Traders focus, European Central Bank's interest rates decision

A huge demand for Euro in early European trade yesterday after Federal Reserve Governor Lael Brainard hinted at a need for an even easier monetary policy in the U.S. that resulted a 0.2% gain on EUR/USD at 1.1416 and is approaching a key daily structure resistance of  1.1500 as its year's high.

Investors will focus on the European Central Bank's interest rates decision due later in the day. It is expected to keep policy unchanged and stress growth challenges. Christine Lagarde, President of the ECB, is set to urge leaders to agree on the recovery fund ahead of their summit on Friday. The "Frugal Four" group of countries reject mutually funded grants, a pillar of the program.

Meanwhile, Merkel indicated yesterday that Germany is ready to compromise on the agreement following a meeting with Spain’s Sanchez who said the EU must agree to a deal this month.

Traders focus, European Central Bank's interest rates decision

👉 The New York Times reported that the White House is considering a sweeping travel ban on Chinese Communist Party members – of whom there are around 90 million. That would serve as a major escalation.

👉 USD is fundamentally challenged by factors beyond simply whether equity markets are up (or down) at any given point. Cyclical support for the USD is weaker, reflecting reduced growth and interest rate differentials over its peers.

👉 U.K. unemployment is likely to rise and wages could fall further once the government begins winding down its coronavirus job retention scheme.

👉 The asymmetric impact of the coronavirus crisis will lead to renewed economic divergence within the European monetary union, erasing the marginal improvements during the 2014 to 2019 recovery. However, the nature of the shock and the European Central Bank's targeted responses should keep this from creating a problem for monetary policymakers. What matters for monetary policy is the convergence in economic cycles, such as GDP growth. (Nicola Nobile, chief Italian economist at Oxford Economics)

👉 The global GDP has climbed more than halfway back from the 17% drop witnessed from mid-January to mid-April, according to Goldman Sachs's current activity indicator. The bank forecasts the global economy will contract by 3.4% this year, making 2020 weaker than the year following the 2008-09 financial crisis. "We believe that global economic activity will continue to rebound as the world learns to live with the virus, assuming virus developments don't prompt the reimposition of widespread control measures," Goldman Sachs says. In the U.S., the bank expects GDP to shrink 4.6% year-on-year, while predicting a larger 9.4% fall for the eurozone.

👉 CAD is doing its usual thing of lagging behind its commodity peers’ gains on the day but event risk perhaps gives the market a reason for caution.

👉 It is clear that the US’ COVID-19 management has been poorly executed and will hinder the US rebound relative to some of its peers as well, which markets are starting to reflect. US coronavirus cases continue rising rapidly with several states such as Texas and California posting record infections and/or deaths. Total cases surpassed 3.5 million and deaths are above 137,000.

👉 Top US epidemiologist Anthony Fauci expressed hopes that immunization could be achieved by year-end. His words followed Moderan's publication of progress in developing a vaccine. AstraZeneca and OXford University also advanced in their research, suggesting their solution will provide a "double protection."

👉 Oil jumps as risk sentiment improves. Falling inventories and strict compliance levels seem to be boosting oil prices as WTI and Brent both scored gains overnight. But what's the outlook for oil as the number of Covid-19 cases is still rising?

👉 Twitter hack: Prominent Americans such as Joe Biden, Elon Musk, Kanye West, Bill Gates, and others were hacked and promoted a Bitcoin scam. The development weighed on the company's stocks and other tech shares.

Here are the High Impact Economic events expected today:
Economic Calendar (7.16.20) - Forex Trading tutorials for beginners in the Philippines





INTRADAY MARKET INSIGHTS


USD/JPY Intraday: 
Key resistance at 107.05. The pair's rebound from a low of 106.63 is losing steam. The pair has returned to levels below both 20-period and 50-period moving averages keeping the intraday bias as bearish. A return to the immediate support at 106.80 would trigger a further fall toward 106.65 (around the low of yesterday) on the downside. The trailing key resistance has been lowered to 107.05.

EUR/USD Intraday:
Rebound. The pair is rebounding from a reaction low of 1.1399 seen overnight. Currently it has returned to levels above both 20-period and 50-period moving averages. And the relative strength index has climbed back to levels above 50, indicating a lack of downward momentum for the pair. Upon reaching the overhead resistance at 1.1425, the pair should then target 1.1450 on the upside (around the high of yesterday). Key support is located at 1.1390.

AUD/USD Intraday:
Caution. The pair is testing the key support at 0.6990 and therefore caution is advised. This key support level was a reaction low marked by the pair yesterday after it retreated from an intraday high of 0.7037. Trading above 0.6990, the pair could still target 0.7020 on the upside. Alternatively, below 0.6990, the alternative downside target at 0.6975 would come into sight.

NZD/USD intraday: 
Upside prevails. The pair is supported by a rising trend line drawn from July 13. Currently, support is also provided by the ascending 50-period moving average, while the relative strength index stays above the neutrality level of 50, signaling a bullish bias. Unless the key support at 0.6545 is violated, the pair should advance to 0.6607 and 0.6623. Alternatively, a break below 0.6545 would trigger a pull-back to 0.6517.

GBP/USD Intraday: 
Under pressure. The pair remains on the downside after retreating from an intraday high of 1.2650 seen yesterday. It remains capped by the descending 20-period moving average, which has just crossed below the 50-period one. A break below the immediate support at 1.2570 would trigger a further fall toward 1.2545 on the downside. Key resistance is located at 1.2610.

USD/CHF Intraday: 
Further advance. The pair has broken above a declining trend line drawn from July 13. In fact, the 20-period moving average has moved further above the 50-period one, and the relative strength index stays in the 50s, indicating that the bullish bias persists. As long as the key support at 0.9420 holds, the pair should target 0.9460 and 0.9475 on the upside. Alternatively, below 0.9420, expect a return to 0.9405 on the downside.

USD/CAD Intraday: 
Downside prevails. The pair remains on the downside after breaking below a bullish trend line drawn from July 9. Currently, the 20-period moving average has dropped further below the 50-period one, while the relative strength index remains below 30, suggesting continued downward momentum. Below the key resistance at 1.3545, expect a decline to 1.3485 and 1.3460. Alternatively, a break above 1.3545 would open a path to 1.3575 on the upside.

EUR/JPY Intraday: 
Rebound. The pair maintains a bullish bias above the key support at 121.66. In fact, it has rebounded to levels above the 20-period moving average, and the relative strength index shows upward momentum. As long as the key support at 121.66 holds, the pair should proceed to 122.56 and 122.81 on the upside. Alternatively, below 121.66, expect a drop to 121.25.

EUR/GBP Intraday: 
Target 0.9117. The pair has stabilized after retreating to the 61.8% Fibonacci retracement support level of the rally started from July 13. Currently, it has broken above both the 20-period and 50-period moving averages, while the relative strength index has climbed to the 60s, signaling a bullish bias. Above the key support at 0.9038, the pair should target 0.9100 and 0.9117 on the upside. Alternatively, a break below 0.9038 would trigger a pull-back to 0.9010.