Forex News Analysis by LiteForex

EUR/USD: downward correction

Current trend

After a downward correction, the EUR/USD pair is trying to recover, trading at 1.1813.

As soon as the American currency tried to form a new uptrend, another fundamental hit forced the USD Index to decline. Wisconsin has declared an emergency and a curfew at night after police injured African American Jacob Blake on August 23. The US currency is declining, despite the positive data on New Home Sales for July, which rose to 901K against 784K forecasted.

Analysts' expectations of a significant decline in German Q2 GDP came true. A small positive point was that the values were slightly better than forecasts: –9.7% QoQ versus –10.1% expected and –11.3% YoY versus –11.7%. A slight increase is also observed in the IFO business climate index for August, which amounted to 92.6 points against the background of the forecast of 92.2 points.

Support and resistance

The instrument trades within the ascending channel. After reaching the support line, the price practically formed a local Head and shoulders reversal pattern. Fast EMAs on the Alligator indicator have crossed and are ready to overcome the signal one upwards, and the AO oscillator histogram is approaching the transition level.

Support levels: 1.1785, 1.1711.
Resistance levels: 1.1840, 1.1950.

AUD/USD: trading near record highs

Current trend

AUD maintains an uptrend against USD in the ultra-short term, again approaching record highs since August 19. The instrument is supported by the weak USD, which is retreating practically across the entire spectrum of the market in anticipation of today's publication of updated data on the dynamics of US GDP. In addition, investors are awaiting a speech by the Fed Chairman, Jerome Powell, who may announce changes in the vector of the regulator's monetary policy.

The macroeconomic statistics from Australia also provide moderate support to the instrument. Yesterday, investors drew attention to the data on the dynamics of Construction Work Done. In Q2 2020, the indicator decreased by 0.7% QoQ, after a 1% QoQ decline in the previous quarter. Analysts had expected a sharp 5.8% QoQ drop. Today's Private Capital Expenditure data showed a 5.9% QoQ decline despite forecasts of an 8.4% QoQ fall.

Support and resistance

Bollinger Bands in D1 chart demonstrate flat dynamics. The price range is slightly expanding from above, but is limiting the development of "bullish" trend in the ultra-short term. MACD indicator is growing preserving a weak buy signal (located above the signal line). Stochastic rises more steadily but is rapidly approaching its highs, which reflects risks of the overbought AUD in the ultra-short term.

Existing long positions should be kept until technical indicators are clarified.

Resistance levels: 0.7249, 0.7274, 0.7300.
Support levels: 0.7226, 0.7200, 0.7150, 0.7130.

Morning Market Review

EUR/USD

EUR is strengthening against USD during today's Asian session, recovering from the active multidirectional dynamics on Thursday, which was the result of the reaction to the speech of the Fed Chairman Jerome Powell and the publication of macroeconomic statistics from the US. Powell's speech supported USD for a while, as the markets saw the long-awaited changes in monetary policy: now the Fed does not limit inflation to a strict threshold of 2%, but will allow prices to stay above this level for some time so that the American economy could recover after the crisis. Additional support for USD was provided by the updated data on the dynamics of US GDP for Q2 2020. According to new estimates, the indicator dropped by 31.7% YoY, which was better than the market's expectations at –32.5% YoY.

GBP/USD

GBP is growing against USD during today's morning trading session, developing the uptrend that formed earlier this week. Yesterday's trading proceeded with multidirectional dynamics due to the Fed Chairman Jerome Powell's speech; however, GBP still managed to update its record highs since December 17, 2019. Today, investors are focused on the Bank of England Governor Andrew Bailey's speech, in which he may clarify the prospects for the monetary policy of the regulator. Also at the end of the week, traders await the publication of July statistics on Personal Income and Spending of American citizens.

NZD/USD

NZD is actively growing against USD during today's Asian session, forming a fairly strong "bullish" trend in the short term. The instrument adds about 0.45% and is testing the level of 0.6660 for a breakout. The uptrend for the instrument at the end of the week is supported by corrective sentiments for USD. USD showed moderate growth after the speech of the Fed Chairman, Jerome Powell, who announced changes in monetary policy in terms of adjusting the inflation target. NZD so far is ignoring the appearance of weak macroeconomic statistics from New Zealand on Friday. Meanwhile, the ANZ Consumer Confidence index in August fell from 104.3 to 100.2 points. Total Filled Jobs in July fell by 7.418M after rising by 2.2M last month.

