EURUSD prods three-week uptrend while keeping post-ECB losses

The risk complex remains mostly downbeat early Friday as geopolitical woes from the US, China, and the Middle East join fresh doubts about the US Federal Reserve’s (Fed) rate cuts in 2024. The same allows the US Dollar to extend the previous day’s rebound from a four-month low while challenging riskier assets like equities, commodities, and Antipodeans.

The US Dollar’s rebound also takes clues from the European Central Bank’s (ECB) dovish halt and weighs on the EURUSD prices. That said, GBPUSD also remains on the way to posting a weekly loss despite refreshing its yearly high earlier in the week amid mixed UK data and fears that the Bank of England (BoE) might not be able to defend the rates for long.

USDJPY recovers from a multi-day low while paring the weekly loss as policymakers cut growth forecasts but criticized the softer Yen. Furthermore, increasing odds of no September rate hike from the Bank of Japan (BoJ) also allow the Yen pair to consolidate weekly losses.

The Dollars of Australia, New Zealand and Canada, known as the Antipodeans, bear the burden of China's woes and a pullback in commodity prices, as well as a lack of hawkish bias about the respective central banks.

Crude Oil fails to cheer sustained draws in the weekly stockpiles amid fears of downbeat energy demand from China while Gold extends its pullback from the all-time high amid US Dollar’s rebound. The precious metal, however, remains on the way to posting the weekly gain while justifying its status as a traditional haven asset.

BTCUSD and ETHUSD lack upside momentum but brace for the second consecutive weekly gains amid crypto market optimism. Among the key catalysts, Donald Trump’s lead in the US Presidential Election polls and spot ETH ETF launch gain major attention of late.

Following are the latest moves of the key assets:

• WTI Crude oil remains downbeat for the second consecutive week, down 0.20% intraday near $82.10 at the latest.
• Gold pares weekly gains with a three-day losing streak, down 0.90% on a day to $2,423 at the latest.
• The USD Index extends the previous day’s rebound from a four-month low, picking up bids to 104.30 as we write.
• Wall Street closed in the red while the Asia-Pacific shares edged lower. Further, equities in Britain and Europe also remain on the back foot during the initial trading hour.
• BTCUSD and ETHUSD lack clear directions around $64,200 and $3,420 while trying to defend the second consecutive weekly gain.

ECB, sour sentiment trigger US Dollar rebound…

Escalating political uncertainty in the US joins the European Central Bank’s (ECB) lack of convincing policy hawks and growing acceptance of delayed Fed rate cut allowed the US Dollar Index (DXY) to rebound from a four-month low. In doing so, the Greenback’s gauge versus six major currencies also braces for the first weekly gain in three.

That said, the ECB matched market forecasts while portraying a status quo in its monetary policy action the previous day. The region’s central bank also pushed back chatters about the September rate cut while highlighting the data dependency. However, recently softer EU statistics joined an absence of strong commitment to defend the higher rates poured cold water on the face of the hawks and triggered the EURUSD pair’s reversal from a four-month high.

Apart from the ECB-linked moves, growing political drama in the US, China-linked fears and a three-month high Philadelphia Fed Manufacturing Index also allowed the US Dollar Index (DXY) to reverse the previous losses and grind higher of late. It’s worth noting that the International Monetary Fund’s (IMF) suggestions to the Fed about waiting for rate cuts until at least late 2024 add strength to the US Dollar’s corrective bounce.

Reports about US President Joe Biden’s likely retirement from the Presidential Elections and downbeat updates from China’s Third Plenum meeting challenged the risk appetite early Friday.

While the aforementioned catalysts allowed the US Dollar to rebound and challenge the EURUSD bulls, GBPUSD failed to cheer a three-year high in UK Consumer Confidence amid mixed employment figures. With this, the Pound Sterling extends the previous day’s retreat from a yearly high ahead of the UK Retail Sales.

On the same line, USDJPY also justifies the US Dollar’s rebound but stays on the way to posting the second consecutive weekly loss amid mixed inflation clues from Japan. Also luring the Yen pair sellers are comments from Japanese policymakers who criticize a weaker Yen, which in turn favor the market’s concerns about the Bank of Japan’s (BoJ) further rate hikes. Furthermore, Japan’s market intervention to defend the Yen also weighs on the currency pair despite the latest corrective bounce. Meanwhile, the Japanese government’s cutting of growth forecasts for the current fiscal year ending March 2025 also seemed to have favored the Yen pair’s latest rebound.

AUDUSD prints a five-day losing streak while NZDUSD extends the previous day’s losses toward refreshing a two-month low. Furthermore, USDCAD also braces for the first weekly gain in six amid downbeat Crude Oil prices and growing concerns about the Bank of Canada’s (BoC) rate cut during late 2024.

Crude Oil bears the burden of China's woes and the US Dollar’s latest rebound to stay on the back foot for the second consecutive week. It’s worth mentioning, however, that the Gold price drops for the third consecutive day but stays on the way to posting a four-week uptrend as the market’s uncertainty directs traders toward the traditional haven.

• Strong buy: USDCAD, USDJPY, US Dollar, Silver
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Sell: DAX, FTSE 100, EURUSD, Crude Oil

UK/Canada Retail Sales, Fed talks and geopolitical news in the spotlight…

Having witnessed a “Turnaround Thursday”, traders will seek more clues about the hawkish Fed bias and Biden’s exit from the US Presidential Election race to defend the US Dollar’s rebound. Also important to watch will be the geopolitical developments in the Middle East. Elsewhere, monthly Retail Sales from the UK and Canada are extra catalysts to watch for intraday.

Overall, the market is in consolidation mode and can help the US Dollar to extend the previous day’s rebound, which in turn could weigh on the prices of Commodities and Antipodeans.

May the trading luck be with you!