CURRENCY HIGHLIGHTS – July 2019
EUR/USD remains parked around 1.1270, market's focus is on US data. The optimism around the shared currency stays well and sound at the beginning of the week, with EUR/USD following a consolidative pattern in the 1.1270 area for the time being.
The pair is posting gains since last Wednesday and the up move remains propped up by the firm speculations of a rate cut by the Federal Reserve later this month, although market participants are still debating whether it will be a 25 bps (insurance cut) or 50 bps rate cut.
In addition, the cautious tone is expected to gather traction among EUR investors in response to the potential announcements of some kind of easing measures by the ECB, either at this month’s meeting or the September one. At this point, market chatter commenced to mull the idea of a 10 bps rate cut to the deposit rate and the restart of the QE programme, along with changes in the forward guidance.
USD/JPY traders should also pay attention to the Fed speakers this week. In June, Fed policymakers voted 9 to 1 to leave rates unchanged. St. Louis Fed President James Bullard voted for a rate cut. He has already said since then that 50-basis point rate cut is too excessive.
3ertywdfThere were no major reports out of Japan last week, and the minor reports didn’t offer anything encouraging about the economy. It really didn’t matter anyway since most investors were watching and reacting to the interest rate differential between U.S. Government bond yields and Japanese Government bond yields.
In Japan, the only positive was the Current Account, which came in at 1.31 Trillion, lower than the previously reported 1.60 Trillion, but better than the 1.24 Trillion forecast.
The lowlights were misses by Bank Lending, Core Machinery Orders, M2 Money Stock, Preliminary Machine Tool Orders, Producer Inflation, Tertiary Industry Activity and Revised Industrial Production.
Bank of Japan Governor Haruhiko Kuroda started the week by saying the country’s economy was expected to expand moderately as a trend and gradually push inflation toward the central bank’s 2% target.
“The BOJ will make necessary policy adjustments to sustain the economy’s momentum towards achieving its inflation target,” Kuroda said in a speech at a quarterly meeting of the central bank’s regional branch managers.
GBP/USD recovered losses in the second half of last week after breaking to a fresh six-month low. Will the pair continue to rally from here or it will linger arround resistance level near 1.2570? At the same time, Sterling is the largest net short among the major currencies. It is also the weakest major currency in the first half of July. In fact, it is the only currency that is in the red versus the dollar. The rest have either moved in the green or have mostly pared early month losses against the greenback.
Gold price is near 6-years high. Gold prices have been on the move over the past two months as expectations for rate cuts from the FOMC have gotten priced-in. Gold prices hit a fresh yearly high earlier this month, finding a bit of resistance off of a big batch of prior swing highs that are called »the danger zone«. We believe Gold is setting up for an upside breakout move after reaching our predicted target near $1450. The first attempt to break that resistance was not successfull, but we believe there will be more attempts in the next coming weeks.
BITCOIN and ALTCOINS
Since our recent BTC analysis, after Bitcoin has stabilized in a range between $10200 and $11800. Most of altcoins dropped slightly against Bitcoin who remains the absolute king of digital assets in the moment. Effect of Libra (Facebook announced creation of their cryptocurrency) is expected, but still not yet determined when Libra will be launched. Many other players are also entering blockchain and crypto field and the future of money is digital for sure. The general sentiment in the crypto market is very positive and as said many times already, we expect a huge breakout of cryptocurrency.