Thread: Daily Market Analysis from ForexMart

Brent. July 21, 2020 – Oil updates local highs

Brent oil closed yesterday with growth to $43.20. Today, oil bulls continue their northern campaign, approaching $ 44.60 a barrel. The prices were supported by news of the end of the EU summit: the leaders of the EU countries have finally reached an agreement on an aid package for the countries most affected by the coronavirus in the amount of 750 billion euros.

Earlier, the pressure on oil prices was exerted by the decision of the OPEC+ countries to increase oil production from August 1, bringing the overall reduction under the energy pact to 7.7 million. In July, the volume of reduction was 9.7 million barrels per day.

Tonight and tomorrow, you should pay attention to the data on US crude oil inventories. If reports from the American Petroleum Institute (API) and the US Department of Energy reflect an increase in inventories, Brent quotes may come under pressure again.

EUR/USD. July 21, 2020 – EU summit is over, euro is up

The EUR/USD pair is trading in no specific direction on either side of the 1.1440 level. The EU summit ended tonight, following which the leaders of the EU countries agreed on the creation of a fund for the restoration of European economies in the amount of 750 billion euros.

The parties found a compromise on the issue of the donor countries' capabilities and the needs of the recipient countries. In particular, the fund's subsidies will amount to 390 billion euros, and loans – 360 billion euros, which should balance the risks. About 70% of the fund must be exhausted and used for its intended purpose during 2021-2022, and another 30% in 2023. The total debt should be repaid by the end of 2058.

The fact that agreements have been reached after the five-day summit already provides support for the European currency, so further growth of the euro with a target of 1.15 is quite likely.

GBP/USD. July 22, 2020 – Sterling weakly corrected after morning dip

On Tuesday, the British pound sterling managed to renew its high since mid-June, hitting 1.2770. However, during Wednesday morning trading, the pair dropped to the level of 1.2640.

The growth of the sterling yesterday was promoted by the general market optimism, the reason for which was the agreement of the European fund to help the countries affected by the pandemic in the amount of 750 billion euros. In addition, the EU countries have also approved a multi-year EU budget of more than 1 trillion euros.

Today pressure on the British currency was exerted by information that the UK and the EU are unlikely to have time to agree on a trade agreement before the end of the summer. This means that negotiations may drag on until the end of the year, which casts doubt on the possibility of a soft Brexit. In this case, the UK will have to leave the European Union with the loss of access to the single European and customs markets.

Today the macroeconomic calendar is empty, the pair will grow weakly from the level of 1.2640. On Friday, the situation may change after the release of data on business activity in the manufacturing sector and the service sector. Market participants are waiting for weak statistics, and if the forecasts are confirmed, the pound will begin to decline to the area of ​​1.26.

EUR/USD. July 22, 2020 – Euro has reached 1.1550

Yesterday, the European currency managed to renew its high since the beginning of 2019 at 1.1550. The euro was supported by the results of the EU summit, at which it was decided to create a fund for the recovery of the European economy in the amount of 750 billion euros: 360 billion euros will be loans and 390 billion euros – subsidies. Experts note that the approval of a common fund in times of crisis is a signal of political stability in the eurozone.

Moreover, the President of the European Council Charles Michel announced the harmonization of the EU budget for 2021-2027 in the amount of 1.074 trillion euros.

Analysts predict further growth in the European currency, as the widespread spread of the coronavirus in the world, ongoing tensions between the US and China and the upcoming US elections could severely limit the appetite for high-yielding assets in the near future.

GBP/USD. July 23, 2020 – Sterling falls after the release of weak economic statistics

On Thursday, the British currency came under pressure after the release of macroeconomic statistics from the UK. In particular, the index of industrial orders in July showed an increase to -46 points from -58 points a month earlier. However, the latest data turned out to be worse than forecasted, as analysts had expected the indicator to rise to -38 points. Moreover, household incomes have fallen by 4.5% since the onset of the crisis, and sharply increased unemployment remains the country's key economic problem.

At the same time, the US dollar is also under pressure following statements by US Treasury Secretary Steven Mnuchin about the likelihood of new measures to stimulate the country's economy, despite the huge budget deficit.

The growth of the pound sterling is also limited due to the uncertainty in the Brexit negotiations between the UK and the European Union. The current round of talks will end this week, and no new meetings are expected yet. At the same time, there is no visible result in the debate yet, which increases the risks of a lack of a trade agreement and, as a result, a fall in the British currency.

The current quote for the GBP/USD pair is 1.2690. The RSI indicator declines towards the neutral zone, which signals in favor of further weakening of the pound sterling.