USD/JPY

USD is actively strengthening against JPY during today's morning trading session, updating local highs since August 14. The pair is gaining about 0.30% and is preparing to test the strong resistance at 107.00. The appearance of a "bullish" momentum for the instrument was caused by yesterday's publication of good macroeconomic statistics from the USA, as well as by the results of the speech by the Fed Chairman, Jerome Powell, who was able to calm and support the markets for a while. Weak statistics from Japan provide additional support to the pair today. Tokyo Consumer Price Index slowed down in August from the previous 0.6% YoY to 0.3% YoY, which turned out to be much worse than market expectations at 0.8% YoY.

XAU/USD

Gold prices are rising during today's Asian session, recovering from the decline the day before, which was a reaction to the long-awaited speech of the Fed Chairman Jerome Powell. In the long term, the US regulator will not restrict inflation to a threshold of 2%, but will allow prices to remain above this level for some time to compensate for years of extremely low consumer prices. In addition, Powell, in his speech, paid much attention to the situation on the labor market, promising to develop a number of new measures to stabilize and restore it. Additional support for USD was provided by the revised indicators of US GDP dynamics for Q2 2020. However, even according to the updated data, the US economy lost more than 31%.

USD/JPY: the pair is trading in both directions

Current trend

The US dollar is actively growing against the Japanese yen today, compensating for the sharp drop at the end of last week. Then the yen showed active growth and retreated from two-week lows in response to the resignation of Japanese Prime Minister Shinzo Abe, who decided to leave the post due to deteriorating health. The demand for the Japanese currency rose markedly, as analysts suggested the beginning of a possible repatriation of capital due to the sharply increased political uncertainty.

This week, the yen is pressured by the ambiguous macroeconomic statistics. Retail sales in July decreased by 3.3% MoM and 2.8% YoY, which turned out to be significantly worse than the market forecasts of +8% MoM and +2.4% YoY. Industrial output contracted by 16.1% YoY in July after falling by 18.2% YoY last month. MoM, the indicator rose by 8%, sharply accelerating from the previous value of +1.9%.

Support and resistance

Bollinger Bands in the D1 chart demonstrate a gradual decrease. The price range is narrowing from above, reflecting a sharp change of trend in the short term. MACD is going down having formed a weak sell signal (histogram is located under the signal line). Stochastic is declining more actively and is currently rapidly approaching its minima.

The current showings of the indicators do not contradict the further development of the downtrend in the short and/or ultra-short term.

Resistance levels: 105.67, 106.00, 106.46, 106.79.
Support levels: 105.29, 105.00, 104.50, 104.17.

XAG/USD: silver prices rise

Current trend

Today, during the Asian session, silver prices are actively growing, renewing local highs since August 11 and continuing the development of the “bullish” impulse that formed at the end of the last trading week. The instrument is strongly supported by the Fed's soft monetary policy, as well as the continuing uncertainty in the American economy in connection with the upcoming presidential election. The epidemiological situation in the world also raises concerns. Despite the successes achieved in the development of a vaccine, an effective remedy has not yet appeared, and most of the world's economies still have to maintain some of the quarantine restrictions, taking new measures to stimulate and support growth.

On Tuesday, investors expect a block of macroeconomic statistics on business activity in the US for August. Also, Lael Brainard, a member of the US Federal Reserve Open Market Committee, will speak during the day.

Support and resistance

On the daily chart, Bollinger Bands grow moderately. The price range expands but not as fast as the “bullish” activity develops. MACD reverses upwards, forming a new buy signal (the histogram is above the signal line). Stochastic grows more actively but is rapidly approaching its highs, indicating that silver is overbought in the ultra-short term.

It is better to keep the current long positions in the short-term and/or ultra-short term until the signals from technical indicators are clarified.

Resistance levels: 28.78, 29.81, 30.50.
Support levels: 28.00, 27.00, 26.17, 24.92.

Morning Market Review

EUR/USD

EUR is trading in both directions against USD during today's Asian session, consolidating at 1.1900. EUR retreated from its record highs since May 2018 and the important psychological level of 1.2000, responding to the emergence of not the most confident macroeconomic statistics from Europe yesterday. Core Consumer Price Index in the euro zone slowed down in August from 1.2% YoY to 0.4% YoY, which turned out to be noticeably worse than market expectations at 0.9% YoY. Consumer Price Index for the same period fell by 0.2% YoY, while investors expected its growth by 0.2% YoY. Unemployment Rate in the euro area in July rose from 7.7% to 7.9%, which was only 0.1% better than the forecasts. In turn, USD received some support after the publication of statistics from the US on business activity from ISM. Today, traders are focused on the US ADP report on Employment Change in August, as well as the monthly economic review, the Fed's Beige Book.

