The dollar ended edging higher on Friday, registering its largest weekly gain in a month, after an upbeat retail sales data lifted expectations that economic growth speeded in the second quarter.
US retail sales suddenly increased in June as demand for goods remained strong even as spending was shifting back to services. A study showing US consumer sentiment fell unexpectedly in early July to the lowest level in five months, as inflation fears undermined confidence in the economic recovery, did little to diminish the dollar’s strength.
Strong US data and a move in interest rate expectations after the Federal Reserve flagged in June sooner-than-expected hikes in 2023 have helped lift the US dollar in recent weeks and made investors nervous about shorting. The Friday’s gains came despite Fed Chair Jerome Powell repeating on Thursday that soaring inflation was likely to be transitory and that the U.S. central bank would continue to support the economy.
Next week is somewhat quiet due to the Summer. The most important economic data next week will be:
On Tuesday, the Australian Monetary Policy Meeting Minutes will be released which is a detailed record of the RBA Reserve Bank Board’s most recent meeting, providing in-depth insights into the economic conditions that influenced their decision on where to set interest rates.
On Wednesday, the monthly Australian Retail Sales will be announced which the source issued an interim release to cover the impact of COVID-19. Later on the US Crude Oil inventories.
On Thursday and Friday Japanese banks will be closed in observance of Marine Day and Health-Sports Day, respectively. On Thursday, the EU Monetary Policy Statement and the ECB Press Conference will be held and later on the US Unemployment Claims.
Finally, on Friday the UK monthly Retail Sales will be released. Later on, the UK, French, German and EU’s Flash PMI will be released. Later in the day the Canadian monthly Retail sales and the US Flash PMI will be released as well.
Major Currencies Performance and Signals
EUR/USD
The euro fell throughout last week, breaking down below the previous week’s lows before bouncing a bit too close right around the 1.18 level. Nonetheless, this is a market that looks as if it is slightly lower, and I think we are eventually going to go looking towards 1.16 underneath.
FORECAST: SELL
Resistance: 1.1850, 1.1900, 1.1950
Support: 1.1800, 1.1750, 1.1700
GBP/USD
As expected, the British pound moved lower last week, and we expect the same in the next due to the increase covid-19 hospitalizations and deaths.
FORECAST: SELL
Resistance: 1.3800, 1.3850, 1.3900
Support: 1.3750, 1.3700, 1.3650
AUD/USD
The Australian dollar initially tried to rally during the week but found the 0.75 level above the be far too resistive to continue going higher. During the end of the week the price breached the 0.7400 price and we expect that it will continue to go lower.
FORECAST: SELL
Resistance: 0.7400, 0.7450, 0.7500,
Support: 0.7500, 0.7450, 0.7400
USD/JPY
USD/JPY bears are in control as the yen picks up the safe-haven bid. US Treasury dynamics should remain the main driver for the yen but we expect the pair to range
FORECAST: NEUTRAL
Resistance: 110.00, 110.50, 111.00
Support: 109.50, 109.00, 108.50
USD/CAD
US dollar surrendered last week’s gains after NFP. WTI rises 1.2% to near three-year high. US Treasury rates drop after Friday’s payrolls. We expect a long-term consolidation below 1.2400.
FORECAST: BUY
Resistance: 1.2650, 1.2700, 1.2750
Support: 1.2600, 1.2550, 1.2500
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