The U.S. Dollar Bounces To the 93.00 Handle
Jason Lubin August 20, 2020 7:00 AM
The overall weakness of the U.S. Dollar is pushing up the GBP/USD currency pair.
The US Dollar was bullish against all of its major currency pairs on Wednesday as a result of the US Dollar Currency Index rising back up to its 93.00 handle. On the U.S. economic data front, the Mortgage Bankers Association's Mortgage Applications decreased 3.3% for the week ending August 14th, from +6.8% in the prior week. The Federal Open Market Committee released its July 28th-29th Meeting Minutes which stated that U.S. central bankers have decided to hold off on any decisions regarding the federal funds rate as a result of fundamental changes in the economy as they related to the Fed's duel mandate of maximum employment and price-stability objectives.
On Thursday, Initial Jobless Claims for the week ending August 15th are expected to decline to 920K, from 963K in the previous week. Continuing Claims for the week ending August 8th are expected to fall to 15,000K, from 15,486K in the week before. Finally, the Leading Index for July is anticipated to rise 1.1% on month, compared to +2.0% in June.
The Euro was bearish against most of its major pairs with the exception of the CHF and GBP. In Europe, the U.K. Office for National Statistics has released July CPI at +1.0% (vs +0.6% on year expected). The European Commission has posted final readings of July CPI at +0.4% on year, as expected.
The Australian dollar was bearish against most of its major pairs with the exception of the CHF and GBP.
The GBP/USD pulled back roughly 48 pips on Wednesday after the US Dollar Currency Index bounced. The currency pair is managing to hold above the upper trendline of an ascending wedge pattern that began to form in mid-March. The GBP/USD will likely chop around and use the upper trendline as support before advancing the retest the 1.3270 resistance level. If the pair can break above the 1.3270 level, it will likely continue upward to retest its 2019 high of 1.3515. If the pair falls below the upper trendline, it will probably fall back to the 1.2815 support. However, the current economic situation in the U.S. is continuing to weaken the US Dollar, which in turn will likely hold up the currency pair.
Source: GAIN Capital, TradingView
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