Daily Market Analysis from ForexMart

EUR/USD. July 06, 2020 – The euro strengthened to 1.13, but failed to gain a foothold above this level

At the beginning of the new trading week, the European currency showed strengthening to the level of 1.13, but could not rise higher. The euro was supported by signs of economic recovery in Germany, as well as hopes for additional incentives in the near future.

In particular, the volume of production orders in Germany grew in May by 10.4% after quarantine restrictions were relaxed in the country. Since this country is Europe's strongest economy, its restoration gives hope to other European countries.

In addition, market participants are waiting for a decision to create a restoration fund in Europe. On Thursday, a meeting of EU finance ministers will take place, and on July 17-18, a summit of regional leaders is planned.

Today is not rich in publishing important macroeconomic data. One should pay attention only to business activity indices in the construction sector throughout Europe: all indicators showed growth. Additional support for the euro today was provided by data on retail sales in the eurozone in May. Sales in the region grew by 17.8% compared with April -12.1%.

GBP/USD. July 07, 2020 – Sterling is trying to gain a foothold above the level of 1.25

The British currency continues to stay in the area of ​​local maximums – above 1.25. The GBP/USD pair is under the influence of multidirectional news, which does not allow sterling to decide on the movement vector.

On the one hand, the pound received support from data on business activity in the country's construction sector: the indicator unexpectedly rose to 55.3 points against 28.9 points a month earlier. Experts predicted growth to 47 points.

At the same time, the currency is under pressure amid growing tensions between the UK and China. In June, Britain announced its readiness to offer citizenship to nearly 3 million Hong Kong residents whose civil liberties are threatened by a new national security law. The British authorities also thought about introducing a ban on the participation of the Chinese company Huawei in the deployment of fifth-generation networks (5G). China also promised to take action in response.

Thus, the UK may be drawn into a trade war with China, which will inevitably lead to a deterioration in the country's economic condition, already undermined by the protracted negotiations on Brexit.

Brent fundamental analysis for July 8th

Brent crude oil continues to trade above $43 a barrel. Market participants are waiting for data on US crude oil inventories from the US Department of Energy. Also, the absence of a certain dynamics of quotes is explained by the reluctance of traders to take risks amid the deteriorating epidemiological situation in the world.

The number of new Covid-19 diseases in the USA continues to grow, exceeding 50 thousand per day. Experts note that concerns about the second wave of the epidemic could provoke the reintroduction of restrictive measures, which will slow down the global economic recovery and again reduce the demand for hydrocarbons.

Moreover, the economic crisis in China casts doubt on the ability of the Celestial Empire to fulfill its obligations under a trade deal with the United States. According to the latest data, oil exports from the US to China in May amounted to only $2 billion. If relations between countries continue to deteriorate, the risk of a new round of trade war will be another threat to global economic growth.

Today, attention should be paid to data on stocks, as well as oil production in the United States. Analysts forecast a 3.1-million-barrel reduction in stocks. If recent data show growth, Brent quotes will return to the level of $43 per barrel.

GBP/USD. July 09, 2020 – The sterling rushed to the level of 1.27

The British currency continues to grow steadily on Thursday, approaching 1.27. The growth is primarily due to the weakening US dollar amid growing demand for risky assets. At the same time, the sterling itself received support after the British government announced its latest economic recovery plan after the pandemic in the amount of 30 billion pounds ($38 billion).

The plan includes a reduction in taxes on the purchase of housing, discounts in restaurants for all citizens, as well as a cash bonus for employers who do not fire their employees.

At the same time, the growth potential of the sterling is limited, since the main driver of the growth of the British currency today are the trade negotiations between the European Union and the UK, and they still look rather uncertain.

Thus, the growth of the GBP/USD pair may be limited by the level of 1.27. The RSI indicator is growing slightly from the neutral zone, which confirms this scenario.

EUR/USD. July 10, 2020 – The dollar is strengthening after the release of labor market data

The pair EUR/USD on Friday shows a recovery to the level of 1.13 after falling to 1.1250. Yesterday, it became known that the US Supreme Court allowed the New York attorney to receive D. Trump's financial statements, which poses certain risks for him on the eve of the presidential election.

Market participants also drew attention to the growing number of cases of new coronavirus diseases in the United States. In some states, the country reintroduces quarantine restrictions.