GBP/USD

GBP is trading near zero against USD during today's morning session, retreating from its highs since the end of last year. The instrument was supported moderately by data from the UK yesterday, but later, with the publication of statistics on business activity from the US, the "bulls" began to rapidly lose their positions. The UK data was encouraging showing growth in Consumer Credit. In July, the indicator rose by GBP 1.2 billion after falling by GBP 0.382 billion in the previous month. Analysts had expected positive dynamics at GBP 0.678 billion to appear. At the same time, Markit Manufacturing PMI in the UK in August fell from 55.3 to 55.2 points. Today analysts expect the speeches of the representatives of the Bank of England, Andrew Haldane and Ben Broadbent, who may concretize the prospects of the monetary policy of the regulator for the near future.

AUD/USD

AUD is trading down against USD during today's Asian session, interrupting yesterday's "bullish" rally when it hit record highs since August 2018. In addition to the correctional growth of USD, AUD is under pressure from the macroeconomic statistics from Australia published on Wednesday. Australian GDP for Q2 2020 collapsed by 7% QoQ after falling by 0.3% QoQ in the prior period. The forecasts suggested a 6% QoQ decline. In annual terms, the Australian economy declined by 6.3% YoY, which also turned out to be significantly worse than market expectations at the level of –5.3% YoY. In Q1 2020 the Australian economy showed growth by 1.4% YoY.

USD/JPY

USD is trading marginally higher against JPY, testing 106.00 for a breakout. The instrument received support the day before after the publication of upbeat statistics from the US on business activity; however, the positions of USD remain extremely vulnerable ahead of the publication of the labor market report at the end of the week. ISM Manufacturing PMI in the USA in August rose from 54.2 to 56 points, which significantly exceeded the projected 54.5 points. ISM Manufacturing New Orders Index for the same period jumped from 61.5 to 67.6 points, while analysts expected it to decline to 53.5 points.

XAU/USD

Gold prices are slightly declining during today's Asian session, developing weak corrective dynamics after updating local highs since August 19. The instrument is still supported by the prospect of maintaining low interest rates in the US for a long period of time. Earlier, the Fed changed its approach to its inflation target and allowed prices to rise above 2% to offset the negative effect of a prolonged period of low inflation. In addition, the previous epidemiological risks remain in force, posing a threat of re-closure of economies and the return of part of quarantine restrictions. Finally, USD remains under pressure ahead of the US presidential elections this fall.

Morning Market Review

EUR/USD

EUR has been declining against USD during today's Asian session, building on the corrective momentum formed last Tuesday when the instrument reversed downwards after updating its two-year highs. In addition to the development of technical factors, some pressure on EUR on Wednesday is exerted by uncertain data from Germany. Retail Sales in Germany fell by 0.9% MoM in July after decreasing by 1.9% MoM in the previous month. Analysts had expected positive dynamics at 0.5% MoM. On an annualized basis, Retail Sales slowed down from +6.7% YoY to +4.2% YoY, which, however, turned out to be slightly better than the forecast of a slowdown to +3% YoY. Today, traders are focused on the statistics on Services PMI of the euro area for August and July data on the dynamics of Retail Sales in the euro area.

GBP/USD

During today's Asian session, GBP is retreating from its record highs, updated on September 1. Investors are fixing long profits against USD practically across the entire spectrum of the market, which triggered a correctional decline. Meanwhile, fundamentally the situation changes little. Earlier it became known that the US Treasury Department again rejected the latest proposal for new measures to support the American economy, put forward by the Democratic Party. American lawmakers continue to demonstrate their inability to agree in a difficult time for the country's economy, which cannot provide any support to USD. Today, British investors are awaiting a speech by the Governor of the Bank of England, Andrew Bailey, who may touch upon the prospects of the regulator's monetary policy for the near future in his speech.

NZD/USD

NZD has seen a slight decline against USD during today's morning trading session, retreating from record highs since July 2019, updated the day before. The instrument loses about 0.26%, testing the level of 0.6750 for a breakdown. Technical factors contribute to the decline in the instrument, as traders seek to close part of their long positions ahead of the publication of the August US labor market report on Friday. Meanwhile, Wednesday's ADP report on Employment Change in the US was disappointing. According to the published data, employment in the country grew by only 428K new jobs, which turned out to be twice worse than market expectations. Statistics from China provides moderate support to NZD on Thursday. Caixin Services PMI in August fell by only 0.1 points to 54 points, while experts had expected a sharp decline to 50.4 points.

