Daily Market Analysis from ForexMart

EUR/USD. July 27, 2020 – The dollar is weak for many reasons

The US dollar continues to weaken against all major currencies at the start of the new trading week. The current quote for the EUR/USD pair is 1.1700. This week, market participants are likely to continue selling dollars, and there are several reasons for this.

First, the American Benefit Co-Pay program expires on Monday. Over the course of several months, more than 20 million US citizens received weekly co-payments of $ 600. Now, after the completion of the program, many enterprises and households will fully feel the negative consequences of the lack of financial assistance from the authorities.

Second, the US economy has already slowed significantly, which will be confirmed by the US Q2 GDP report on Thursday. Experts predict a 35.0% decline in the American economy.

Finally, the position of the US Federal Reserve System also does not give the dollar any incentives to strengthen. Against the background of the fact that the economic prospects are disappointing, the deadline for payments to citizens has expired, and the packages of new assistance measures may turn out to be ineffective, the regulator can only continue to adhere to the «dovish» position in its monetary policy.

Coupled with a further increase in the number of Covid-19 diseases in the United States, the above factors will only have a negative impact on the dollar exchange rate.

EUR/USD. July 28, 2020 – Euro finishes rally

The euro suspended its strong growth and stabilized in the area of ​​the reached highs near 1.1740. The US dollar is still under strong pressure from several factors: an increase in the number of coronavirus cases in the United States and expectations of the «dovish» rhetoric of the US Federal Reserve at a meeting on Wednesday. The regulator is likely to keep the rate unchanged around zero, as well as comment on inflation parameters.

However, having received local support from data on the number of orders for durable goods in the US, the dollar managed to recover somewhat. June orders rose 7.3% month-on-month, higher than the 7.0% growth forecast.

Today the EUR/USD pair will continue to fluctuate slightly above 1.17 in anticipation of tomorrow's results of the US Federal Reserve meeting.

Brent. July 28, 2020 – Oil rises thanks to dollar weakness

Yesterday’s day ended for Brent oil with a decline to $43 per barrel, but today quotes managed to recover to $44.25. The prices were supported by the weakening of the US dollar across the entire spectrum of the Forex market due to continuing concerns about the outlook for the US economy.

However, it should be noted that oil is growing despite a number of negative factors. First, the oil market is monitoring further plans by OPEC and Russia to increase oil production by 2 million barrels from August. Such measures are incorporated in the gradual removal of additional production restrictions imposed by the pandemic.

In addition, investors fear a further deterioration in relations between the United States and China and an increase in the number of new cases of coronavirus infection in the world.

Another factor weakening Brent may be statistics from Baker Hughes, according to which the number of oil rigs in the US last week increased for the first time since March 13, by 1 unit.

Thus, as soon as the US dollar manages to show the first signs of recovery, oil «bulls» risk losing all their positions.

Brent. July 29, 2020 – Oil rises after the publication of the report from the API

During the trading session on Wednesday, Brent crude rose to $44.20 per barrel. Prices were supported by yesterday's report from the American Petroleum Institute (API), according to which crude oil reserves in the country fell by 6.8 million barrels per week. Analysts had forecast a reduction of only 1.2 million barrels.

Today you should pay attention to a similar report from the US Department of Energy. If the new data also reflects the decline in inventories, Brent quotes will be able to reach a maximum of $45 per barrel.

At the same time, the softening of the terms of the OPEC+ deal to reduce production by 2 million barrels per day starting from August may act as a pressure factor in the near future. Analysts have calculated that the softening of the OPEC+ deal will lead to an oversupply over the next four months.

EUR/USD. July 29, 2020 – The pair is sideways in anticipation of the results of the US Federal Reserve meeting

Today is extremely important for the dynamics of the EUR/USD pair, since the US Federal Reserve will announce its decision on the rate and share its plans for further monetary policy.

In addition, market participants are waiting for the regulator's assessment of the prospects for the recovery of the American economy. Earlier in June, the FOMC released its quarterly reports, according to which a progressive economic recovery could be expected. However, after that, the States were swept by the second wave of the coronavirus, which led to another tightening of quarantine restrictions and a decrease in business and production activity.

