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Currency Market Analysis

Jul 06, 2020 | Currency Market Analysis

Global Themes

USD rangebound as surging COVID 19 cases dampens risk sentiment

EUR: Euro was rangebound on Friday as US was closed for Independence Day, with the market trying to balance between hopes for an economic recovery amid surging COVID 19 infections in the US. "In a week characterized by dropping FX volatility, the dollar looks to be re-establishing a gentle bear-trend as equities keep showing complacency to grim contagion news," wrote ING strategists in a note to clients. Looking ahead, Germany will release factory orders, retail sales, industrial production, trade and PMI data this week. Meanwhile, there will be more noise about EU recovery fund as there will be a meeting between various EU departments on 8 July. In terms of technical levels, nothing much has changed and the pair enters a 4th week of 1.1150 to 1.1350 range.

JPY: USDJPY was little changed in somewhat subdued trading. Technically speaking, USDJPY is trapped between 106.08 and 107.96 according to Reuters. Looking ahead, for the US economic calendar this week, there will be ISM Non Mfg, services PMI and consumer credit will be of focus but the market sentiment will continue to be tracking COVID 19 trends. Goldman cuts US GDP forecasts due to resurgence in COVID 19 (zerohedge)

GBP: Sterling had the best week in 4, closed just below 1.25 despite talks between UK and the EU ended early (Reuters), but meetings are expected to resume soon. The longer the wait for concrete news on Brexit the more likely the pound is to push lower. The huge political uncertainty suggests that volatility is likely to remain higher than other G10 peers, Foley at Rabobank said. UK will release construction PMI this week.

CNH: USDCNH did not move much despite very Caixin PMI hit the strongest level in 10 months (marketwatch), with 7.044, 200 DMA still showing decent support. Reuters analysis mentioned that the Yuan looks cheap as stocks soar, because since Chinese stocks began to rally in March, the trade weighted CNH has dropped 4.5%, implying some catch up may follow. China will release inflation, money supply, loan data and FX reserves data this week.

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