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Trading ideas for EUR/USD, GBP/USD and Brent

July 29, 2022

EUR/USD: The European currency is weakening against its main competitors – the yen, the US dollar, and the pound. Yesterday Germany released preliminary July inflation data: the rate rose from 0.1% to 0.9% on a monthly basis and fell from 7.6% to 7.5% on an annual basis. Nevertheless, price pressures in the German economy remain very significant. In its turn, the index of consumer and business confidence in the eurozone countries, also published yesterday, missed expectations: in July the value adjusted from 103.5 points to 99.0 points, which is much lower than preliminary market estimates of 102.0 points. The level of optimism declined in all economic sectors amid growing inflation and the consequences of the Ukrainian crisis. Consumer sentiment is also weakening, having reached its lowest level since 2000. Amid this backdrop, experts at JPMorgan Chase & Co. warned of the possibility of a contraction of the European economy.

SELL 1.0185/TP 1.0118/SL 1.0200

 

GBP/USD: The pound is attempting to strengthen against the U.S. dollar. In the absence of significant economic releases, the movement of the British currency is influenced by external factors. The only thing worth noting is the weekly data from the Office for National Statistics, according to which last week consumer spending on clothing, furniture and cars fell to its lowest level since February this year amid rapid price increases. Investors were also alarmed by the economic promises of British Prime Ministerial candidates Liz Truss and Rishi Sunak. The previous day Sunak promised partial tax cuts and lower energy bills, while Truss had previously stated the need to reduce the fiscal burden. Thus, both candidates are now pursuing measures that could serve as a catalyst for rising inflation in the country.

SELL 1.2160/TP 1.2118/SL 1.2180

 

Brent: Oil demonstrates mixed dynamics today. Several main factors contributed to the initial rise in prices: reduction of gas supplies from Russia to the eurozone countries, reduction of oil products stocks in the USA, and the decision of the US financial authorities on the interest rate. A report released by the Energy Information Administration (EIA) showed a drop in US crude and products inventories, with the volume of black gold down by 4.523 million barrels. Finally, the rhetoric of the US Federal Reserve officials on a possible reduction in the future rate hike size returned investors’ interest in risky assets and put pressure on the US currency position against alternative assets and digital commodities. Weak U.S. gross domestic product data, signaling a technical recession, alerted the market and caused a decline in prices, as investors feared a drop in demand for energy as the situation in the first world economy deteriorated.

BUY 104.20/TP 107.10/SL 103.10