USD/JPY

USD rallies moderately against JPY during today's Asian session, continuing to develop a weak "bullish" signal that formed earlier in the week. Macroeconomic statistics from the US released yesterday turned out to be mixed, but investors preferred to focus only on the positive moments. The volume of Factory Orders in the US in July showed an increase of 6.4% MoM, repeating the data for the previous period. Experts expected the indicator to slow down to +6% MoM. Today, traders are focused on data on the dynamics of Jobless Claims in the US, as well as the August report from ISM on business activity in the US services sector. Interesting statistics from Japan are not expected until the beginning of next trading week, so investors are likely to continue to discuss the process of forming a new Japanese government after the resignation of Shinzo Abe.

XAU/USD

Gold prices are consolidating during today's morning session after a strong decline the previous day, which brought the instrument back to 1930.00. On Wednesday, USD almost completely ignored the release of the disappointing ADP employment report, which reflected the growth of new jobs in the private sector, almost half of the predicted values. In turn, gold continues to benefit from the failures of US legislators to develop a new package of measures to support the US economy.
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XAU/USD: general review

Current trend

During today's Asian session, the price of gold futures contracts rose to the level of 1942.38 after Thursday's correction. Major US indices fell by 3-5% after the publication of weak macroeconomic statistics the day before. The US Trade Deficit in July rose to USD 63.6B from USD 53.5B a month earlier, which turned out to be much worse than the projected growth to USD 58B. The US Services PMI fell from 58.1 to 56.9 points in August, the first decline since April, when the coronavirus pandemic began to affect the market. The publication of disappointing statistics has raised concerns among investors about the recovery of the American economy, causing a cooling of risk sentiment, and increasing their interest in safe-haven assets.

Today, market participants are focusing on macroeconomic statistics on the US labor market. According to analysts, the US Unemployment Rate in August could fall to 9.8% from 10.2% in July, and Nonfarm Payrolls could rise by 1.400M after increasing by 1.763M in the previous month. If the forecast proves right, gold may fall under pressure.

Support and resistance

Bollinger Bands are directed downwards on the 4-hour chart. The MACD indicator is in the negative zone. Stochastic is showing a steady rise, being halfway to the overbought level.

Resistance levels: 1942.38, 1951.50, 1972.02, 1992.54.
Support levels: 1922.08, 1903.11, 1862.12.

USD/CAD: the pair shows ambiguous dynamics

Current trend

Today, during the Asian session, the USD/CAD pair is growing moderately, recovering from the active decline yesterday due to the market reaction to the publication of ambiguous reports on the US and Canadian labor markets. Now, the dollar has added about 0.32% and is preparing to test the level of 1.3100 for a breakout.

Canadian statistics for August reflected a sharp decline in the number of employees from 418.5K to 245.8K, which was significantly worse than market expectations of 275K. The unemployment rate in the country fell from 10.9% to 10.2%, which almost coincided with market forecasts of 10.1%. At the same time, the positive investor sentiment was supported by the average hourly wage, which increased by 6% YoY in August, as well as the Ivey business activity index, which was significantly better than forecasted: 67.8 points against 57.5 points.

Support and resistance

On the daily chart, Bollinger bands are steadily declining. The price range expands slightly from above, reflecting the ambiguous nature of trading in the short term. The MACD indicator is growing, maintaining a poor buy signal (the histogram is above the signal line). Stochastic is also strengthening, signaling in favor of further growth of the instrument in the ultra-short term.

The development of upward dynamics is possible in the nearest time intervals.

Resistance levels: 1.3100, 1.3132, 1.3160, 1.3200.
Support levels: 1.3043, 1.3000, 1.2975, 1.2950.

GBP/USD: decline in instrument

Current trend

The GBP/USD pair is in a downtrend due to USD Index strengthening and is trading around 1.3130.

Discussions on a package of agreements on Britain's exit from the EU continue. Yesterday, it became known that the Parliament intends to approve a bill according to which the clause of the Brexit agreement, in which Northern Ireland will be assigned the status of an official subject of the UK customs space, will be canceled. It caused serious discontent from the EU, as it actually violates the terms of the entire agreement. Thus, the already half-forgotten GBP driver is relevant again.

Locally, the instrument is under pressure from the growing US dollar. The quotes of the index, which shows the ratio of the US dollar to a basket of world currencies, exceeded 93 points and are at 93.177.

Support and resistance

The price moves is within the boundaries of the global Expanding formation pattern, approaching the support line within the fifth wave. The likelihood of a further decline is quite high, as indicated by technical indicators: Alligator indicator’s EMA fluctuations range is expanded, and the AO oscillator histogram is below the zero line with a downward trend. Considering the statistics of this pattern, the probability of the formation of the sixth upward wave is more than 70%.

Resistance levels: 1.3170, 1.3260.
Support levels: 1.3090, 1.2970.