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Market Update: Dollar Slump Continues, 6th Week Of EUR/USD, AUD/USD Rally?

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(27 July 2020) 

EUR/USD AND AUD/USD manage to hit record-breaking 6th-week rally this morning; as the US Dollar index (DXY) continues its downward slide.  Rising US-China Tension, slow economic recovery and weak attractiveness as compared to another haven – gold (XAU) drives USD to a 5-week downslide never seen since January 2018.

 

USD

As mentioned above, USD continues to trade lower across the board, this is due to multiple factors.

Increasing US-China tension brings pressure to the dollar, as the State Department orders to close the Chinese Consulate in Houston and China retaliated an order to shut down the US Consulate in Chengdu.  Adding flame to the tense relationship are the disagreements over China’s South-China Sea claim, trade deals and Hong Kong’s national security law.

Furthermore, unemployment data last week signals that US economic recovery is slower than expected. The market had waited too long for the government to provide a stronger stimulus to the nation to recover from the Coronavirus impact.  

Traditionally, investors will shift from stocks to US Dollar at times where risk-sentiment is lowered like this. However, countries outside of the US are doing well recovering from the Coronavirus impact, lowered risk-sentiment in US alone drives investor to the other currencies instead.

Adding to the pressure are gold (XAU)’s higher attractiveness than USD, with XAU/USD reaching record-breaking 1920 price for decades.

 This week’s event:

Mon – Core Durable Goods Orders

Tue – CB Consumer Confidence

Wed – Pending Home Sales, Crude Oil Inventories, Fed Interest Rate Decision

Thu – GDP, Initial Jobless Claims

Fri – Core PCE Price Index

 

 EUR

EUR/USD buyers are celebrating Euro’s 6th-week rally against the Dollar. The pair hits the 1.1700 mark today, the highest level since September 2018.  The market’s buying bias seems to shrug of technical indicator’s overbought condition.

This week Germany will be announcing news regarding their business climate and unemployment data, this will be an impactful data released since Euro leaders agreed to the landmark stimulus package last week, it can be seen as an indicator on the market’s actual reaction to the stimulus package whether it is just a short-term bullish or long-term rally.

 This week’s event:

Mon – German IFO Business Climate Index

Thu – German GDP, German Unemployment Change

Fri – Euro CPI

 

 AUD

Similar to EUR, AUD is continuing on its rally streak against the USD. RBA’s statement on not considering negative-interest rates signals a positive outlook on the Australian economy. This is supported with evidence of China’s economic rebound and increasing Australian export to China.

However, underlying this AUD rally is the concerns of inflation, China-US tension and resurgence of Coronavirus cases in Australia. Increasing inflation rate could drive RBA into a dovish stance on the interest rate, while geopolitical tension may impact Australian exports to China.

 This week’s event:

Tue – CPI

  

GBP

The GBP/USD pair shot to 1.2858 this morning during the Asian session, a record high since March. The driving force behind this is due to huge pressure weakening the USD.  Worries of Coronavirus cases re-emergence in the states undermines the economic recovery effort in the US.

However, the pair’s rally got pulled back as the overbought heat cools down and the fruitless Brexit trade deals discussion still leaves a lingering cap on the GBP currency’s gains.

 This week’s event:

Thu – Nationwide HPI (Housing Price Index)

 

Asian Session Today Morning

USD Index (DXY) slumped to 93.99 from last week’s highest of 96.18

USD/CNY dropped to 7.000 from last week’s highest of 7.0232

USD/JPY dropped to 105.59 from last week’s lowest of 107.54

EUR/USD shot to 1.1700 from last week’s lowest of 1.15578

AUD/USD rose to 0.7125 from last week’s lowest of 0.6984

GBP/USD rose to 1.2820 from last week’s lowest of 1.2518

XAU/USD shot to 1933 from last week’s lowest of 1805

Data from Tradingview.com (UTC+8)

 

Sources:  

https://www.fxstreet.com/news/eur-usd-price-analysis-hits-fresh-22-month-high-of-11690-as-dollar-sell-off-continues-202007270058
https://www.fxstreet.com/news/gbp-usd-door-open-for-a-move-to-12900-uob-202007270513
https://www.investing.com/news/forex-news/dollar-down-continuing-slide-amid-rising-uschina-tensions–2241434
https://www.investing.com/news/forex-news/australian-dollar-faces-rising-obstacles-to-sustain-its-rally-2241309
https://www.forex.com/en/market-analysis/latest-research/ahead-of-german-ifo/
https://www.investing.com/economic-calendar/

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