The US dollar continued to decline as risk-sensitive assets tapped into higher commodity prices. Commodity currencies rose on the back of two events. Chinese authorities claimed to have halted the latest flareup of the Covid Delta variant. The Food and Drug Administration (FDA) on Monday issued full approval to the Covid-19 vaccine developed by Pfizer and BioNTech, a move that could speed up vaccination in the US.
Today’s macro agenda (GMT 3)
- 12:00 Germany: Ifo business climate, current conditions, and expectations (August)
- 13:00 UK: CBI distributive trades (August)
- 15:30 US: durable goods orders (July)
- 17:30 US: EIA weekly petroleum status report
Major currencies were on a downside trajectory in Tuesday APAC trading, with the aussie, the loonie, and franc down 0.23%. By the time of writing, the euro was trading at 1.1743 (-0.12%).
This morning’s uptick in the dollar index (DXY) was mostly attributable to a pickup in the number of Covid cases across Australia and New Zealand. On the other hand, strengthening of the dollar may have been stoked by the usual correction in commodity-linked currencies after a two-day rally. Since the beginning of the week, the Canadian has climbed 2.87%, while the Australian and New Zealand dollars are up about 2.16%.
Today, the focus shifts to Germany’s IFO prints for August and the durable goods orders stateside. Upbeat Ifo readings would lend support to the euro against all currencies. The highlight of the week will be Fed Chairman Jerome Powell's virtual speech at Jackson Hole.
The euro dipped to 1.1733 during APAC trading. The fall was held back by the balance line (the midpoint of the 55-day SMA). The technical picture still reveals a buy-side bias. Powell is scheduled to deliver a speech on Friday, so the bulls have a couple of days to pump up the price action. Today the resistance level is at 1.1760.
The aussie and the kiwi are risk-sensitive currencies, so it makes sense to focus on the dynamics of the major AUDUSD and NZDUSD pairs. If they continue to head north, it means that speculators are not interested in the Covid narrative in the run-up to Powell's speech.
A quick retracement to 1.1760 would portend extension of the upward march to 1.1800. At 1.1799, there is a 112-degree angle reversal (Gann level). The euro bulls have 3-4 hours to test the 1.1760 mark. If they don’t make it, the risk of a leg down below 1.1725 will be more tangible.