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Wednesday, July 12th
The EUR/USD pair corrected slightly lower from its 14-month highs, posted at 1.1489 this morning, on the back of minor profit-taking actions ahead of Fed Chair J.Yellen’s testimony. Yesterday the pair received strong bullish boost, as the US dollar came under pressure amid another US political scandal and slightly dovish Fedspeaks. Now all eyes are directed on Fed Chairwoman J.Yellen’s semiannual Monetary Policy Report before the House Financial Services Committee. It is expected that policymaker will justify another rate hike this year, while any details regarding further actions of the Federal Reserve will be able to shape up pair’s short-term trend. Besides Mrs Yellen’s speech, nothing important is scheduled in data calendar for this Wednesday, so broad market trend will continue to lead the pair throughout European trading hours.
The USD/CAD pair struggles to correct higher after last week’s slump, remaining under pressure so far this week amid US dollar’s weakness and better tone around oil prices. Yesterday the greenback once again came under bearish pressure amid renewed US-Russia political drama, forcing the pair to reverse its yesterday’s gains. Adding to this, solid recovery of oil prices, backed by larger-then-expected drawdown in crude oil stockpiles by API, is also adding some bearish pressure on the pair this week. Today we have data-heavy session ahead, with Fed Chair J.Yellen’s testimony, US Crude Oil Inventories and BoC interest rate decision. It is expected that the Canadian regulator will increase today its cash rate by 25 bps, especially after recent hawkish talks of BoC members, which showed Bank’s readiness to refuse previous monetary policy easing measures, so the market will keep wait-and-see mode ahead of key risky events of this Wednesday.
The USD/JPY pair extends retreat from its multiweek highs, losing more than 100 pips from the level of 114.49, which was marked during previous trading session, as risk-off moods are dominating the market this Wednesday. Yesterday the market reacted aggressively on headlines that current US President D.Trump could receive some support from Russia during his presidential campaign last year, sending the US dollar sharply lower against its major competitors. Furthermore, the US political drama has heavily increased demand for safe-haven assets, sending USD/JPY to refresh its weekly lows at 113.32 spot. Adding to this, fresh wave of risk aversion ahead of the key risky event of this Wednesday is also adding some bullish pressure to the yen. It is expected that the pair will extend its corrective downside move during the European trading session, as risk-off sentiments and weaker USD dollar remain as key determinants for the pair in the middle of this week, while Fed Chair J.Yellen testimony will hog the limelight in the NA session.
The GBP/USD pair broke out of its overnight consolidation to the downside, having refreshed its its 2-week lows at 1.2815 spot, as the market turns cautious ahead of Fed Chairwoman J.Yellen’s testimony that negatively affects the pound. Moreover, yesterday the pair came under strong selling pressure, losing nearly a cent since previous session’s highs, as the market remained disappointed by uninformative talks by BOE policymakers – A.Haldane and B.Broadbent, which failed to provide any details on monetary policy or economic outlook. Now immediate focus shifts towards the UK employment data release, which will bring some fresh trading opportunities to investors in European session. However, increasing cautiousness ahead of Fed Chair J.Yellen’s testimony before the House Financial Services Committee will limit market’s reaction on UK data, as US policymaker’s speech remains the riskiest event of this Wednesday.
The main events of the day:
UK Average Earnings Index +Bonus – 11.30 (GMT +3)
UK Claimant Count Change – 11.30 (GMT +3)
Fed Chair J.Yellen Testimony – 17.00 (GMT +3)
BoC Interest Rate Decision – 17.00 (GMT +3)
US Crude Oil Inventories – 17.30 (GMT +3)
BoC Governor S.Poloz Speech – 18.15 (GMT +3)
Support and resistance levels for the major currency pairs:
EURUSD S. 1.1345 R. 1.1539
USDJPY S. 113.27 R. 114.83
GBPUSD S. 1.2771 R. 1.2965
USDCHF S. 0.9580 R. 0.9724
AUDUSD S. 0.7588 R. 0.7666
NZDUSD S. 0.7157 R. 0.7311
USDCAD S. 1.2855 R. 1.2973
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