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EURGBP Hovers Below Key Resistance, USDCNH Extends Above 7.00

FOREX
  • More aggressive rhetoric from Russia kept equities/risk under pressure on Thursday. Although the greenback was mixed against other G10 currencies, the likes of AUD, NZD and GBP all traded poorly, falling roughly half a percent.
  • Additionally, some initial weakness for stocks saw USDCNH rise above the 7.00 level for the first time in more than two years. Continued concerns surrounding a fragile economy and the underpinned greenback continues to support the upward trend for USDCNH. The next resistance is at 7.0302, the July 24, 2020 high.
  • We noted that yesterday’s EURGBP weakness was considered technically corrective, and today’s firm bounce sees the pair swiftly narrowing the gap with key resistance at 0.8721, the Jun 15 high. The level represents an important bull trigger which has seen multiple tests dating back to April 2021.
    • Clearance of this hurdle would confirm a resumption of the bull cycle that started early March and open 0.8811, a Fibonacci projection.
  • Outperforming on Thursday were both the Euro and the Swiss Franc. Continual large option expiries around parity in EURUSD appear to be limiting the momentum in either direction, while the Swiss franc continues on a notable upward trend.
  • Despite bouncing back to ~0.96, EURCHF made fresh cycle lows below of 0.9532 and may continue to garner attention ahead of next Thursday’s SNB meeting where roughly 100bps of hikes are priced in.
  • Tomorrow delivers the August round of Chinese activity data. On tap is new home prices, IP, retail sales, fixed asset investment (FAI), property investment and the unemployment rate. UK retail sales highlights the European docket before Uni Michigan consumer sentiment and inflation expectations data in US trading hours.
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