It has been a snoozefest of a session so far
Major currencies are keeping in narrow ranges and are still within 10 pips of one another on the day, as the mood couldn’t be more dull in European morning trade.
To keep things flowing, let’s take a look at some dollar pairs right now and gauge the technical situation that is playing out amid the summer doldrums.
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The pair was poised for a further push higher, touching a high of 110.80 in European morning trade yesterday, before pulling back to 110.30-40 after the US CPI data release dragged Treasury yields lower.
Yields have since rebounded but the dollar remains more tentative for now as the market continues to debate between taper expectations and delta variant concerns.
From a technical perspective, USD/JPY is still holding below daily resistance from the 23 July and 14 July highs @ 110.59 and 110.70 respectively for now.
That presents a challenge for buyers to try and push above in order to establish the next upside leg. That said, any such move requires the bond market to conform as well.
Next up is GBP/USD, which has seen more of a choppy past few days and is trading close to unchanged levels on the week currently.
The BOE didn’t provide much to lift pound sentiment but policymakers also didn’t really signal any undertones that will chip away at the current outlook in the UK.
There are concerns that growth expectations may have peaked but the same goes for the US and Europe as well. For now though, cable price action is largely dictated by the dollar and there isn’t much to suggest a firm bias in the pair.
The 100 and 200-day moving averages (red and blue lines respectively) @ 1.3922 and 1.3765 respectively are the key levels to watch and that signifies a rather large range for cable to play around with before getting a better sense of the next directional move.
Meanwhile, a look at USD/CAD also shows that the pair is still in search of fresh direction after the retreat in July stalled around support @ 1.2423.
The 200-day moving average (blue line) offers sellers a spot to lean on and keep some downside pressure going but there needs to be a push below 1.2423 and preferably the 100-day moving average (red line) to really establish a fresh leg lower.
Oil prices are stabilising lately and that may help to provide some comfort to the loonie but its fortunes are also somewhat tied to the US economic recovery (and Fed outlook), so that is another risk factor to be mindful of when viewing the currency.
For now, there is more of a defined area that price action is settling in and there needs to be a break on either side to suggest any fresh directional movement in the pair.
Adding to that from a technical perspective, a ‘death cross’ looms on the daily chart with the 100-day moving average (red line) looking to cross over the 200-day moving average (blue line) in the pair for the first time since August last year.
That will be a bit of a blow to buyers, especially if the dollar continues to keep more resilient and we see a push below 0.7300 and the July low of 0.7289.
Such a play will leave little in the way of a push towards 0.7000 next, especially so if the virus situation in Australia continues to dampen the RBA/economic outlook.