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Forex daily charts: risk-on mood fuels AUD, NZD & CHF, but how long can it last?

15:25, 8 August 2022

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In this article:
  • AUD/USD
    AUD/USD
    0.64355 USD
    -0.00563 -0.870%
  • USD/CAD
    USD/CAD
    1.37170 USD
    0.00995 +0.730%
  • USD/JPY
    USD/JPY
    144.827 USD
    0.131 +0.090%

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Stimulus package financial package government for people, US dollar cash banknote on American flag
Stimulus package financial package government for people, US dollar cash banknote on American flag – Photo: Shutterstock

It's a risk-on start to the week on the forex market, with major G-10 currencies all gaining ground against the dollar, as the market begins to dismantle the likelihood of a hard-landing scenario for the world's largest economy after last Friday's solid data from the US labour market.

The US dollar (DXY) index fell to 106.2, while commodity and risk-sensitive currencies such as the Australian (AUD), Canadian (CAD), and New Zealand (NZD) dollars gained the most on the day. The Swiss franc (CHF) was also among the best performers today, as the country's unemployment rate remained at 2%, the lowest since November 2001.

Last Friday, the increase in US employment (+528,000 nonfarm payrolls in July) and wage growth far exceeded analysts' expectations. A tight and resilient US labour market reduces short-term recession risks but increases the likelihood of an aggressive Fed in fighting inflation and raising interest rates.

Risk sentiment was also boosted after the US Senate passed a $430 billion "Inflation Reduction Act" to combat climate change, spur investment in the solar and renewables sectors, and reduce drug costs for the elderly while raising taxes on the wealthiest households.

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Forex market today: Dollar takes a breather

A forex table that compares nine major currencies against each other, including USD, EUR, GBY, JPY, CHF, AUD, NZD, CAD and NOK

Currency strength matrix August 8, 2022 – Photo: Capital.com

A forex table showing the performance of US dollar and the euro against other currencies

Performance of global FX pairs as of August 8, 2022 – Photo: Capital.com

A chart showing the performance of major currencies vs US dollar, 1-week and 1-month %change

Performance as of August 8, 2022 – Photo: Capital.com

A forex table that compares nine major currencies against each other, including USD, EUR, GBY, JPY, CHF, AUD, NZD, CAD and NOK

Currency strength matrix August 8, 2022 – Photo: Capital.com

A forex table showing the performance of US dollar and the euro against other currencies

Performance of global FX pairs as of August 8, 2022 – Photo: Capital.com

A chart showing the performance of major currencies vs US dollar, 1-week and 1-month %change

Performance as of August 8, 2022 – Photo: Capital.com

1/3
  • The dollar index (DXY) fell to 106.8, down by 0.4% on the day on Monday's  European market close
  • EUR/USD hovered around 1.02 gaining 0.3% on the day, after plunging as much as 0.6% on Friday. 
  • The pound (GBP/USD) held at 1.21, up by 0.3%.
  • The Japanese yen recovered some ground with USD/JPY pulling back below 135 levels (-0.3%), on the back of lower US Treasury yields. The 10-year Treasury yield fell by 5 basis point to 2.77%. 
  • The Australian (AUD) and New Zealand dollar (NZD) rose the most on the day, both up by 1.2% against the US dollar.
  • The Canadian dollar (CAD) and the Swiss franc (CHF) gained 0.7% and 0.9%, respectively, against the greenback.

Euro-dollar (EUR/USD) – Chart analysis: Parity concerns are by no means over

technical analysis on EUR/USDEUR/USD chart analysis as of August 8, 2022 – Photo: Capital.com / Source: Tradingview

The euro (EUR/USD) experienced a positive session today, recovering from the severe blow it received on Friday following the strong U.S. labour market report. 

However, more than a strengthening of the euro itself, today's price action in EUR/USD reflects a general market risk that has dragged the dollar's broader decline.

GBP/USD

1.12 Price
-0.890% 1D Chg, %
Long position overnight fee -0.0010%
Short position overnight fee 0.0001%
Overnight fee time 21:00 (UTC)
Spread 0.00014

AUD/USD

0.64 Price
-0.870% 1D Chg, %
Long position overnight fee -0.0009%
Short position overnight fee -0.0002%
Overnight fee time 21:00 (UTC)
Spread 0.00006

EUR/USD

0.98 Price
-0.470% 1D Chg, %
Long position overnight fee -0.0022%
Short position overnight fee 0.0006%
Overnight fee time 21:00 (UTC)
Spread 0.00006

USD/JPY

144.83 Price
+0.090% 1D Chg, %
Long position overnight fee 0.0009%
Short position overnight fee -0.0027%
Overnight fee time 21:00 (UTC)
Spread 0.008

As a result, the concerns surrounding the single currency are still very much alive. According to the August Sentix Economic Index for the Eurozone, which was released today, the Eurozone's economic situation remains difficult, despite the overall index rising slightly to -25.2 points. The expectations index dropped to -33.8 points, which is close to the lowest levels seen during the 2008 financial crisis, and continues to paint a bleak picture of the Eurozone economy.

This week, all eyes will be on the US CPI data for July, with consensus expecting a 8.7% annual surge in inflation. A stronger-than-expected reading would give the Fed the green light to keep raising interest rates at a rapid pace.

This could result in a further widening of the rate gap between the United States and Europe, which will now also be accompanied by a gap in economic growth in the coming quarters, which has the potential to penalise the single currency even further.

The EUR/USD has been trading in a very tight range roughly between 1.01 and 1.03 over the past three weeks. Looking at the daily chart, the RSI is struggling to break through the 50-point barrier, while MACD flattens.

On the upside, the 1.028 regions (50% Fibonacci retracement level of June highs/July lows) remains a difficult resistance to overcome. The short-term support level is at 1.098 (July 27 lows). A break here would allow for a retest of parity. 

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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