FX Update – July 29 – USD got a break but not for long

<h3>USDJPY, H1</h3>
<p>The <strong>Dollar</strong> relief rally yesterday and dip today is consolidating the sharp declines seen over the prior 10 days. The narrow trade-weighted <strong>USDIndex</strong> has posted new 25-month lows at <span><strong>93.31</strong></span> today, breaking below Monday&#8217;s 93.40 low. <strong>EURUSD</strong> is showing gains too, though below the 22-month high seen on Monday at <strong><span>1.1780</span></strong>. <strong>Cable</strong> has moved higher to test R1 at <span><strong>1.2975</strong></span>, and above the five-month high seen Tuesday at 1.2951. <strong>AUDUSD</strong> whittled out a fresh 15-month peak at <span><strong>0.7192</strong></span>, 8 pips shy of the key 0.7200 which was last seen on April 14. <strong>USDCAD</strong> trades at the <span><strong>1.3360</strong></span> mark, above Tuesday&#8217;s seven-week low at 1.3329. <strong>USDJPY</strong> remains heavy, and broke below yesterday&#8217;s near five-month low at 104.93, to register a new low at <span><strong>104.80</strong></span> before finding support. The Japanese currency is registering as the biggest gainer on the week so far, gaining most against the US Dollar and New Zealand Dollar, with just over a 2% advance versus both underperformers. The sputtering price action in global equity markets has driven safe haven demand into the Yen, with the Dollar evidently perceived to be no longer providing protection.</p>
<p><a href="https://analysis.hotforex.com/wp-content/uploads/2020/07/2020-07-29_14-21-01.png"><img class=" wp-image-155233 aligncenter" src="https://analysis.hotforex.com/wp-content/uploads/2020/07/2020-07-29_14-21-01-300×132.png" alt="" width="582" height="256" srcset="/wp-content/uploads/2020/07/2020-07-29_14-21-01-300×132.png 300w, /wp-content/uploads/2020/07/2020-07-29_14-21-01-1024×449.png 1024w, /wp-content/uploads/2020/07/2020-07-29_14-21-01-768×337.png 768w, /wp-content/uploads/2020/07/2020-07-29_14-21-01-1536×674.png 1536w, /wp-content/uploads/2020/07/2020-07-29_14-21-01-696×305.png 696w, /wp-content/uploads/2020/07/2020-07-29_14-21-01-1068×469.png 1068w, /wp-content/uploads/2020/07/2020-07-29_14-21-01-957×420.png 957w, /wp-content/uploads/2020/07/2020-07-29_14-21-01.png 1896w" sizes="(max-width: 582px) 100vw, 582px" /></a></p>
<p>Profit taking and position trimming has been a theme across markets over the last day into the Fed&#8217;s policy announcement and the final week of political wrangling over the next US fiscal package (there is a degree of uncertainty about the outcomes of both, or at least in terms of signalling with regard to the Fed). Corporate earnings and concerns about the impact of new localized lockdown measures due to spikes in coronavirus infections have also been in the mix.</p>
<p><a href="https://analysis.hotforex.com/wp-content/uploads/2020/07/2020-07-29_14-22-50.png"><img class=" wp-image-155243 aligncenter" src="https://analysis.hotforex.com/wp-content/uploads/2020/07/2020-07-29_14-22-50-300×132.png" alt="" width="587" height="258" srcset="/wp-content/uploads/2020/07/2020-07-29_14-22-50-300×132.png 300w, /wp-content/uploads/2020/07/2020-07-29_14-22-50-1024×450.png 1024w, /wp-content/uploads/2020/07/2020-07-29_14-22-50-768×337.png 768w, /wp-content/uploads/2020/07/2020-07-29_14-22-50-1536×675.png 1536w, /wp-content/uploads/2020/07/2020-07-29_14-22-50-696×306.png 696w, /wp-content/uploads/2020/07/2020-07-29_14-22-50-1068×469.png 1068w, /wp-content/uploads/2020/07/2020-07-29_14-22-50-956×420.png 956w, /wp-content/uploads/2020/07/2020-07-29_14-22-50.png 1891w" sizes="(max-width: 587px) 100vw, 587px" /></a></p>
<p>Regarding the <strong>Fed</strong>, no policy changes are expected and a dovish stance is expected, though Forex markets will be laser focused on whether there is a signal that it will tolerate higher inflation, as this could weigh on real yields, and thereby the Dollar, further. Additional comments surrounding the purchase of longer-dated debt and the sticky and tricky issue of yield caps will be in the spotlight. The <strong>statement</strong> is due at <strong>18:00 GMT</strong> with Chair Powell&#8217;s Press Conference 30 minutes later.</p>
<p><strong>Click </strong><a href="https://www.hotforex.com/en/trading-tools/economic-calendar.html"><strong>here</strong></a><strong> to access the HotForex Economic Calendar</strong></p>
<p><strong>Stuart Cowell</strong></p>
<p><strong>Head Market Analyst</strong></p>
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