USD currency rate will focus on two issues this week. The US-China tensions and the coronavirus pandemic relief will determine movement in the USD currency exchange rate.
After two weeks of negotiations, the trillion-dollar relief fund for the pandemic did not yield any result. The US death toll caused by the viral pandemic is at 162k, while it has crossed 5 million infected cases, weakening the USD currency exchange rate.
The USD Currency Rate Continues its Decline
The US Dollar index closed at 93.412 on Friday 7, August. Once the US dollar breached 95, it slipped to take support at 93.32 in July. After sliding down to levels of 92.48, the US dollar is back at 93.40 levels, which it saw last in September 2018.
The USD currency rate has been on the decline for the seventh consecutive week. Treasury yields are on a steady decline, and the coronavirus infections continue unabated, causing more panic in the economy. Further, a consensus has not been reached over additional stimulus in the country, causing the greenback to decline.
Weekly jobless claims data and the retail sales report for July will be watched this week.
It is Advantage Euro
The euro against the USD currency rate closed at 1.788 on Friday. It has been moving up to levels of 1.1906 for the past two weeks, but unable to cross this level. The EUR/USD currency exchange rate has seen a steady upswing for the past seven weeks but is at critical resistance levels.
If the euro slides against the USD currency rate, it will take support at 1.1748 and has another support at 1.1623. The currency pair sees resistance at 1.19 levels, and it is forming a short-term base at 1.17 levels.
The non-farm payroll came as anticipated and the country has added 1.76 million jobs in July. The unemployment rate has declined to 10.2%. The US data shows that the economy has slowed down in July. Meanwhile, inflation data for July is expected this week.
Germany, Spain, and France continue to see more than 1,000 cases affected by the pandemic.
Pound Sterling Remains Volatile against the US Dollar
After touching lows of 1.2251 on 29 June, the Sterling against the USD exchange currency rate has been on an uptrend. However, it saw resistance at 1.387 on 6 Aug and slid briefly to 1.3009. The currency pair closed at 1.3053 on Friday.
The GBP/USD foreign exchange rate slipped 0.8% towards market close on Friday. The pair ended at 1.3053 last week after some volatility. With massive unemployment figures, the US economy remains on shaky grounds. The economy requires a fiscal stimulus to see sustainable growth, feel analysts. However, the package has not yet received approval in Washington.
Bank of England, on Thursday, made a forecast that its economy may recover towards the end of 2021. However, Finance Minister Rishi Sunak says, “hardship lies ahead” for the economy.
EUR/GBP Pair On Consolidation at 0.91 Levels
The EUR/GBP exchange rate closed at 0.9031 on Friday, last week. The currency pair was unable to pierce past 1.9054 levels, the whole of last week, as it was facing stiff resistance here. The pound saw a brief rally after the monetary policy was announced by the Bank of England to continue interest rates at 0.1%. The pair continues to see support at 0.8935 and 0.8865 levels.
The EU and the UK have not agreed upon a deal on future relationships between the two sides. It will hurt the United Kingdom and impact the European Union too, though not to the same extent.
USD/CAD on Five-Month Decline
The USD currency exchange rate against the Canadian dollar closed on 7 Aug at 1.3384. The USD/CAD pair has been on a downtrend for the past five months. After reaching a high of 1.4669 in March 2020, the currency pair has been sliding negatively.
The 61.8% Fibonacci retracement is at 1.3057. The currency pair has to brush past 1.3459 levels to move upwards. It has to hold on to its 1.2061 support level, which is the 2017 low.
The Chinese economic data will be closely watched this week. China was the first to be affected by the pandemic and is leading other countries in its economic recovery too. In the data to be released this week, retail sales and industrial production data are expected to improve, after the contraction caused by the virus.
The US-China relationship has deteriorated with the ban on Chinese firms WeChat and TikTok. Further, President Trump has threatened to delist Chinese firms from the US stock exchange unless they comply with the accounting standards followed in the US. Trade talks this week will determine the USD currency rate which is currently weak.
Analysts expect a further fall in the dollar against the euro and the yen. The USD currency exchange rate against the Japanese yen is moving sideways. The pair started the week with a hammer pattern. The Japanese Yen is at 105.93 levels after moving lower last week. It may rise to last week’s high of 106.21.
Gold scaled record high this week but slid 2%.