In the currency markets, the US dollar is stable above the 93 mark. Net speculative short positions in the US dollar are at decade-high levels, but mostly concentrated against the euro and other reserve currencies, warning against the rising possibility of a sharp upside correction in the greenback and a rapid reversal of the recent appreciation across the majors.
The EURUSD was offered near the 1.18 mark on Monday. At these levels, the fundamentals do no longer support a further euro appreciation against the greenback as the long positioning in the single currency has become overly stretched. Technical indicators point that a downside correction would be healthy at the current levels. We could see a pullback to 1.1635, the minor 23.6% retracement on March – August rebound.
Cable failed to extend the post-Bank of England (BoE) gains above the 1.3185 last week. Despite the BoE’s unfavourable view on negative rates that triggered a quick pop in sterling purchases post-meeting, the BoE doves will likely remain in charge of the market due to the pandemic and Brexit uncertainties. Still, the GBPUSD’s faith above the 1.30 mark depends on the US dollar appetite. Any improvement could easily throw Cable below its 200-day moving average, 1.29.
Due Wednesday, the British GDP data should give an idea on the extent of the economic damage in the second quarter; analyst expect a slump over 20% in the 2Q GDP. Sterling traders will also be watching employment (Tue) and production (Wed) figures – which should confirm near 10% jump in June and temper the agony around the growth numbers.
Gold started the week on the back foot as the dust started settling after the Beirut tragedy last week. An ounce of gold was exchanged within the $2020/2035 range. At this point, the gold market is swamped with heavy long speculative positions, if closed could send the price of the precious metal below the $2000 per oz. Short-term support is eyed at $1980 per oz.
US crude trades little changed near the $42 per barrel. Solid resistance is expected to cap the topside potential near $43pb, the 200-day moving average.
