USD boosted after Fed minutes
Not even an England win in the Euro 2020 semi-final was enough to boost Sterling against the US Dollar. The US Federal Reserve’s commitment to tapering their bond-buying has seen the USD strengthen across the board. We have not yet seen their test of ‘substantial further progress’ (whatever that means) met but the hawkish force remains strong with this bank.
There are two Dollar related trendlines I am watching. In the GBPUSD rate, there is a support line that is currently around USD 1.3740. If it breaks, then USD 1.3675 and maybe 1.3580 will be likely targets.
In the EURUSD rate, a similarly medium-term trend line is in place. That provides support for the euro around USD 1.1765 right now. A break of that support would leave USD 1.1700 and USD 1.1625 as short-term targets.
This US Dollar strength means the Australian Dollar is weaker despite the Reserve Bank Australia Governor, Philip Lowe confirming an interest rate hike before 2024 can’t be ruled out. More broadly, all the commodity reliant currencies, the Aussie, Kiwi, and Canadian Dollars amongst them, are weaker this morning. The resurgence of the US Dollar makes commodities less prone to inflation and that has this knock-on effect.
GBPAUD at 14 month high
GBPAUD is up to just below AUD 1.85 this morning; the highest level we have seen in 14 months. Many traders will be taking advantage of this in the short term until we see signals that AUD 1.8750 is on the cards. There is nothing certain about that yet.
GBPNZD is similarly buoyant at NZD 1.9740 this morning. That is above a short-term trendline, so we ought to see NZD 1.98 and maybe even another run at the magical NZD 2.000 but it failed to get there on the last attempt in June and hasn’t hit 2.00 since a brief spike in August 2020.
GBPCAD is at the highest level since 26th April; breaking from its narrow trading range of the last two months. There are several resistance levels right here (CAD 1.7250) so we can’t assume further gains on this one yet.
Sterling does have support elsewhere though after two very positive UK house price reports and reports of a hiring boom across Britain. The Recruitment and Employment Confederation’s (REC) survey has been running for almost 24 years and they are reporting the highest number of vacancies on their records. As long as the English economy is opened up on 19th July, we ought to see further GBP strength. That is especially true when news is still coming in of further lockdown in Australia, Japan, and elsewhere.
There is a strong chance the Olympics in Tokyo will have to go ahead without spectators, as Japan signals these extended quarantine periods.
ECB in action today
Back to today and the European Central Bank will release their Monetary Policy Statement at 12:30 GMT. ECB President Christine Lagarde will speak later in the day. The Euro, as mentioned above, is battling the USD just like the Pound is. GBPEUR is in a narrow range centring on EUR 1.1675. That break of EUR 1.1750 is still proving to be unattainable right now.
This afternoon also brings the US weekly jobless data. Another fall in the fresh claims for jobless support would give the USD another boost.
Anyway, I am off to search the backs of drawers and under the sofa cushions after a chap in Florida, Kenneth Morgan did so and found a jackpot-winning lottery ticket. His $1 million prize came from a lost 3-month old ticket. Good on him.