Major pairs moved in tight intraday ranges during the last session. The U.S. dollar managed to post a modest intraday advance, boosted by a pessimistic market’s mood.
On Monday, European indexes closed in the red, and U.S. stocks were mixed. The Nasdaq Composite kept soaring, though, ending the day at record highs with substantial gains.
EUR/USD tumbled down to 1.1902, reaching its lowest level in 5 days. Despite that, the pair finished the day in the 1.1920 area. ECB’s Robert Holzmann announced that there’s no room to increase rates, considering weak inflation. He also added that the PEPP would end when the Covid-19 pandemic is over, but that won’t happen anytime soon. The bank plans to revise the facilities program in September.
Meanwhile, GBP/USD remained lower than the 1.3900 mark. The pair trades around 1.3870 now. After Matt Hancock’s resignation over the weekend, Sajid Javid became the new U.K. health minister. He affirmed that the authorities would lift Covid-19 related restrictions on July 19. According to Javid, the government sees no reason to go beyond that date.
However, Britain reported 22,868 new infection cases, which is the largest one-day increase in the last five months. Currently, the country is fighting the virus’ Delta variant, which has originated from India.
Commodity-linked currencies also lowered against the greenback. On the other hand, gold prices continued consolidating at around $1,780. Crude oil prices declined, but, WTI trades at $72.90 a barrel.
What will influence the forex market during this week?
U.S. Treasury yields surged forward during European trading hours but tumbled down again ahead of Wall Street’s opening, ending the day with modest losses.
Traders focus on the U.S. employment figures this week, along with announcements related to the U.S. government infrastructure investing program.
Finally, Fed member Thomas Barkin will speak later Tuesday. He may provide insights on how close the agency is to tapering bond buys.
The USD/JPY and EUR/JPY declined. Why’s that?
The USD/JPY and EUR/JPY pairs lowered slightly on Tuesday due to the strong Japan retail sales numbers. According to data, sales skyrocketed by 8.2% in May after jumping by 11.9% in the previous month. Experts forecasted only a 7.9% increase, but it seems Japan’s economy is recovering faster than expected. Household spending is one of the measures of economic strength, and this news boosted the Yen.
However, the country’s unemployment rate also increased from 2.8% in May to worse than the expected 2.9%. Data also showed that the jobs to applications ratio remained the same at 1.09.
Some key events are scheduled today. For instance, in Sweden, statistics agencies will release the consumer and business confidence numbers. The agency already published retail sales data yesterday.
Meanwhile, the Bank of England plans to release the latest mortgage data. The European Commission also plans to publish the latest business climate numbers while the German statistics agency will report its preliminary inflation figures.
Will the USD/JPY pair continue lowering?
The USD/JPY pair tumbled down to an intraday low of 110.48 during the last session, but it still traded slightly below this month’s high of 111.40.
On the four-hour chart, the pair dropped below the upper side of the ascending channel. It is now approaching the lower side. The USD/JPY has also crossed the 50-day, and 25-day moving average as the MACD has formed a bearish crossover. As a result, the pair will likely keep falling. The USD/JPY last sat at 110.5300, while EUR/JPY pair traded at 131.72 at last.
AUD/USD pair dropped below 0.7550 due to Coronavirus’ Delta-version concerns
The buying interest around the greenback remains unabated. As a result, AUD/USD pair plunged to fresh session lows, trading near the midpoint of the 0.7500 level.
The Aussie lost almost 0.17% on the day, exchanging hands at 0.7553. It declined after rallying to 0.7565 during the late-Asian session.
The safe-haven demand for the U.S. dollar remains intact, as investors worry about the rapid spread of the Delta Covid-19 variant, as well as its risks to the global economic recovery. The dollar also draws support from the Federal Reserve’s hawkish comments. So far, most U.S. central bank officials dismiss inflation concerns, remaining optimistic about the United States’ economic rebound.
Meanwhile, the Australian dollar trades under pressure, as half of the country’s population is back under lockdown and the virus cases soar.
On Tuesday, Australia’s other regional capital city Brisbane restricted movement outside of homes except for essential reasons for at least three days. Darwin also announced longer lockdowns of up to two weeks over the weekend. Thus far, Australia has been unable to contain the rapid spread of the new variant.
What about the NZD/USD pair?
On Monday, the NZD/USD pair closed in the negative territory. It also extended its decline during the first half of the day on Tuesday. Currently, the pair is trading at its lowest level since June 22 at 0.6983, tumbling down by 0.58% daily.
In the absence of significant fundamental drivers, the greenback’s market valuation remains the main driver of NZD/USD’s movements.
The U.S. dollar Index soared by 0.3% at 92.15 on Tuesday. If it continues rising, the NZD/USD will decline further.