Additional pressure on the US dollar is exerted by the expectations of tomorrow's GDP report. Experts predict a significant decline in the economy in the second quarter, up to 35%.

At the same time, the markets are following the discussion in Congress of new measures to support the US economy in the amount of $1 trillion. It is expected that a new aid package will be adopted this week.

The current quote for the EUR/USD pair is 1.1745. The euro is clearly overbought, and it is logical to observe a downward correction. During the day, trading will be held in a calm manner, pending the results of the Fed meeting.

EUR/USD. July 30, 2020 – US dollar strengthens moderately after the Fed meeting

Over the past week, the US dollar has been actively selling and reached lows in the 1.1800 area. Yesterday ended a two-day meeting of the US Federal Reserve, the results of which did not manage to significantly change the situation on the market – the pair EUR/USD fell only to the level of 1.1730.

The regulator noted that there are serious risks from the pandemic, and the Central Bank is ready to use its entire arsenal of tools to support the economy. Fed Chairman Jerome Powell also said during a press conference that household spending has rebounded by about 50%, but manufacturing capital investment cannot boast a similar trend.

Moreover, rising inflation, the end of the unemployment benefit program and the second wave of coronavirus in the United States – all these factors prevent optimism from emerging in the market.

Today you should pay attention to the publication of the report on US GDP. Experts predict the worst release in the entire history of data collection: the fall of the US economy by 35%. At the same time, the European currency feels quite comfortable: the macro statistics for the eurozone continues to improve, and at the moment the forecast for GDP for the third quarter suggests an increase in the indicator.

EUR/USD. July 31, 2020 – Euro has updated its maximum at around 1.1900

The euro continues to rally, reaching 1.1900. The US dollar again came under pressure from several factors at once: from the fresh macroeconomic data and statements by US President Donald Trump.

So, yesterday's data on US GDP showed a decline in the US economy in the II quarter by 32.9%. This was the largest decline since the Great Depression. Experts note that without the $3 trillion stimulus package, the GDP failure would have been even greater, but the current figures are impressive.

Additional pressure on the currency was exerted by the words of D. Trump, who does not exclude the postponement of the upcoming presidential elections in November due to low GDP and economic problems. Moreover, the lack of progress in talks between Republicans and Democrats in the US Congress on a new $1 trillion package of measures also does not give the US dollar optimism.

Today we should pay attention to the data on inflation for July in the eurozone and changes in the volume of GDP for the II quarter. Inflation in the region rose 0.4% on an annualized basis, while GDP fell by a record 12.1%. Such news somewhat dampened the appetite for the euro, which allowed the EUR/USD pair to fall to 1.1850.

GBP/USD. August 3, 2020 – Sterling started to decline from highs

Monday starts with a moderate weakening of the pound sterling after rising to the level of 1.3100. The current quote for the GBP/USD pair is 1.3000. Rally of the British currency lasted 11 days in a row; experts note that such a growth of the pound has not been observed for a whole decade.

Today, the sterling was under pressure from the statistics on business activity in the UK manufacturing sector for July. The indicator rose from 50.1 points to 53.3 points. However, the latest data turned out to be worse than the forecast for growth to the level of 53.6 points, which had a negative impact on the exchange rate.

Additional negativity comes from the uncertainty surrounding Brexit. Negotiations between the UK and the EU are failing, and the likelihood that the country will leave the EU without a full-fledged trade agreement is growing every day.

A meeting of the Board of the Bank of England will take place on Thursday. Market participants expect that all parameters of the regulator's monetary policy will remain unchanged.

Brent. August 04, 2020 – Oil awaiting data from API

Yesterday ended with the growth of Brent quotes to $44.40 per barrel. Market participants are optimistic about the further recovery of demand after the release of fairly good reports on business activity in the manufacturing sector of the eurozone and the United States.

Further support for oil prices is provided by a decrease in the number of new cases of coronavirus infection in the United States, which also indicates a further recovery in demand.