Yesterday, the States presented data on the labor market: the number of claims for unemployment benefits for the week amounted to 1.314 million, a decrease of 99 thousand, better than the forecast. Today, attention should be paid to data on producer prices, the decline rate of which should slow down from -0.8% to -0.6%. If the forecasts are confirmed, the US currency will be able to complete the week on a major note.

Brent. July 20, 2020 – Oil is moderately reduced

At the beginning of the week, Brent crude oil shows a moderate decline to $42.76 per barrel. The asset is under pressure from the OPEC+ decision to increase oil production, as well as an increase in the number of new cases of Covid-19 infection in the world. According to Johns Hopkins University, the total number of confirmed cases of coronavirus infection in the world has exceeded 13.6 million.

Last week, OPEC+ countries agreed to cut their supply caps in August from 9.7 million barrels to 7.7 million barrels per day. At the same time, countries that did not fulfill their obligations in May and June, on the contrary, will have to cut production in August even more.

The dynamics of Brent are also affected by the likelihood that in August, the growth of oil supply will provide American oil producers. According to a report from Baker Hughes, the total number of oil rigs in the US last week decreased by only 1 unit, from 181 to 180. It is quite possible that only an increase in the number of installations will follow, and this will be an extremely negative factor for Brent quotes.

EUR/USD. July 20, 2020 – Euro growth was suspended at 1.1460

The euro suspended its growth at 1.1465. Earlier, the currency was supported by the continuing interest in risky assets and the expectations of the results of negotiations of the EU leaders on the formation of a fund for the recovery of the European economy in the amount of $750 billion. Market participants are sure that politicians will be able to reach an agreement one way or another, but so far they have not succeeded.

Today trades promise to be calm, because the macroeconomic calendar is almost empty. On Thursday, you should pay attention to the data on the consumer confidence index: the indicator in July could improve to -12 points from the June value of -15.

On Friday, the block of preliminary statistics on the index of business activity in the service sector of the euro zone and individual EU countries for July will be of interest. Experts predict that indicators have improved in all regions.

The dynamics of the pair today will mainly depend on the final results of the meeting of the European leaders. If the agreement does not succeed, the pair will begin to decline to the 1.1400 area.

Brent. July 21, 2020 – Oil updates local highs

Brent oil closed yesterday with growth to $43.20. Today, oil bulls continue their northern campaign, approaching $ 44.60 a barrel. The prices were supported by news of the end of the EU summit: the leaders of the EU countries have finally reached an agreement on an aid package for the countries most affected by the coronavirus in the amount of 750 billion euros.

Earlier, the pressure on oil prices was exerted by the decision of the OPEC+ countries to increase oil production from August 1, bringing the overall reduction under the energy pact to 7.7 million. In July, the volume of reduction was 9.7 million barrels per day.

Tonight and tomorrow, you should pay attention to the data on US crude oil inventories. If reports from the American Petroleum Institute (API) and the US Department of Energy reflect an increase in inventories, Brent quotes may come under pressure again.

EUR/USD. July 21, 2020 – EU summit is over, euro is up

The EUR/USD pair is trading in no specific direction on either side of the 1.1440 level. The EU summit ended tonight, following which the leaders of the EU countries agreed on the creation of a fund for the restoration of European economies in the amount of 750 billion euros.

The parties found a compromise on the issue of the donor countries' capabilities and the needs of the recipient countries. In particular, the fund's subsidies will amount to 390 billion euros, and loans – 360 billion euros, which should balance the risks. About 70% of the fund must be exhausted and used for its intended purpose during 2021-2022, and another 30% in 2023. The total debt should be repaid by the end of 2058.

The fact that agreements have been reached after the five-day summit already provides support for the European currency, so further growth of the euro with a target of 1.15 is quite likely.

GBP/USD. July 22, 2020 – Sterling weakly corrected after morning dip

On Tuesday, the British pound sterling managed to renew its high since mid-June, hitting 1.2770. However, during Wednesday morning trading, the pair dropped to the level of 1.2640.

The growth of the sterling yesterday was promoted by the general market optimism, the reason for which was the agreement of the European fund to help the countries affected by the pandemic in the amount of 750 billion euros. In addition, the EU countries have also approved a multi-year EU budget of more than 1 trillion euros.

