FX Recap and outlook: FX traders focused on EU Summit developments, or lack thereof. The so-called frugal four (Austria, Denmark, Sweden, and the Netherlands) balked at Germany, and France plans of a €750 billion Relief Fund, which included €500 million in grants. The debate is ongoing.
Soaring Chinese equity markets underpinned AUDUSD and NZUSD. The Shanghai Shenzhen soared 2.98%. The other major Asia equity indexes rose marginally, while European bourses are either side of unchanged.
EURUSD traded higher on the back of hopes that the EU leaders reach an agreement on the COVID-19 relief fund.
Prices broke above the first layer of resistance at 1.1450 just before Europe opened. Europeans added to the gains, but the rally stalled at 1.1467. German PPI, and Eurozone Current Account reports were ignored.
GBPUSD had a down then up session. Prices dropped from Friday’s closing level of 1.2567 and hit 1.2520 in Asia.
They started to rise just before Europe opened and then accelerated, reaching 1.2606 in early NY trading, coinciding with a drop in EURGBP. UK House prices rose 2.4% in July.
USDJPY rallied from 107.03 to 107.55 in Asia, on hopes of an EU deal and another US stimulus package.
However, the lack of progress
with the EU talks, sent USDJPY to 107.18 in NY.
AUDUSD and NZDUSD chopped about in tight ranges with surging China equity prices, and a modestly positive risk tone, supporting prices.
USDCAD inched lower on the back of broad US dollar sentiment, but its losses were limited. The domestic currency is an “after-thought” in global FX markets but may underperform in part due to the US/Canada border closure to non-essential travel, which is extended until August 21.
There is not any US or Canadian economic data due today. EU Summit headlines and Wall Street will determine FX direction.
USDCAD Technicals: The USDCAD downtrend from March is intact while prices are below 1.3600 on daily chart. For today, a break below 1.3560 targets 1.3510 while a break above 1.3600 targets 1.3660. Today’s Range 1.3530-1.3600
Chart: USDCAD daily
Source: Saxo Bank