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Thursday, July 13th
Seems that the sharp sell-off of the USD/CAD pair, triggered by hawkish BoC decision, ran out of steam, after the pair faced support at the level of 1.2681, which was last seen on June 24, 2016. Yesterday the Canadian CB made a decision to increase its interest rate by 0.25% for the first time in seven years that was considered by the market as extremely hawkish event, forcing the pair to lose more than 200 pips during the previous session. Adding to this, decision-accompanying statement also showed Bank’s confidence in further inflation potential growth, stating that recent softness of the inflation is temporary. However, the pair managed to correct slightly higher after its enormous downside rally, subsequently entering consolidation phase in the region of 1.2740-50. Expectedly that the pair will continue to stay under pressure during this session, as markets will continue to digest recent BoC meeting outcome, while bloc of data from both neighbor economies coupled with the second round of Fed Chair J.Yellen’s testimony will be able to bring fresh trading opportunities in the day ahead.
The EUR/USD pair eased part of its overnight gains by the European opening, having faced resistance at 1.1456 level, as the US dollar attempts to recover some positions against its main competitors after its recent decline. Moreover, yesterday the pair failed to benefit from not so hawkish Fed Chair J.Yellen’s testimony, having retreated from its 14-month highs, posted in the region of 1.1490, as investors preferred to lock in some profits after significant bullish rally of the pair, seen earlier this week. Market participants perceived Mrs. Yellen’s testimony as somewhat dovish on Wednesday, as it lacked any surprise regarding further Fed monetary policy steps. However, further decline of the pair looks unlikely, as Yellen’s testimony reinforced speculations surrounding narrowing divergence between monetary policies of the Fed and ECB, which were supporting the pair lately. Now all focus shifts towards the US data releases and the second part of Fed Chair J.Yellen’s testimony, which will take center stage during the NA session, while EU data calendar will remain relatively quiet today, so the pair will continue to follow global market trend throughout the European trading session.
The GBP/USD pair extends its bullish rally in the second half of this week, having stepped above the level of 1.29 this morning, as broad US dollar weakness remains as a key determinant across the market. Yesterday the pair sank into the region of 1.2810 on the back of attempts of the US dollar to regain its positions, however, the major managed to stage a solid comeback, as positive data from the UK labor market interrupted a streak of disappointing macroeconomic results. Adding to this, the pair gained further traction after Fed Chair J.Yellen failed to surprise the market with any hawkish details during her testimony, reiterating what was already told to markets. On the other hand, recent hawkish comments from the BOE MPC member I.McCafferty, who suggested increasing BoE interest rate on August meeting and considering QE tapering program earlier than it is planned, indicated narrowing divergence between both the UK and US central banks’ policies, which in turn significantly supported the pair this Thursday. However, increased concerns over the Brexit negotiations, as both sides struggle to come to a consensus regarding rights of EU citizens after UK will leave Eurozone, are limiting pair’s further upside. Looking ahead, today investors will closely watch for the bloc of US data, featuring PPI and several second tier reports, while the UK docket will remain silent today, leaving the pair at the mercy of global market trend during European trading hours.
The Aussie remains one of the best performers of this trading session, forcing the AUD/USD pair to extend its winning streak for the fifth session in a row and refresh its 4-month highs at 0.7715 level. Seems that positive risk environment remains highly supportive to higher-yielding assets, as better-than-expected Chinese Trade Balance figure boosted investors’ risk appetite. Adding to this, broadly based US dollar weakness, backed by not hawkish enough Fed Chair J.Yellen’s testimony, coupled with prevalent positive moods on the commodity market are also remaining supportive to the strong bid tone surrounding the pair lately. On the data front, today the US economy will release PPI report, which will be able to provide some impetus to the pair, while second round of Mrs. J.Yellen’s testimony before the Senate will take center stage in NA session.
The main events of the day:
US PPI – 15.30 (GMT +3)
Fed Chair J.Yellen Testimony – 17.00 (GMT +3)
Support and resistance levels for the major currency pairs:
EURUSD S. 1.1332 R. 1.1528
USDJPY S. 112.31 R. 114.39
GBPUSD S. 1.2772 R. 1.2962
USDCHF S. 0.9579 R. 0.9699
AUDUSD S. 0.7613 R. 0.7715
NZDUSD S. 0.7186 R. 0.7316
USDCAD S. 1.2530 R. 1.3050
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