Daily Market Analysis from ForexMart

USD/CAD. August 31, 2020 – Canadian dollar at highs

At the beginning of the week, the quotes of the USD/CAD pair dropped to the area of ​​local minimums of 1.3050 against the background of the weakness of the US dollar after J. Powell's speech last week. The politician announced a new targeting of average inflation and a significant extension of the period around zero interest rates.

At the same time, the Canadian dollar was supported by Friday's macroeconomic data: although Canada's GDP fell by 38.7% in the second quarter, it turned out to be better than the forecasted fall by 39.6%. On a monthly basis, the Canadian economy showed growth at all by 6.5% against the forecast of 5.6%.

Today is a relatively calm trading day as the economic calendar is almost empty.

EUR/USD. September 01, 2020 | Euro approaches 2-year highs in the 1.20 area

On Tuesday, the euro continues to approach the highs of April 2018 at 1.2000. At the beginning of the new trading week, dollar sales resumed after the publication of data from China: the growth of activity in the service sector in August increased from 54.2 to 55.2 points. The index of business activity in the industrial sector in August was 51.0 against 51.1 in July. The lull in US-China relations has also supported the bullish trend in risky assets.

Today we should pay attention to the data on inflation in Germany, which turned out to be worse than expected. Labor market statistics turned out to be better than forecasted: the number of unemployed in Germany in August fell by 9 thousand – to 2.915 million people. Unemployment remained at 6.4%, the August 2015 high.

Consumer prices in the euro zone in August fell by 0.2% in annual terms. The fall in prices in annual terms was recorded for the first time since May 2016. Experts predicted an average growth of 0.2%. Unemployment in 19 eurozone countries rose to 7.9% in July, the highest level since November 2018.

At the same time, the epidemiological situation in Spain and France continues to deteriorate, which may put pressure on the euro in the short term.

In the evening hours, data from the US will be of interest: on the index of business activity in the manufacturing sector for August, as well as the ISM manufacturing index for August and data on the change in the volume of expenses in the construction sector for July.

Brent. September 1, 2020 | Oil trades in different directions

Oil prices show mixed trading dynamics. Yesterday, Brent quotes rose to the level of $46.50, but in the end the initiative remained with the sellers, who sent the asset to $45.30 per barrel. The current Brent quote is $45.80.

Local support to prices was provided today by data from China, according to which the index of business activity in the non-manufacturing sector in August rose from 54.2 to 55.2 points. The dynamics of growth has been maintained for the sixth month in a row. The last decline under the 50 level was recorded in February. Additional positive for oil prices is brought by the weakness of the US dollar throughout the Forex market.

At the same time, the data on the volume of oil production in the USA exerted pressure on prices. According to the EIA, production in June increased by 4.2% and reached 10.4 million barrels per day. However, further increases in production are in question as Hurricane Laura severely damaged a number of refineries in the Gulf of Mexico.

The further dynamics of oil prices will be influenced by tomorrow's report from the US Department of Energy on crude oil reserves in the country. If the data shows a decrease in volumes, then buyers will have a good reason to renew the highs.

EUR/USD. September 02, 2020 | Euro has suspended the fall at 1.1850

The euro is showing a corrective decline against the dollar, reaching 1.1850 after yesterday's gains to highs in the 1.20 area. The quotes were pressured by macroeconomic data from Europe: the final index of business activity in the manufacturing sector of the eurozone in August remained at 51.7 points. In Germany, the same indicator was lower than the previous value (52.2 points against 53.0).

Preliminary data on inflation in the eurozone for August reflected an increase of 0.4% in annual terms. The forecast assumed a decline to 0.9% y/y after July to 1.2%. By itself, inflation in August fell by 0.2% y/y against expectations of growth by 0.2 y/y. Today, the euro was under pressure from data from Germany, according to which retail sales fell 0.9% month-on-month in July, which was worse than expected.