EUR/USD. July 23, 2020 – Euro retains potential for further growth

The euro continues to trade in the area of ​​yesterday's highs near the level of 1.1600. The European currency managed to renew the maximum from October 16, 2018 after the leaders of the EU countries agreed on the creation of a global fund for the recovery of the European economy in the amount of 750 billion.

Amid such a powerful factor supporting the European currency, the deterioration in relations between the United States and China fades into the background. However, many experts are sure that this is «for the time being». Earlier it became known that the US intends to close the Chinese consulate in Houston, to which China also promised to take retaliatory measures.

Today you should pay attention to the data on applications for unemployment benefits in the United States. Experts expect an increase in the number of applications from 1,300 to 1,360 for the first time in last weeks. If forecasts are confirmed, the dollar will receive additional impetus to weaken. Also of interest will be the data on the consumer confidence index in the euro zone for July, where the indicator may improve to -12 points from -15 earlier.

EUR/USD. July 24, 2020 – Euro declines from highs within correction

The pair ends the week near the 1.1600 level. The euro hit a new high at 1.1625 yesterday. Today, the European currency is supported by the PMI business activity indices in France and Germany, published in the morning: the indicators were better than the market forecasts (57.8 points and 50.0 points, respectively).

The euro remains the leader in the foreign exchange market amid high demand for the currency after the leaders of the European Union have agreed on a global stimulus package for the economy. In contrast, the United States has recently faced difficulties in adopting a new stimulus program, as well as in containing the further spread of Covid-19. In addition, the United States continues to wage a trade war with China, which also puts pressure on the greenback.

However, on the H4 chart, we see that the RSI indicator reversed and headed down towards the neutral zone. The forecast for today assumes a decline in the pair within the correction to the 1.1560 area.

EUR/USD. July 27, 2020 – The dollar is weak for many reasons

The US dollar continues to weaken against all major currencies at the start of the new trading week. The current quote for the EUR/USD pair is 1.1700. This week, market participants are likely to continue selling dollars, and there are several reasons for this.

First, the American Benefit Co-Pay program expires on Monday. Over the course of several months, more than 20 million US citizens received weekly co-payments of $ 600. Now, after the completion of the program, many enterprises and households will fully feel the negative consequences of the lack of financial assistance from the authorities.

Second, the US economy has already slowed significantly, which will be confirmed by the US Q2 GDP report on Thursday. Experts predict a 35.0% decline in the American economy.

Finally, the position of the US Federal Reserve System also does not give the dollar any incentives to strengthen. Against the background of the fact that the economic prospects are disappointing, the deadline for payments to citizens has expired, and the packages of new assistance measures may turn out to be ineffective, the regulator can only continue to adhere to the «dovish» position in its monetary policy.

Coupled with a further increase in the number of Covid-19 diseases in the United States, the above factors will only have a negative impact on the dollar exchange rate.

EUR/USD. July 28, 2020 – Euro finishes rally

The euro suspended its strong growth and stabilized in the area of ​​the reached highs near 1.1740. The US dollar is still under strong pressure from several factors: an increase in the number of coronavirus cases in the United States and expectations of the «dovish» rhetoric of the US Federal Reserve at a meeting on Wednesday. The regulator is likely to keep the rate unchanged around zero, as well as comment on inflation parameters.

However, having received local support from data on the number of orders for durable goods in the US, the dollar managed to recover somewhat. June orders rose 7.3% month-on-month, higher than the 7.0% growth forecast.

Today the EUR/USD pair will continue to fluctuate slightly above 1.17 in anticipation of tomorrow's results of the US Federal Reserve meeting.

Brent. July 28, 2020 – Oil rises thanks to dollar weakness

Yesterday’s day ended for Brent oil with a decline to $43 per barrel, but today quotes managed to recover to $44.25. The prices were supported by the weakening of the US dollar across the entire spectrum of the Forex market due to continuing concerns about the outlook for the US economy.

However, it should be noted that oil is growing despite a number of negative factors. First, the oil market is monitoring further plans by OPEC and Russia to increase oil production by 2 million barrels from August. Such measures are incorporated in the gradual removal of additional production restrictions imposed by the pandemic.

In addition, investors fear a further deterioration in relations between the United States and China and an increase in the number of new cases of coronavirus infection in the world.

Another factor weakening Brent may be statistics from Baker Hughes, according to which the number of oil rigs in the US last week increased for the first time since March 13, by 1 unit.

Thus, as soon as the US dollar manages to show the first signs of recovery, oil «bulls» risk losing all their positions.

Brent. July 29, 2020 – Oil rises after the publication of the report from the API

During the trading session on Wednesday, Brent crude rose to $44.20 per barrel. Prices were supported by yesterday's report from the American Petroleum Institute (API), according to which crude oil reserves in the country fell by 6.8 million barrels per week. Analysts had forecast a reduction of only 1.2 million barrels.

