• USD/CAD was seen oscillating in a range below mid-1.3200s on Thursday.
  • The USD remained depressed amid the impasse over the US fiscal stimulus.
  • A modest pullback in oil prices undermined the loonie and helped limit losses.

The USD/CAD pair now seems to have entered a bearish consolidation phase and was seen oscillating in a range near six-month lows, below mid-1.3200s.

A combination of diverging forces failed to provide any meaningful impetus to the major, instead led to a subdued/range-bound price action through the early European session on Thursday. The US dollar remained depressed in the wake of the impasse over the next round of the US fiscal stimulus measures.

This coupled with a fresh leg down in the US Treasury bond yields exerted some additional pressure on the greenback. However, a softer tone around crude oil prices undermined the commodity-linked currency – the loonie – and helped limit deeper losses for the USD/CAD pair, at least for the time being.

Oil prices slipped around 0.50% on Thursday after the OPEC – in its monthly report – said that the fuel demand could fall more than expected. The statement overshadowed the US government data, which showed a fall in inventories and suggested that demand is returning despite the coronavirus pandemic.

Looking at the technical picture, the pair has been trending lower along a downward sloping channel over the past one month or so. The formation points to a well-established bearish trend and supports prospects for an extension of the recent bearish trajectory, even below the 1.3200 mark.

Moving ahead, market participants now look forward to the release of the US Initial Weekly Jobless Claims. The data will influence the USD price dynamics and produce some short-term trading opportunities later during the early North American session on Thursday.

Technical levels to watch

 

The upside momentum in USD/JPY is forecasted to push the pair beyond the 107.00 level in the next weeks, noted FX Strategists at UOB Group.

Key Quotes

24-hoour view: “Our view for USD yesterday was that ‘barring a move below 106.15 (minor support is at 106.30), USD could extend its gain to 106.90 before a pullback can be expected’. Our view was not wrong as USD rose to 107.01 before easing off. Overbought conditions coupled with waning momentum suggest that 107.01 could be an interim top. From here, the pullback from the high has room to edge lower but any weakness is viewed as part of 106.45/107.00 range. In other words, a sustained decline below 106.45 is not expected.”

Next 1-3 weeks: “We highlighted yesterday that ‘upward momentum is showing sign of improving but for now, the prospect for a clear break of 106.60 is not high’. However, the sudden surge in momentum came as a surprise as USD soared to a high of 106.68. The rapid improvement in momentum suggests USD is likely to trade with an upward bias. From here, USD could strengthen towards 107.15. The next resistance at 107.50 is likely out of reach for now. Overall, only a breach of 105.85 (‘strong support’ level) would indicate the current upward pressure has dissipated.”

 

In light of advanced figures from CME Group for Natural Gas futures markets, open interest went down for the fourth consecutive session on Wednesday, now by around 1.8K contracts. On the other hand, volume reversed two drops in a row and rose by nearly 43K contracts.

Natural Gas still targets $2.50/MMBtu

Wednesday’s negative price action in Natural Gas was in tandem with declining open interest, allowing for a rebound in the very near-term. That said, immediate target emerges at recent tops near the $2.30 region ahead of the more relevant peak in the $2.50 area.

A break of 1.2950 would signal a deeper correction is in play potentially targeting a reversal back to 1.26/1.28 – a great buy opportunity ahead of FOMC meeting on 15/16 September, according to economists at Westpac.

Key quotes

“The eye-popping 20.4% collapse in UK GDP emphasises the vulnerabilities in the UK economy, especially if COVID case counts continue rising across Europe.” 

“GBP looks to be in a technical holding pattern as what looks like a short-term USD correction evolves through August. We still tend to see that move developing into an opportunity to sell USD into the Sep 15/16 FOMC outcome. However, it is quite possible that the correction could go further.” 

“For now, key support at 1.3020 and then 1.2950 remain intact; but a break of that lower level would signal a deeper correction is in play potentially targeting a reversal back to 1.26/1.28. We would use such a dip as an opportunity to buy ahead of the Fed’s possible move to average inflation targeting.”

 

The Aussie dollar could edge higher to the 0.72 region vs. the greenback in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that ‘we continue to see chance for AUD to test the 0.7125 support’ and added, ‘however, in view of the lackluster momentum, the next support at 0.7095 is not expected to come into the picture’. AUD subsequently dipped to 0.7109 before staging a surprising robust rebound. The recovery has scope to move nearer to 0.7200. For today, the next resistance at 0.7225 is likely out of reach. Support is at 0.7155 followed by 0.7130. The low of 0.7109 is expected to be ‘safe’ for today.”

Next 1-3 weeks: “There is not much to add to our update from Tuesday (11 Aug, spot at 0.7150). As highlighted, AUD is deemed to have moved into a consolidation phase. For these couple of weeks, AUD is expected to trade between 0.7050 and 0.7250.”

El EUR/USD ha aprovechado la caída de las últimas horas del dólar y ha tomado impulso hacia nuevos máximos de 6 días en 1.1838 después de haber avanzado más de 50 pips en lo que llevamos de jueves.

El billete verde, medido por su índice DXY, ha perdido cerca de 30 pips hasta ahora, cayendo a 93.08, su nivel más bajo desde el pasado 7 de agosto. El estado de ánimo optimista en los mercados por la posible consecución de una vacuna contra el coronavirus, y el descenso de los rendimientos del Tesoro de EE.UU. están pesando sobre el dólar.

En Europa se han publicado los datos de inflación de Alemania para el mes de julio. El IPC mensual ha caído un 0.5% y el anual un 0.1%, tal como estaba previsto. La inflación armonizada anual se ha situado en el 0%, cumpliendo previsiones.

Más adelante en el día, el foco estará en las peticiones de desempleo semanales de la semana del 7 de agosto en Estados Unidos y en las continuas del 31 de julio.

Niveles EUR/USD

Con el par operando al momento de escribir sobre 1.1821, ganando un 0.32% en el día, la primera resistencia aparece en 1.1916, techo del 6 de agosto y del año 2020. Más arriba, el nivel a superar es la barrera 1.1200.

En dirección sur, el soporte principal está en 1.1711, suelo del 12 de agosto, seguido de 1.1695, mínimo del 3 de agosto.