Demand for the euro and the pound increased due to the resignation of Andreas Vosskuhle, president of the Federal Constitutional Court of Germany. Bulls took advantage of the news, as well as the removal of a number of quarantine restrictions in the UK.
Meanwhile, in the US, the White House released contradicting statements, as adviser Peter Navarro said yesterday that the trade deal with China is breaking, but Donald Trump denied this information. It affected the quotes of the US dollar, and lowered the value of the currency against other world currencies.
The resignation of Andreas Vosskuhle, president of the Federal Constitutional Court of Germany, has increased the demand for risky assets. This is because his dismissal gives light to the relations of Germany with the European Central Bank, since recently, it was the German court that opposed the expansion of the bank's bond purchase program, as well as the approval of general assistance programs within the eurozone for all countries. The changes in the German High Court will smooth out the confrontations with the ECB, especially on the issue in which the court required the ECB to provide justification on its bond purchase program, otherwise the German Central Bank will withdraw from it. The ECB, meanwhile,
In the US, the White House released contradicting statements yesterday, as adviser Peter Navarro disclosed that the United States is ready to abolish its deal with China due to issues related with the coronavirus. It led to a sharp appreciation of the US dollar, but US President Donald Trump then denied it, writing on his Twitter that the deal with China is completely safe. He also expressed hope that Beijing will continue to comply with the terms of the agreement.
The deal between the US and China was signed at the end of last year, in which the PRC committed to increase the volume of goods purchased from the United States by $ 200 billion. The terms of duties, which is 25% on goods from China with a total value of $ 250 billion remained in effect.
Immediately after Donald Trump's statements, adviser Peter Navarro said that his words about breaking the deal with China were "taken out of context."
In another note, the macroeconomic reports published yesterday revealed a strong recovery within the area of the Chicago Fed. According to data, economic activity began to recover in May, reaching a value of 2.61 points. An index value below -0.35 usually corresponds to periods of recession so the current value indicates positivity in the index. Economists expected the figure to be -4.5 points in May.
Meanwhile, the data on sales in the US secondary housing market was not very positive. According to the report, sales in May fell by 9.7% due to the continued caution of buyers against the ongoing coronavirus pandemic. Nevertheless, low interest rates will quickly return market activity in the summer. The National Association of Realtors also reported that sales in the US secondary housing market gained to 3.91 million homes a year in May, while economists had expected it to fall by 8.8%. Today, a report will be released on the volume of home sales in the US primary market.
As for the technical picture of the EUR/USD pair, a lot will depend on the resistance level of 1.1280, a breakout from which will lead to an upward movement of the euro to 1.1350, the highest level reached on June 16. An upward move to the resistance level of 1.1420 may also occur, but a decrease in demand for risky assets will pull the euro down in the chart. Thus, the bulls need to defend the support level 1.1220, if they don't want the quotes to return to the weekly low of 1.1170. Large sell-offs will lead to an exit at the lows of 1.1105 and 1.1030.
GBP/USD
The British pound also rose because of the statements of British Prime Minister Boris Johnson, which discussed the further lifting of quarantine restrictions in the country. According to Johnson, caterings may reopen in July, as with pubs and restaurants. Salons with hotels are also soon to open, and the requirements of maintaining a two-meter distance will also be relaxed. Such measures will lead to the restoration of economic activity, which will add some optimism to consumers and improve leading indicators in the future.
Reports also appeared yesterday which claimed that at the current pace of purchases, the Bank of England is set to exhaust the remaining £ 5 billion for the purchase of corporate bonds by mid-August this year. Such conclusions prompt market participants to the fact that in August, the regulator will most likely announce a new expansion of the program, adding more to the recent increase of £ 100 billion pounds. At the moment, the fund for the program amounts to £ 745 billion.
As for the technical picture of the GBP/USD pair, the bulls need to protect the level of 1.2430, in order to continue the upward correction in the chart. If there are no new purchases when approaching this range, it is best to postpone long positions until the quotes update the support level of 1.2380, where the bottom line of the current upward correction is passing now. A breakthrough of this range will surely return large sellers to the market, betting on a further fall of the pair in the short term. In any case, only a breakout from the resistance level of 1.2500 will add optimism to buyers, which may lead to a test of new highs around 1.2580 and 1.2680.
