The EUR/USD pair remained red on Wednesday, suffering from mild downside momentum on the four-hour chart. It is trading below the 50, 100, and 200 simple moving averages on the four-hour chart currently. However, EUR/USD has rebounded from the previous multi-month low of 1.1808. Below 1.1808, the pair’s next support lines are at 1.1760 and 1.17, as well as 1.1650.
Meanwhile, the current resistance is at 1.1825, the daily high, followed by 1.1885. Further above, 1.1910 and 1.1950 also await EUR bulls.
The U.S. dollar has been able to hold onto its gains and extend them even though U.S. bond yields dropped significantly. The Japanese yen was the one exception, rallying against the greenback.
Returns on 10-year Treasuries tumbled down by 1.35% on Tuesday, dropping to the lowest level since February when the United States struggled with a considerable COVID-19 wave.
The disappointing ISM Services Purchasing Managers’ Index increased the demand on the safe-haven dollar. The index hit 60.1, a far worse result than the expected 63.4. However, this score still reflects robust growth in America’s largest sector.
Besides, the U.S. economic rebound still outshines Europe’s slower recovery. Germany’s ZEW Economic Sentiment figures for July were mixed. In addition, Wednesday’s publication of German Industrial Production disappointed traders with a drop of 0.3%.
Investors are now waiting for the Federal Reserve’s Meeting Minutes from the June meeting. The agency’s comments could weigh on the greenback or further boost it.
Three weeks ago, the Fed stunned markets by announcing that the debate about tapering down bond buys has begun. It also signaled two rate hikes in 2023. However, the new minutes will either reinforce or negate the original message.
Coronavirus remains the veritable threat against the global economy
The rapid spread of the coronavirus’ Delta variant in Spain and elsewhere in Europe threatens to slow economic recovery. The eurozone countries are lagging behind their peers in vaccinating their population and may suffer a downbeat summer.
Still, the European Commission published its updated economic forecasts, and according to it, the immunization campaign has substantially picked up recently. That could boost the common currency.
How did the USD/JPY pair trade during today’s session?
The USD/JPY pair attracted some dip-buying, hovering near the 110.40 region on Wednesday. It slightly recovered from the over two-week low that occurred earlier in the session. The USD/JPY managed to hold on to its modest gains around the 110.65-70 region during the mid-European session, even though it lacked the support for a stronger rally.
A mildly positive tone surrounding the U.S. equity futures boosted the pair as it tends to undermine demand for the safe-haven Japanese yen. Despite that, COVID-19 concerns, along with a subdued greenback price action, hindered any meaningful upside for the USD/JPY trading pair.
Furthermore, market players seemed reluctant to place any aggressive bets while waiting to release the FOMC June meeting minutes. Traders hope that the minutes will give them clues about the Fed’s policy outlook. That information will play a key role in influencing the U.S. dollar, as well as provide a fresh directional impetus to the USD/JPY pair.
Thus far, the USD/JPY defended support marked by the lower end of an ascending trend-channel, which extended from April monthly swing lows. Currently, the pair stands firm, stopping its recent sharp pullback from the 111.65 region. Technical indicators on the daily chart are also holding comfortably in positive territory.
Is now a good time for bullish moves?
Traders should wait for a sustained strength beyond the 111.000 mark before adding bullish bets. The pair might then retest YTD tops again, around the 111.65 region, before increasing momentum further towards the 112.00 round figure.
On the other side, the trend-channel support is currently concentrating around the 110.40 region, and might continue to protect the rapid downside. In that case, a convincing break below will shift the sentiment in favor of bearish traders, turning the USD/JPY pair vulnerable and prolonging its recent corrective slide.
The next relevant support is now nearing the crucial 110.00 psychological mark. Still, the USD/JPY pair might turn vulnerable and decrease further, testing the 100-day SMA.
Meanwhile, the GBP/USD pair continues rallying
The GBP/USD pair managed to rebound after an early European session dip, climbing back above the 1.3800 mark. This pair also managed to attract some dip-buying near the 1.3775 region today. It seems the GBP/USD has stopped the previous day’s sharp retracement slide from the 1.3900 mark.
The U.K. Prime Minister Boris Johnson spoke about his plans for the final step of lifting the pandemic lockdown in Britain. That was a key factor that extended some support to the Sterling. A subdued greenback price action also provided a modest boost for the GBP/USD pair.
The U.S. dollar struggled to capitalize on the strong overnight gains, remaining on the defensive through the first half of the trading session. Some investors expect the Fed to wait for a longer period before tapering its asset purchases and raising interest rates. Such sentiment held the dollar back.