EUR / USD continues to trade around monthly highs, while GBP / USD has broken above the 39th figure and is heading towards 1.4000.
With regards to COVID-19, incidence has dropped very significantly. In fact, the US has recorded the lowest number of new infections yesterday. Accordingly, this makes it possible for the governments to start easing quarantine and social distancing measures. For example, in New York, subways will resume their round-the-clock work starting February 22. UK is also planning to lift its restrictions. But all this will depend on the vaccination status of countries, as well as the number of active coronavirus cases.
Going back to GBP / USD, a lot depends on whether the quote breaks above 1.3955. Such will set off a continued rise towards the base of the 40th figure, just above which there is resistance at 1.4040. But if the bears manage to push the pound below the 39th figure, pressure on the pair will increase, which will lead to the test of 1.3860 and 1.3820.
In any case, demand is reflected in the Commitment of Traders reports, where, according to the latest data, long non-commercial positions rose from 53,658 to 60,513. At the same time, short non-commercial positions fell from 44.042 to 39.395. All in all, non-commercial net position rose to 21.118, in which the weekly closing price was 1.3745. The fact that bulls held their positions at such a high volatility suggests that the pair is clearly set to overcome yearly highs and then to quickly return to the 40th figure.
Another factor that pushed GBP / USD up was the report on UK GDP. According to the Office for National Statistics, the index grew by 1.0% in the 4th quarter of 2020, while economists expected it to be 0.5%. But despite the fairly active rebound, the level is still 6.6% lower than in the previous year. Unsurprisingly, this slowdown in economic growth is largely driven by the services sector, which is still paralyzed due to the quarantine measures set to combat the COVID-19 pandemic.
On the bright side, the World Health Organization has approved the use of AstraZeneca's vaccine. Accordingly, this will accelerate the immunization of the world's population, since the vaccine can now go to developing countries. To add to that, all adults over 18 years of age are eligible for the drug, which is different from the approach taken by some countries in the European Union. With this, many are expecting that the world economy can now start returning to its pre-crisis levels.
Yesterday, a rather weak report on EU industrial production halted the rally in EUR / USD. Hence, today, euro bulls are working for a break above 1.2150, since only such will trigger a strong upward move towards 1.2190 and 1.2230. But if the quote drops to 1.2110, the euro will decline further to 1.2070.
To put it more precisely, according to the latest data, EU's industrial production declined for the first time since December 2020. It dropped by 1.6%, much higher than the expected 1%. This decline is mainly driven by the 3.1% drop in capital goods production and 0.6% decline in durable goods production. Only the production of intermediate goods increased, and it was by only 1%.
Data on EU's trade balance was also released. However, it was ignored by traders even though it jumped to a record high. The growth was a result of good export volumes, which increased to € 27.5 billion. All in all, exports rose by 1.1%, while imports fell by 0.3%.
The Reserve Bank of Australia is actively fighting the rally in the Australian dollar. It said it expects very significant monetary support to continue in the coming years, all due to the fact that the achievement of inflation and unemployment targets is progressing at a slower pace than expected. According to the February minutes, the bond purchase program helped keep interest rates low, which contributed to the lower exchange rate. Hence, the RBA will expand its QE program by another A $ 100 billion, and is postponing the increase of interest rates until 2024. RBA Governor Philip Lowe said he will follow the path of developed countries, that is keeping rates at the lowest levels to avoid speculation with exchange rates.
"Many central banks announced their decision to extend their bond purchase programs until the end of 2021. This is how we will act too," Lowe said.
In that regard, in the AUD / USD pair, a break above 0.7800 could lead to a continued rise towards 0.7870 and 0.7940. But if it does not, the Australian dollar will trade sideways, the lower limit of which is 0.7570.
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