However, on Tuesday Brent quotes began to decline to $ 43.40 per barrel. The asset is still under pressure from the increase in oil production by the OPEC+ countries and Russia. More and more countries are gradually phasing out the previously set production quotas as part of the OPEC deal.

Today and tomorrow you should pay attention to the data from the American Petroleum Institute (API) and the US Department of Energy on crude oil reserves in the country. In case of another decline in reserves, Brent quotes may test the resistance of $45 per barrel.

GBP/USD. August 05, 2020 – Sterling continues to rise from 1.31

The British currency continues to grow in tandem with the dollar, reaching 1.3130. Today the UK released the final data on business activity in the service sector for July: the index was 56.5 points, which was slightly worse than analysts' expectations (56.6 points). The last month's figure was noted at the level of 47.1.

The key event for the pound sterling will be the meeting of the Bank of England on Thursday. No major changes in monetary policy are expected (the rate will remain at the level of 0.10% per annum), but the regulator is likely to share its plans to maintain a «balance» in finance and economy.

It should be noted that the British currency has plenty of risks for the second half of the year. Here are the low rates of GDP recovery, and the weakness of the employment market, and the possibility of a second wave of coronavirus. Moreover, the failure of the Brexit negotiations continues to put strong permanent pressure on the pound. Thus, the current growth of the currency is seen to be short-lived.

Brent. August 06, 2020 – Oil drops slightly after updating March highs

Yesterday Brent quotes rose to $46.16 per barrel on the back of a favorable general market environment and further weakening of the US dollar. However, on Thursday, the asset fell slightly – to $45.

The prices were supported by reports from the API and the US Department of Energy on crude oil reserves in the country: indicators showed a reduction in reserves by 8.5 million and 7.37 million, respectively. At the same time, the loading of refineries in the United States increased by only 0.1%, and oil product inventories, contrary to forecasts, grew. Gasoline stocks increased by 419 thousand barrels, distillates – by 1.592 million barrels. Oil reserves at the Cushing terminal increased by 532 thousand barrels.

The depreciation of the US dollar in recent days also contributes to the rise in oil prices. Since oil futures are priced in dollars, prices usually rise during such periods, which compensates for the weakening of the US currency.

GBP/USD. August 06, 2020 – What to expect from the Bank of England meeting?

GBP/USD is approaching the 1.3200 level, the high of early March. The sterling is supported by investors' expectations of today's meeting of the Bank of England. The regulator is to make a statement on monetary policy, as well as submit a quarterly report on inflation in the UK.

The central bank is not expected to change its monetary policy as macroeconomic indicators continue to show an improvement in the UK economy. Moreover, the situation with the spread of Covid-19 in the country remains under control.

However, in June, the position of the Bank of England turned out to be more «hawkish» than market participants had expected. If at today's meeting the atmosphere is saturated with pessimism and the regulator lowers economic forecasts, the pound sterling will inevitably go down to the 1.30 area. Additional pressure on the currency will come from the revised downward indicators of business activity in the services sector (56.5 points) and the composite PMI index (57.0).

EUR/USD. August 07, 2020 – The pair consolidates at 1.18 in anticipation of data on the US labor market

At the end of the week, the euro depreciates moderately, reaching the level of 1.1800. The EUR/USD pair has entered the overbought zone, which may trigger profit taking before the weekend, as well as cause a corrective decline.

The US dollar received some support from the data on applications for unemployment benefits, the number of which fell to 1.19 million. This figure was below the forecast of decline to 1.4 million applications. Fewer Americans are applying for benefits, even as the Unemployment Benefit Enhanced Program expired at the end of July. This suggests that the situation in the US labor market is gradually improving.

Today you should pay attention to the key release of the employment market in the United States for July. Forecasts are quite optimistic: the unemployment rate should fall from 11.1% to 10.5%. Moreover, outside agriculture, 2,200 new jobs can be created.

So, in anticipation of these data, the pair is consolidating at the level of 1.18. Further dynamics of the pair will fully depend on American statistics.