The greenback has extended gains since the opening of the APAC session, drawing strength from the July FOMC minutes, which showed that most Fed officials are ready to start winding down the bond purchasing program this year. The US currency has tapped into additional support from a sharp decline in the Australian dollar and the New Zealand dollar amid the spread of the Delta variant and the RBZN’s decision not to raise rates.
Today’s macro agenda (GMT 3)
- 15:30 Canada: retail sales (June)
- 20:00 US: Baker Hughes weekly oil and gas rig count
Current outlook
By the time of writing, major currencies were showing patchy performance. The Swiss franc, the kiwi dollar, the euro and the yen were trading in positive territory. Other currencies made unsuccessful attempts to move higher.
Australia has recorded a record increase in Covid-19 cases. Over the past 24 hours, 754 new cases of Covid were detected in that country. Most of the cases are in Sydney, where the lockdown continues. A sharp increase in infections has also been observed in Thailand, Malaysia, Japan, Germany and the US.
Strong US macro data supports bullish dollar sentiment. The Fed continues to take cautious steps toward tapering. On the other hand, the risk and uncertainty associated with the pandemic also lend support to the US dollar, since it is a defensive asset. The DXY broke out of the critical resistance level of 93.20 and continues to hold above it.
A “golden cross” shaped up on the DXY daily chart on July 27. This is when the 50-day moving average forms a crossover above the 200-day moving average. The bullish moving average signal encourages speculators to buy into the US dollar.
The euro is changing hands at 1.1682. Major euro crosses are trading in positive territory, except for EURCHF. The dollar bulls have successfully held their positions and are not allowing upward moves to turn into a correction. Today’s support level still remains the 112-degree angle of the Gann fan (1.1669).
On Thursday, the euro drew support from rising crosses. If the aussie and the kiwi dollars fail to enter an upward correction, another downward impulse should be expected for major currencies. Support levels for EURUSD are at 1.1657 and 1.1643, whereas resistance levels are located at 1.1697 and 1.1715.