Today pressure on the British currency was exerted by information that the UK and the EU are unlikely to have time to agree on a trade agreement before the end of the summer. This means that negotiations may drag on until the end of the year, which casts doubt on the possibility of a soft Brexit. In this case, the UK will have to leave the European Union with the loss of access to the single European and customs markets.

Today the macroeconomic calendar is empty, the pair will grow weakly from the level of 1.2640. On Friday, the situation may change after the release of data on business activity in the manufacturing sector and the service sector. Market participants are waiting for weak statistics, and if the forecasts are confirmed, the pound will begin to decline to the area of ​​1.26.

EUR/USD. July 22, 2020 – Euro has reached 1.1550

Yesterday, the European currency managed to renew its high since the beginning of 2019 at 1.1550. The euro was supported by the results of the EU summit, at which it was decided to create a fund for the recovery of the European economy in the amount of 750 billion euros: 360 billion euros will be loans and 390 billion euros – subsidies. Experts note that the approval of a common fund in times of crisis is a signal of political stability in the eurozone.

Moreover, the President of the European Council Charles Michel announced the harmonization of the EU budget for 2021-2027 in the amount of 1.074 trillion euros.

Analysts predict further growth in the European currency, as the widespread spread of the coronavirus in the world, ongoing tensions between the US and China and the upcoming US elections could severely limit the appetite for high-yielding assets in the near future.

GBP/USD. July 23, 2020 – Sterling falls after the release of weak economic statistics

On Thursday, the British currency came under pressure after the release of macroeconomic statistics from the UK. In particular, the index of industrial orders in July showed an increase to -46 points from -58 points a month earlier. However, the latest data turned out to be worse than forecasted, as analysts had expected the indicator to rise to -38 points. Moreover, household incomes have fallen by 4.5% since the onset of the crisis, and sharply increased unemployment remains the country's key economic problem.

At the same time, the US dollar is also under pressure following statements by US Treasury Secretary Steven Mnuchin about the likelihood of new measures to stimulate the country's economy, despite the huge budget deficit.

The growth of the pound sterling is also limited due to the uncertainty in the Brexit negotiations between the UK and the European Union. The current round of talks will end this week, and no new meetings are expected yet. At the same time, there is no visible result in the debate yet, which increases the risks of a lack of a trade agreement and, as a result, a fall in the British currency.

The current quote for the GBP/USD pair is 1.2690. The RSI indicator declines towards the neutral zone, which signals in favor of further weakening of the pound sterling.

EUR/USD. July 23, 2020 – Euro retains potential for further growth

The euro continues to trade in the area of ​​yesterday's highs near the level of 1.1600. The European currency managed to renew the maximum from October 16, 2018 after the leaders of the EU countries agreed on the creation of a global fund for the recovery of the European economy in the amount of 750 billion.

Amid such a powerful factor supporting the European currency, the deterioration in relations between the United States and China fades into the background. However, many experts are sure that this is «for the time being». Earlier it became known that the US intends to close the Chinese consulate in Houston, to which China also promised to take retaliatory measures.

Today you should pay attention to the data on applications for unemployment benefits in the United States. Experts expect an increase in the number of applications from 1,300 to 1,360 for the first time in last weeks. If forecasts are confirmed, the dollar will receive additional impetus to weaken. Also of interest will be the data on the consumer confidence index in the euro zone for July, where the indicator may improve to -12 points from -15 earlier.

EUR/USD. July 24, 2020 – Euro declines from highs within correction

The pair ends the week near the 1.1600 level. The euro hit a new high at 1.1625 yesterday. Today, the European currency is supported by the PMI business activity indices in France and Germany, published in the morning: the indicators were better than the market forecasts (57.8 points and 50.0 points, respectively).

The euro remains the leader in the foreign exchange market amid high demand for the currency after the leaders of the European Union have agreed on a global stimulus package for the economy. In contrast, the United States has recently faced difficulties in adopting a new stimulus program, as well as in containing the further spread of Covid-19. In addition, the United States continues to wage a trade war with China, which also puts pressure on the greenback.

However, on the H4 chart, we see that the RSI indicator reversed and headed down towards the neutral zone. The forecast for today assumes a decline in the pair within the correction to the 1.1560 area.