When will the dollar stop its continuous weakness following a terrible July?

Summary:

  1. The US Dollar fell below the key 93.00 psychological level and closed lower at an intraday low, with a black marubozu on the basis of monthly closing.
  2. The euro broke to a new low for the year and its uptrend remained intact, boosted by economic data from euro area.
  3. We will get preliminary Q2 GDP annualized from euro region and U.S. core PCE for June.

The dollar index (DXY) closed at around the lowest point of the year, with a black marubozu on the basis of monthly closing, targeting monthly EMA60 at circa 91.78.

EU July CPI unchanged at 1.3% while the core CPI came in at 1.2% against previous reading of 1.1%. Macro data released yesterday also showed EU unemployment rate in June declined to 9.1% from 9.3%.

All those positive readings boosted the euro and help it to create a new high of the year, leading other non-U.S. currencies to follow suit.

Be aware of the markets impact of preliminary Q2 GDP annualized from euro region and U.S. core PCE for June.

US Dollar Technical

The buck has experienced nightmarish month for July as the DXY staged one-way decline on its daily chart, even accelerated to go down in the past two days, with a black marubozu on the basis of monthly closing, indicating the downtrend remains well-entrenched. The first big test will come from Non-farm payroll report from the United States in the beginning of the new month. With downside support to watch at 91.85 low from May 2016, wait and see if the buck’s downwards movement could take a breather or not.

DXY 20170801

(DXY daily chart)

As to non-U.S. currencies, the euro bounced back sharply to invalidate the potential bearish divergence on its 4 hour chart and then crossed above 1.18 handle, facing tests from EU GDP. The British currency rose sharply in the short term to form a new high of the year, targeting 1.3246 and 1.33. The Aussie dollar resumed its uptrend after the short-term consolidation. However, the commodity currency has not moved above last week’s highs yet, turning attention to markets impact by latest policy decision from the Reserve Bank of Australia.

gbp usd 20170801

(GBP/USD daily chart)

Let’s take a look at precious metals now. Silver extended gains further while gold was stuck between a rock and a hard place, consolidating at highs from rally through-out Monday above H1-period long term moving averages. Keep in mind that H1-period short term moving averages have the potential to turn higher and move away from each other. Downside support is at H1-peirod EMA60 and upside resistances stand at 1272.7 and 1277.7.

gold 20170801

(Gold H1 chart)

By Jason Zou —— Chief Analyst of Avatrade China

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Disclaimer: The views and opinions expressed in this article are those of the authors and for the purpose of reference only, and shall not be relied upon by investors in making any trading decisions.

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