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Will the US Dollar be the Comeback Kid of August? - US Market Open

Will the US Dollar be the Comeback Kid of August? - US Market Open

2020-08-03 13:00:00
Justin McQueen, Analyst
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USD, EUR, GBP Analysis & News

  • US Dollar on a Firm Footing After Worst Monthly Drop in a Decade
  • Australian Dollar Struggling Ahead of RBA Decision
  • Equities Bounce Despite US Fiscal Concerns

Currencies: After the largest monthly drop in a decade, the US Dollar is starting the month on the front foot in what is a seasonally favourable month. The greenback’s major counterparts has posted key rejections from big resistance areas, most notably, this has been seen in the Euro and Sterling. As we highlighted in the latest CFTC speculative positioning data, US Dollar shorts is a crowded trade and thus risks are for a bout of short covering. Elsewhere, the Australian Dollar is among the notable underperformers ahead of the RBA rate decision as second wave COVID concerns prompt Australia to tighten lockdown measures.

GBP/USD Fell Short of 1.32

Will the US Dollar be the Comeback Kid of August? - US Market Open

Source: Refinitiv

EUR/USD Rejects Trendline Stemming From GFC

Will the US Dollar be the Comeback Kid of August? - US Market Open

Source: Refinitiv

Equities: Despite US lawmakers failing to agree on a COVID support package, equity markets are showing a modest bounce with European shares firmly in the green and being led by the tech sector. Similarly, the positive risk tone has spilled into the US with both the S&P and Dow Jones futures rising 0.5-0.7%. That said, investors will remain cautious throughout August, which is typically a more volatile month.

Commodities: Precious metals are slightly weaker as a stronger greenback halts the advance in both gold and silver prices. That said, the psychological 2000 level remains in sight for gold. However, with real yields continuing to trend lower, upside is likely to persist for the precious metals complex.

Looking ahead: While market focus will be on the US fiscal side and USD dynamics. On the data front, ISM Manufacturing PMI is likely to garner attention. Expectations are for a slight uptick from the prior month.

Will the US Dollar be the Comeback Kid of August? - US Market Open

Source: Refinitiv, DailyFX

WHAT’S DRIVING MARKETS TODAY

  1. British Pound (GBP) Latest: GBP/USD Pulls Back From Multi-Month High by Nick Cawley, Strategist
  2. US Dollar Shorts Becoming Extreme, EUR/USD at Risk of Reversal - COT Report” by Justin McQueen, Analyst
  3. USD/CAD Technical Analysis: Dollar Trying to Turn the Corner vs CAD by Paul Robinson, Strategist

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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