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Currency Market Analysis

Jul 08, 2020 | Currency Market Analysis

Global Themes

Safe haven demand boosted USD as COVID 19 cases tops 3 million in US

EUR

Euro failed to break 1.1350 resistance overnight as USD rebounded on safe haven buying, as COVID 19 cases in US are showing no signs of slowing down, and market took some risk off the table , which also put an end to 5 day rally in US equities. EU deepens their recession outlook, while several Fed policymakers spoke overnight and signals more support are on offer if required (Reuters). Technically speaking, according to Reuters, short term range of 1.1150-1.1350 is still holding.

JPY

USDJPY remains in the 106-108 range for now, with USD slightly bid overnight supported by safe haven demands and US virus crisis deepens, as cases in US is now more than 3 mln (Reuters). According to technical analysis by Reuters, short term support at 107.25(21-DMA) 107.04-12; resistance 107.78(100-DMA), 107.95-108.00. A major US bank attempts to explain why USDJPY did not drop as much as one may expect despite strong QE by Fed is because the lack of Japanese auto makers hedging.

GBP

Sterling rallied above key fibo levels overnight after Reuters reported that UK and EU trade negotiations may find common ground at a dinner planned later in the day. If the bullish momentum continues, the next target could be 200 day moving average at 1.2695. However, GBP could be potentially weigh down by European Commission see deep recession for the EZ.

CNH

USDCNH broke 7.00 in early Asian session but quickly reversed higher on potential profit taking and ongoing US-China trade tensions. After news saying Trump may considers executive orders on China, there are also discussions (Zerohedge) that US want to undermine the HKD peg. Interestingly, an article from SCMP over the weekend talked about China’s readiness to decouple Yuan from USD. Reuters expect 200 DMA now at 7.0420 is expected to hold.


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