The statistics from the USA also disappointed the markets: construction costs in July grew by only 0.1% m/m against expectations of growth by 1.0% and the previous decline by 0.5%.

The 1.1850 level managed to contain the onslaught of dollar bulls. The RSI indicator has stabilized in the neutral zone, which signals the formation of a flat at the current levels.

Brent. September 03, 2020 – Oil declines despite shrinking US stocks

Brent crude oil shows a decline on Thursday, weakening to $43.40 a barrel and hitting a new low since early August. Quotes are falling, even despite yesterday's report from the Energy Information Administration of the US Department of Energy, according to which the commercial oil reserves in the country fell by 9.4 million, to 498.4 million barrels. Reduction of stocks of raw materials in the United States has been observed for the sixth consecutive week. Despite this, US oil reserves still exceed the 5-year average by about 14%.

The asset was under pressure from the data that the demand for gasoline fell, and the recovery from the Covid-19 pandemic is proceeding at a slow pace. According to the EIA, gasoline stocks fell by 4.3 million barrels, to 234.86 million barrels, distillate stocks fell by 1.7 million barrels, to 177.52 million barrels.

Further dynamics of oil will depend on statistics on the US labor market, which will be released tomorrow. Given that yesterday's ADP report was worse than expected, the official statistics may also disappoint the markets and put pressure on the US dollar.

USD/CAD. September 03, 2020 – Looney continues to weaken, losing oil support

The Canadian dollar continues to weaken against the US dollar, reaching 1.31 after strengthening to 1.2990 last week. Earlier, the loonie was supported by the widespread weakness of the American currency and the rise in oil prices to the area of ​​$46.50 per barrel.

However, it should be noted that the fundamental background has changed slightly, despite the correctional decline of the Canadian. In the US, the debate continues on the adoption of measures to stimulate the economy, and it was reported that the Treasury Department again rejected the proposals of the Democrats.

Today we should pay attention to the statistics on business activity in the US services sector for August. The US dollar may also be supported by data on the number of applications for unemployment benefits: experts predict a decrease in the indicator from 1.006K to 980K. Labor market reports will be released tomorrow in both the US and Canada.

In the meantime, the quotation of the USD/CAD pair is growing with a target in the area of 1.3130. Additional pressure on the Canadian dollar is exerted by a decline in the oil market, where Brent quotes weakened to $43.45 per barrel.

EUR/USD. September 04, 2020 – Dollar is in anticipation of data on the US labor market

EUR/USD is consolidating at 1.1840 in anticipation of important macroeconomic news. Today the focus of the markets is centered around the statistics on the US labor market for August. And the further rhetoric of the US Federal Reserve will depend on how strong the indicators turn out to be.

Recently, the dollar exchange rate has been under pressure from expectations of a new stimulus for the American economy, but if today's data are better than expected, then financial injections may not be required.

So, the forecasts of investors according to statistics are as follows: unemployment may fall to 9.8% from 10.2% in July. Average hourly wages are expected to remain unchanged after an earlier rise of 0.2% m/m. The number of jobs outside the agricultural sector may increase by 1.375 million after rising 1.763 million earlier.

Already published statistics from the United States showed an increase in labor productivity by 10.1% in the second quarter of the year. The index of business activity in the US services sector in August from Markit amounted to 55.0 points against the previous value of 54.8. At the same time, official data reflected a decrease in the indicator: to 56.9 points from 58.1 earlier.

EUR/USD. September 07, 2020 – The pair is consolidating above the level of 1.18

EUR/USD starts the week with a slight decline towards the 1.1800 level. Today is a public holiday in the United States to celebrate Labor Day, so volatility in the market will be minimal.

Last Friday, the US released labor market data showing a decline in the unemployment rate from 10.2% to 8.4%. Experts predicted a decline to 9.8%. The number of jobs outside the agricultural sector rose by 1.371 million after expanding in July by 1.734 million. Average hourly wages in the country in August rose by 0.4% m/m. Such strong data was a signal for the recovery of the employment sector and American business.

