USD weakens as market worries intensify

The USD extended its losses yesterday against its counterparts, as market worries tended to intensify about the prospects of the recovery of the US economy. The USD Index has reached a two-year low, after five weeks of consecutive losses, while GBP and EUR had substantial gains against the USD. Yesterday the US GDP growth rate released for Q2, declined less than expected, but nevertheless showed a contraction not seen since the great depression in peace time, while at the same time the initial jobless claims figure rose slightly, implying that the recovery of the US employment market has hit a halt. The uncertainty intensifies further as disputes within the US Congress about the new fiscal package seem to stall its approval, and the federal jobless benefit of $600 is about to expire today. We expect that any headlines indicating that the two parties are nearing a possible deal about the stimulus could support the USD and vice versa.

EUR/USD rallied yesterday breaking consecutively the 1.1790 (S2) and the 1.1850 (S1) resistance lines, both now turned to support, and continued higher aiming for the 1.1910 (R1) resistance line. As the pair has broken the upper boundary of its sideways motion and rallied, we switch our sideways bias in favour of a bullish scenario. However, it should be noted that the RSI indicator below our 4-hour chart, has breached the level of 70, confirming the dominance of the bulls, yet at the same time may imply that the pair’s long position is somewhat overcrowded, and a correction lower nears. Should the bulls maintain control over the pair, we could see EUR/USD breaking the 1.1910 (R1) resistance line and aim for the 1.1995 (R2) resistance level. Should the bears take over, we could see the pair breaking the 1.1850 (S1) support line and aim for the 1.1790 (S2) support level.

Apple and Amazon report great results

According to media, Apple reported far higher quarterly revenue than expected as consumers tended to buy new devices during the pandemic, while Amazon posted the biggest profit ever, as online sales surged during the coronavirus pandemic. Big tech companies were among the main gainers from the pandemic as consumers were limited at home and shares of Amazon, Facebook, Apple and Alphabet tended to rise in value, adding substantially in market cap. It should be noted that the news came one day after the US Congress interrogated the CEO’s of the afore mentioned companies over allegations over power and influence misuse, leaving some mistrust among investors. The better than expected results could create fertile ground for Nasdaq’s rally to restart, as confidence in big tech companies could be restored. Nasdaq rose yesterday, breaking decisively the 10630 (S1) resistance line, now turned to support. We continue to expect the upward direction to be maintained, especially given that the upward trendline incepted since the beginning of April remains the main guide for the index. Should the bulls maintain control over Nasdaq’s direction ,we could see the index breaking the 10845 (R1) resistance line and aim if not also break the 11000 (R2) resistance level, in search of higher grounds. Should the bears take over, we could see the index, breaking the 10630 (S1) support level aiming for the 10450 (S2) support level.

Other economic highlights today and early tomorrow

On a busy Friday, during the European session, we get France’s preliminary GDP growth rate for Q2, Germanys’ retail sales for June, UK’s nationwide house prices for July, France’s preliminary CPI (EU Normalised) rate for July, Eurozone’s preliminary HICP rate for July and Eurozone’s preliminary GDP growth rate for Q2. In the American session, we get the US consumption rate for June, Canada’s GDP growth rate for May, the final US University of Michigan consumer sentiment for July and also from the US the Baker Hughes weekly oil rig count. During Monday’s Asian session, we note the release of Japan’s final Jibun manufacturing PMI for July and China’s Caixin manufacturing PMI for July.

EUR/USD 4 Hour Chart