Once again, the forex market is signalling a risk-on London session as the yen is the weakest of the currencies along with its safe haven partners the Swissy and Greenback. The Antipodean currencies are strong for the 3rd consecutive morning on the back of record Australian trade surplus data as a positive but continued Covid-19 cases and disruption weighing on Asia-Pac sentiment.
Looking at the lasts 3 months forex action, the AUDUSD and NZDUSD are still the weakest performing currencies but are rising from the lows. The GBPUSD is also rising fast against the other pairs and todays Bank of England meeting could influence its continued strength if they come out more Hawkish than expected. The BoE should keep its benchmark interest rate unchanged but signals towards its bond-buying programme and a tightening of monetary policy could emerge as a couple of the MPC members have signalled they are already in favour of exiting the stimulus as the economy continues to grow.
The Australian dollar last night found resistance from the previous support zone and continues to trade within a rising channel. Yesterday’s high is now a key level, nor should it break, and we get a close above there is a good chance we go up to test the daily 50 ema.
On the NZDUSD there is a triple top resistance which includes yesterday’s high, which to me screams stop loss placements above. I feel we definitely run those stops very soon and then if the RBNZ do raise interest rates, we could test the upper bounds of the larger descending channel which originated in late February.
The EURGBP has been going nowhere fast, and even today after German manufacturing data showed positive signs in new orders. Manufactured goods jumped 4.1% in June, reversing a 3.2% decline in May smashing analyst’s expectations of 1.9% growth. This morning the European Union released their economic bulletin which was fairly Hawkish the European economy. The main risk to the European economic performance is down to how well they can contain further outbreaks of the coronavirus. In their report they said, “The Governing Council sees the risks to the economic outlook as broadly balanced. Economic activity could outperform the ECB’s expectations if consumers spend more than currently expected and draw more rapidly on the savings they have built up during the pandemic. A faster improvement in the pandemic situation could also lead to a stronger expansion than currently envisaged. But growth could underperform expectations if the pandemic intensifies or if supply shortages turn out to be more persistent and hold back production.”
With the US dollar in a balance zone and the EURGBP hugging recent lows, any hint of the Bank of England being more Hawkish sooner than expected will give rise to the GBPUSD. Currently the daily 20 and 50 ema’s are acting as great dynamic support and the 200 is starting to show signs of increased upward momentum. Momentum generally guides price and long-term momentum is indicating higher prices. With the 20 ema accelerating higher, if it crosses and closes above the 50 ema that will be a good bullish signal for trend followers.
Oil has come to rest at the swing low market structure, with some upward pressure coming in on the back of tensions in the Middle East. There had been an attack on a tanker in the Gulf of Oman, with Israel, the United Kingdom and the United States blaming Iran. The downside pressure came from the jump in US crude stockpiles.