However, risks remain in the US economy. Investors expect job growth to slow as the entire support program has already been exhausted. However, politicians have been unable to agree on a new $1 trillion aid package for a long time.

GBP/USD. September 08, 2020 – The pound continues to weaken against the dollar

The British pound sterling continues to decline against the dollar, approaching the 1.3100 level. Pressure on the GBP/USD pair is exerted by difficulties in the Brexit negotiations between London and Brussels. A new round of debate starts today, but yesterday it became known that the British Parliament intends to cancel the amendment on the customs space of Northern Ireland, which could violate all preliminary agreements with the European Union.

Earlier, the pound was under pressure from the statements of the representative of the Bank of England Michael Saunders on the need for further easing of the monetary policy. As a result, the market increased expectations of an expansion in the volume of the quantitative easing program at the next meeting of the British Central Bank.

Additional support for the «bears» is provided by the strengthening of the US dollar after the release of strong data on the US labor market.

Today the pair's downward dynamics will continue. However, the RSI indicator is directed towards the support area, which signals a likely trend change in the near future.

EUR/USD. September 9, 2020 – Euro dipped to the level of 1.1750

The EUR/USD pair continues to retreat amid risk aversion of investors. The current quote for the pair is 1.1750. Market participants are watching with dismay the rise in the number of new cases of coronavirus, as no economy in the world is ready for new quarantine restrictions.

The euro was also under pressure from the statistics released earlier: the next calculation of the eurozone's GDP for the second quarter reflected a fall of 11.8% q/q against the initial estimate of -12.1% q/q. In annual terms, the eurozone economy fell by 14.7% in April-June. The data turned out to be better than forecasted, but the decline still looks very sharp and strong.

The statistics on the level of employment in the region in the second quarter reflected a decrease of 2.9%, which was slightly worse than the initial estimate. In the first quarter, the same indicator decreased by 0.3%. Experts note that the current state of affairs is the most negative since the start of statistics collection in 1995.

Tonight you should pay attention to the data on the number of open vacancies in the labor market JOLTS for July. Experts predict an increase in the number of vacancies to 6 million.

EUR/USD. September 10, 2020 – Euro rises in anticipation of ECB meeting

On Thursday, the euro demonstrates growth to the level of 1.1890 amid expectations of the results of the meeting of the European Central Bank and the speech of Christine Lagarde. Before there were rumors that the regulator's management plans to revise the economic forecast for 2020 towards improvement, which caused the sudden growth of the euro.

Today, traders are most interested in the ECB's position on the euro exchange rate and its impact on the volume of eurozone exports. Earlier, the chief economist of the central bank Philip Lane said that the euro is too high, which could have an impact on future monetary policy. Whether the head of the ECB will develop this idea during his speech will become known a little later.

Market participants doubt the regulator's transition to a strategy of targeting the average inflation rate following the example of the US Federal Reserve System. If Lagarde reports that the eurozone economy is recovering rapidly, the regulator will not expand the QE program or apply additional mitigation measures, which will be an excellent factor for further strengthening of the European currency.

EUR/USD. September 11, 2020 – Euro demonstrates strengthening after ECB meeting

The EUR/USD currency pair demonstrates increased trading volatility after yesterday's meeting of the ECB. Yesterday, at the moment, the pair managed to renew the high of early September at 1.1915, falling almost immediately to 1.1800. The current quote for the euro is 1.1860.

At the end of the meeting, it was decided to keep the monetary policy unchanged, and the rate at zero. The head of the regulator Christine Lagarde also noted that the PEPP program, designed for the purchase of assets in the amount of 1.35 billion euros, will continue its work, but over time the regulator intends to switch to a flexible system of asset repurchase.

Today, you should pay attention to the data on inflation in the United States, which should rise from 1.0% to 1.1%. And in comparison with Europe, which has already faced deflation, statistics from the United States can give the dollar strength. Perhaps it is these data that will entail the long-awaited correction in the EUR/USD pair.