Risk Sentiments Continue to Drive The USD Performance

In last week’s edition of “Saturday Sit Down”, we touched on how traditional markets like forex moved at “a slower change of pace”. Things, however, seem to be quickly picking up, as they often can in financial markets. While the last few weeks have been relatively quiet on the news front, but as we look ahead, it seems we have a stacked economic calendar moving forward.

We’ll start off by covering the US side of the market, considering every pair that will be mentioned is traded against USD. On Wednesday, US industrial production figures were released, which measure the output of factories and other utilities. This figure rose 5.4% in June, beating expectations of around 3.5%—4%. These numbers are undoubtedly a positive sign, but the more anticipated data will be the weekly jobless claims provided by the US on Thursday, July 16th. In the past, these figures have provided riskier assets with direction, so there’s reason to believe they will do so again on Thursday.

Determining the current risk sentiment is incredibly vital for evaluating the forex space. As we’ve seen since the pandemic took hold in early March, USD performance appears to be driven by risk sentiment. While the world’s investors were fleeing risky-heavy assets like equities, the DXY (US dollar currency index) plummeted, falling nearly 7% in four months. Many pairs have seen gains against the dollar for this reason, but it’s important to remember how closely intertwined investors’ risk preference is with forex performance, primarily related to the dollar.

With some background given on USD’s current state, we move on to cover GBP/USD. On Wednesday, July 15th, the UK’s top financial officer, Rishi Sunak, appeared before the Treasury Committee to speak on the tough road ahead for the country’s finances. The UK’s GDP had declined by 21.2% between May and June. Manufacturing production was equally as dull, with the figure at -22.8. Sunak said that the data “underline the scale of the challenge,” which is why he set forth on his job creation plan last week. One positive sign was Britain’s retail sector, which showed a 2% increase in retail sales. All things considered, however, this one glimmer of hope in the retail sector was not enough to elate investor’s worries, evidenced by the failed breakthrough of GBP/USD at the 1.26 level. At this point, GBP/USD appears technically bearish, although it’s difficult to say which way this will head, given the uncertainty of its trading pair, the USD.

Moving on from the British Pound, we take a look at the EUR/USD pair next. On Wednesday, July 15th, EUR/USD pushed up and past the 1.14 resistance level. It currently sits at 1.14158 at the time of writing, which is a level not seen by EUR/USD in nearly four months. This rise comes in the midst of a busy week for the Eurozone, as member countries are expected to provide inflation, trade, and manufacturing data for the past month. Despite this data’s significance, most traders and investors have their eyes set for Thursday, July 15th, where the European Central Bank will finalize their monetary policy decisions. No “new” news is expected out of this July meeting, which is obviously subject to change. Regardless of any changes, this meeting should undoubtedly provide direction for the EUR/USD pair through July.

Switching over to the USDJPY pair, we see a relatively quiet week ahead compared to the Euro and the Pound. The only economic data expected out of Japan will be the finalized industrial production for May, which many analysts believe will do little to impact the Yen. For a safe haven asset like USDJPY, it’s essential to keep a close eye on external factors like Covid-19, the USD performance, and global risk sentiment.

Lastly, in the news this week, at Twitter.com, one of the world’s largest social media platforms, many prominent accounts, ranging from US presidential candidates to Tech CEOs, got exploited, Bill Gates, Apple Inc, and many more. This exploit caused over 7.5M in Bitcoin losses and counting, as these spam accounts impersonated famous figures in a massive crypto scam.

This egregious security error and PR nightmare have led to Twitter’s stock sliding over 4% in after-hours trading. In direct contrast to traditional equities markets, after-hours trading is something that just doesn’t exist in Cryptocurrency markets, the world’s first truly global market, where it’s always on 24/7. So while you may have some daily trading breaks in traditional markets, you can’t help to stay tuned into accessible digital assets such as BTC/USD and ETH/USD, and both pairs are proudly available around the clock at Overbit.com.

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