Weekly Outlook 6th July to 10th July 2020

Weekly Outlook 6th July to 10th July 2020

05 Jul 2020 12:17 PM

Weekly Outlook 6th July to 10th July 2020

USD/INR – It’s a relatively quiet week ahead on India’s economic calendar. Key data releases include manufacturing output and industrial production (YoY). The industrial production is expected to contract further to 34% from 18.3%. Further dollar inflows would strengthen the rupee until the RBI intervenes. The daily reported cases in India have reached an all-time high of 22,771. As for the dollar, the ISM non-manufacturing PMI for June on Monday, focus would be on Thursday’s weekly jobless claims, revealing how much impact the reclosures had on employment. Any negative news would tend to boost Dollar.

Technical - Technical - 14-day RSI has plunged into the overbought territory while MACD and Slow Stochastics are gradually moving towards it. 100-day Simple Moving Average (purple line) comes at 74.68. A Gravestone Doji is formed on the daily candlestick chart. Even though its forte is calling out market tops, whenever it is formed at a bottom, one needs to be extra cautious. The crucial dollar support of 74.93 – 75.02 (horizontal yellow dashed lines) is broken. Importers should certainly execute hedging decisions - vanilla options and forwards both.

EUR/USD – The upcoming week will start with Germany publishing May’s Factory Orders, Industrial Production, and the Trade Balance for the same month, all seen rebounding from the previous readings but yet within bothersome levels. The EU will release May’s Retail Sales, which is expected to drop by 15% in the month. Old data might have a muted impact on the shared currency. The market will remain focused on COVID-19 developments, including progress in vaccines or treatments that can speed up the economic recovery.

Technical – The whole week short candlesticks have been forming on the chart indicating uncertainty.  A strong resistance is offered at 1.1342 by the 610-day SMA, the next is a trend line resistance same as last week at 1.14 levels. A strong support is offered at 1.10 levels by 144 and 233-day SMA. RSI stands flat at 55 after a moving away from the midline in the neutral to bearish territory.  

GBP/USD – Prime Minister Boris Johnson hopes tourists will return as the UK opens its borders to some 50 countries – yet it is unclear if the gesture will be reciprocated. David Frost and Chief EU Negotiator Michel Barnier will meet and try resolve differences. Key data releases include construction PMI which is expected to rebound from 28.9 to 47. Brussels has agreed to grant access to its single market. London refused and said the point of Brexit was to make its own laws.

Technical – Immediate support is at 1.2420, as indicated by the 50-day SMA. The next support lies at 1.2340, followed by 1.2250 - intra-day lows formed in June. First resistance will be at 1.2550 - late June’s peak, followed by 1.2691, a swing high and where the 200-day SMA hit the price. The trend line (connecting the peaks of Dec'19, Mar'20, Jun'20) comes around 1.27, suggesting the criticality of 1.2690 - 1.27. RSI is neutral at 52.

USD/JPY - No material stats are due to be released in the upcoming week. Uncertainty over the course of the pandemic and the economic response is driving the scanty revival of risk-aversion. Until there is a resolution of the fundamental risk picture the technical qualities of the USD/JPY will continue to dominate trading. That said there is a bias higher in the USD/JPY because of the up-trending coronavirus cases, being the key driver.

Technical – The Bollinger bands indicate increased volatility, the extreme bands have converged significantly last week. The 100-day SMA at 107.85 provides backstop to the 108.00 resistance line. The 200-day SMA is at 108.0. Breaking down below 106 where level opens up the idea of a move to ¥105, possibly even ¥100 over the longer term. A choppy price action can be expected.