Today you should pay attention to a similar report from the US Department of Energy. If the new data also reflects the decline in inventories, Brent quotes will be able to reach a maximum of $45 per barrel.

At the same time, the softening of the terms of the OPEC+ deal to reduce production by 2 million barrels per day starting from August may act as a pressure factor in the near future. Analysts have calculated that the softening of the OPEC+ deal will lead to an oversupply over the next four months.

EUR/USD. July 29, 2020 – The pair is sideways in anticipation of the results of the US Federal Reserve meeting

Today is extremely important for the dynamics of the EUR/USD pair, since the US Federal Reserve will announce its decision on the rate and share its plans for further monetary policy.

In addition, market participants are waiting for the regulator's assessment of the prospects for the recovery of the American economy. Earlier in June, the FOMC released its quarterly reports, according to which a progressive economic recovery could be expected. However, after that, the States were swept by the second wave of the coronavirus, which led to another tightening of quarantine restrictions and a decrease in business and production activity.

Additional pressure on the US dollar is exerted by the expectations of tomorrow's GDP report. Experts predict a significant decline in the economy in the second quarter, up to 35%.

At the same time, the markets are following the discussion in Congress of new measures to support the US economy in the amount of $1 trillion. It is expected that a new aid package will be adopted this week.

The current quote for the EUR/USD pair is 1.1745. The euro is clearly overbought, and it is logical to observe a downward correction. During the day, trading will be held in a calm manner, pending the results of the Fed meeting.

EUR/USD. July 30, 2020 – US dollar strengthens moderately after the Fed meeting

Over the past week, the US dollar has been actively selling and reached lows in the 1.1800 area. Yesterday ended a two-day meeting of the US Federal Reserve, the results of which did not manage to significantly change the situation on the market – the pair EUR/USD fell only to the level of 1.1730.

The regulator noted that there are serious risks from the pandemic, and the Central Bank is ready to use its entire arsenal of tools to support the economy. Fed Chairman Jerome Powell also said during a press conference that household spending has rebounded by about 50%, but manufacturing capital investment cannot boast a similar trend.

Moreover, rising inflation, the end of the unemployment benefit program and the second wave of coronavirus in the United States – all these factors prevent optimism from emerging in the market.

Today you should pay attention to the publication of the report on US GDP. Experts predict the worst release in the entire history of data collection: the fall of the US economy by 35%. At the same time, the European currency feels quite comfortable: the macro statistics for the eurozone continues to improve, and at the moment the forecast for GDP for the third quarter suggests an increase in the indicator.

EUR/USD. July 31, 2020 – Euro has updated its maximum at around 1.1900

The euro continues to rally, reaching 1.1900. The US dollar again came under pressure from several factors at once: from the fresh macroeconomic data and statements by US President Donald Trump.

So, yesterday's data on US GDP showed a decline in the US economy in the II quarter by 32.9%. This was the largest decline since the Great Depression. Experts note that without the $3 trillion stimulus package, the GDP failure would have been even greater, but the current figures are impressive.

Additional pressure on the currency was exerted by the words of D. Trump, who does not exclude the postponement of the upcoming presidential elections in November due to low GDP and economic problems. Moreover, the lack of progress in talks between Republicans and Democrats in the US Congress on a new $1 trillion package of measures also does not give the US dollar optimism.

Today we should pay attention to the data on inflation for July in the eurozone and changes in the volume of GDP for the II quarter. Inflation in the region rose 0.4% on an annualized basis, while GDP fell by a record 12.1%. Such news somewhat dampened the appetite for the euro, which allowed the EUR/USD pair to fall to 1.1850.

GBP/USD. August 3, 2020 – Sterling started to decline from highs

Monday starts with a moderate weakening of the pound sterling after rising to the level of 1.3100. The current quote for the GBP/USD pair is 1.3000. Rally of the British currency lasted 11 days in a row; experts note that such a growth of the pound has not been observed for a whole decade.

Today, the sterling was under pressure from the statistics on business activity in the UK manufacturing sector for July. The indicator rose from 50.1 points to 53.3 points. However, the latest data turned out to be worse than the forecast for growth to the level of 53.6 points, which had a negative impact on the exchange rate.

Additional negativity comes from the uncertainty surrounding Brexit. Negotiations between the UK and the EU are failing, and the likelihood that the country will leave the EU without a full-fledged trade agreement is growing every day.

A meeting of the Board of the Bank of England will take place on Thursday. Market participants expect that all parameters of the regulator's monetary policy will remain unchanged.