100 billion amid significant uncertainty in the current crisis. The regulator also left its key interest rate unchanged, at a record low of 0.25%, as expected.

Reuters reports that people in Britain are increasingly worried about losing their jobs as the country’s economy struggles to cope with the impact of the coronavirus pandemic, a survey published on Wednesday showed.

Forty-two percent of respondents said their job was less safe than it was a year ago, an increase of five percentage points from July, opinion poll firm Kantar said.

One in four thought that over the rest of 2020 their job was not at all or not very secure, little changed from July.

Employment in Britain fell by the most since 2009 in the April-June period, according to official data published on Tuesday. Figures due for release at 0600 GMT on Wednesday are likely to show the country has fallen into a recession.

The Bank of England last week forecast the jobless rate would hit 7.5% at the end of this year, almost double its most recent reading.

The Kantar survey showed a sharp fall in the proportion of respondents who believed the government was lifting coronavirus restrictions too quickly and an increase in those who thought the pace was right or too slow.

FXStreet reports that USD/CNY has resumed its down move as the pair broke below the July low at 6.9651. Analysts at Credit Suisse remain biased lower within the broad range, with the 38.2% retracement of the 2018/2019 upmove at 6.8625/8242 expected to cap the downtrend.

“USD/CNY has resumed its downmove, breaking below the 61.8% retracement of Q1 surge and July low at 6.9694/51, in line with its in-range ‘head & shoulders’ top, which is still in place. The ‘measured objective’ to this top suggests we should see a move to the 2020 and July 2019 low as well as the 38.2% retracement of the 2018/2019 upmove at 6.8625/8242, where we expect the market to hold and shift into a broad range.”

“It is worth noting that a break below the 38.2% retracement of the 2018/2019 upmove at 6.8625/8242 at any stage would complete a much larger and more important ‘double top’.” 

“We ideally look to hold below 7.0279 to maintain the downside pressure.”

According to the report from Office for National Statistics, total production output decreased by 16.9% for Quarter 2 (Apr to Jun) 2020, compared with Quarter 1 (Jan to Mar) 2020, the largest fall since records began in January 1948; this was led by manufacturing output, which fell by a record 20.2%.

The three-monthly fall in manufacturing is because of widespread weakness, with 12 of the 13 subsectors providing downward contributions; this was led by transport equipment which fell by 49.1%.

In June 2020 the index of production is 11.6% below February 2020, the previous month of “normal” trading conditions, prior to the coronavirus (COVID-19) pandemic.

Production output rose by 9.3% between May 2020 and June 2020, with manufacturing providing the largest upward contribution, rising by 11.0%, the largest increase since records began in January 1968; there were also rises from mining and quarrying (8.4%), water and waste (4.1%) and electricity and gas (4.1%). Economists had expected a 9.2% increase.

The monthly increase of 11.0% in manufacturing output was led by transport equipment (52.6%) but this subsector remained 38.2% weaker compared to February 2020; of the 13 subsectors, 11 displayed upward contributions.

For Quarter 2 (Apr to Jun) 2020, compared with Quarter 2 (Apr to Jun) 2019, production output decreased by a record 18.8%; this was led by a fall in manufacturing of a record 22.0%, where 12 of the 13 subsectors displayed downward contributions.

According to the report from Office for National Statistics, UK gross domestic product (GDP) is estimated to have fallen by a record 20.4% in Quarter 2 (Apr to June) 2020, marking the second consecutive quarterly decline after it fell by 2.2% in Quarter 1 (Jan to Mar) 2020. Economists had expected a 20.5% decrease. When compared with Quarter 4 (Oct to Dec) 2019, UK GDP decreased by 22.1% in Quarter 2 2020.

Despite the weakness in Quarter 2 2020, there was some pick up in June. Monthly GDP grew by 8.7% in June 2020 as lockdown measures eased, following upwardly revised growth of 2.4% in May and a record fall of 20.0% in April 2020. In the two months since its April 2020 low, the UK economy has grown by a total of 11.3%. However, it still remains 17.2% below levels seen in February 2020, before the full impact of the coronavirus. 

There have been record quarterly falls in services, production and construction output in Quarter 2, which have been particularly prevalent in those industries that have been most exposed to government restrictions.

Private consumption accounted for more than 70% of the fall in the expenditure measure of GDP in Quarter 2 2020, falling by 23.1%; there were also notable falls in gross capital formation and government consumption.

Commenting on today’s GDP and productivity figures for June and the second quarter, ONS Deputy National Statistical for Economic Statistics Jonathan Athow said: “The recession brought on by the coronavirus pandemic has led to the biggest fall in quarterly GDP on record. The economy began to bounce back in June with shops reopening, factories beginning to ramp up production and housebuilding continuing to recover. Despite this, GDP in June still remains a sixth below its level in February, before the virus struck. Overall, productivity saw its largest fall in the second quarter since the three-day week. Hospitality was worst hit, with productivity in that industry falling by three quarters in recent months.”

EUR/USD

Resistance levels (open interest**, contracts)

$1.1867 (2394)

$1.1839 (1169

$1.1816 (1023)

Price at time of writing this review: $1.1722

Support levels (open interest**, contracts):

$1.1687 (584)

$1.1665 (503)

$1.1638 (946)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date September, 4 is 87175 contracts (according to data from August, 11) with the maximum number of contracts with strike price $1,0500 (5007);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3166 (827)

$1.3127 (726)

$1.3101 (888)

Price at time of writing this review: $1.3035

Support levels (open interest**, contracts):

$1.2974 (493)

$1.2921 (1365)

$1.2853 (1237)

Comments:

- Overall open interest on the CALL options with the expiration date September, 4 is 22078 contracts, with the maximum number of contracts with strike price $1,3800 (3396);

- Overall open interest on the PUT options with the expiration date September, 4 is 16032 contracts, with the maximum number of contracts with strike price $1,3000 (1365);

- The ratio of PUT/CALL was 0.73 versus 0.72 from the previous trading day according to data from August, 11

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.