The CFTC report released on Friday did not bring any surprises. Most commodity currencies strengthened their positions, the long position on the yen sharply declined, which may indicate a continuation of the current trend as a whole - a gradual increase in demand for risky assets and a way out of protective ones. This is the natural behavior of the markets after the launch of several central banks led by the Fed at once, providing liquidity programs, the excess money supply is looking for ways to place and raises the demand for profitable assets.
At the same time, the growth of a long position in gold should be noted, the demand for which has already led to the fact that August futures are trading near a historical maximum, as well as the growth of a short position in the dollar, which reached -14.791 billion. This is less than -17.35 billion in July, but the tendency to develop a weakening dollar is too obvious to ignore. The growth in risk assets is being held back, as the upward pullback after most countries exited coronavirus restrictions did not lead to a V-shaped recovery, as predicted.
The percentage of US adults with a job is at a minimum since World War II. The growth in the number of bankruptcy applications has continued over the past three months, consumer demand is recovering too slowly, and producer prices in June declined despite forecasts.
The NFIB Business Optimism Index and June Consumer Inflation Report will be released on Tuesday. To maintain optimism, it is required that both indicators come out no worse than expected, otherwise the trend that appeared on Monday morning will develop - the dollar will weaken against most G10 currencies.
EUR/USD
The long position in the euro rose again over the reporting week and reached 14.599 billion following the CFTC report published last Friday. This is the largest weekly gain among the G10 currencies, and it may indicate an increase in the probability of EUR/USD coming out of prolonged lateral upward movement. At the same time, the estimated fair price clearly slowed its growth.
The slowdown in the estimated price growth is associated with a decline in expectations regarding ECB's active actions, which obviously takes a break after the June meeting. A number of analytical banking reviews express a common opinion that the ECB may be planning to slow down the pace of bond purchases, which could lead to an increase in their yield, an increase in demand for the euro and, as a result, an increase in EUR/USD pair.
It may be so, but as the CFTC report was being generated, interest in the euro slowed and bond yields did not increase, but rather declined, that is, investors are not ready to bet on strengthening the euro and will wait for the result of the ECB meeting.
The meeting promises to be a passing one, since there is clearly no need to increase the PEPP program after June, and ECB President Lagarde warned in advance that no new incentives are expected.
According to the combination of factors, we must assume that the euro's upward driver is weakening, and growth may continue only under the influence of a weak dollar, for which there are still reasons. The short-term channel is ascending, the nearest resistances are 1.1369 and 1.1405 / 25, the second of them represents the channel border. The chances of breaking through 1.1405 / 25 seem low.
GBP/USD
The pound's short position declined by 341 million during the reporting week, the estimated fair price is almost horizontal, which indicates the absence of a long-term trend.
The pound is on the rise in the short-term, playing off the weakness of the dollar. There will come an understanding in the coming days of whether it is ready to continue recovery. An extensive range of macroeconomic indicators will be published on Tuesday - retail sales, trade balance, industry growth, NIESR will provide an estimate of GDP growth rates through June inclusive. On the other hand, there will be reports on inflation and the labor market on Wednesday and Thursday, so players will have much more information by the end of the week that can be used to make forecasts regarding the next actions of the Bank of England and the UK government.
For the short-term, the pound may continue to grow to a resistance 1.2664/88 and then make an attempt to test the level of 1.2813, but fundamentally, the reasons for strong growth have not yet formed. Therefore, any attempt to grow will be blocked. The most likely development of events in the coming days is trading in the range.