FX.co ★ It's too early to bury the dollar; Overview of USD, EUR, and GBP

The CFTC report turned out to be quite informative and indicates a possible change in the mood. The dollar is still under strong pressure, but if it weakened across the entire spectrum of the market in previous weeks, then now we need to proceed from the fact that the demand for defensive assets is increasing, while it is decreasing for risky assets.

Speculators are building up long positions in the euro, franc and yen, which is a sign of growing concern, while only the CAD has seen a reduction in the short position of commodity currencies, and AUD and NZD have started to sell off. In addition, the pressure on oil has increased, which may fall below $ 40 per barrel, while the growth in demand for gold has stopped, even despite the record level of last week.

In terms of reporting, the dollar looks to have taken a starting position before an extremely busy week. As the election approaches, consumer confidence is at a very low level, which is equivalent to defeat for the Trump administration.

As a consequence, we should expect actions that can raise positivity. The US economy is recovering too weakly, the probability of new monetary stimulus from the FRS is growing, and the overall rise in anti-risk sentiment will boost demand for the dollar.

EUR/USD

Euro continues to dominate confidently against the dollar. Despite the fact that the macroeconomic data published at the end of last week showed a strong slowdown in the eurozone economy in the 2nd quarter, the depth of the fall is still noticeably less than in the United States. GDP was reduced by 12.1%, at the same time, inflation increased by 0.4% against the forecast of 0.2% in July, and according to the European Commission, the business climate indices are recovering much faster than forecasts.

The net long position in the euro increased by 5.057 billion and reached the level of 23.075 billion - the absolute maximum among the G10 currencies. At the same time, the estimated fair price is clearly slowing its growth, which indicates that the bullish momentum is nearing exhaustion.

Nevertheless, the demand for the euro will remain strong, as the EU is consistently moving towards a common bond market, which is a strong long-term factor. At the same time, there are growing signs that the dollar will begin to recover some of the losses ahead of the November elections in accordance with the Treasury plan, which has accumulated 1.8 trillion in the Fed's account. This "safety cushion" is likely to play a role and fill the system with cheap liquidity, which will lead to increased demand for US assets.

The calendar for the euro this week is uninformative, which cannot be said about the dollar. The news background will shift towards data from the US, which may serve as a convenient reason for taking profit. The reversal in EUR/USD has not yet taken place, but the probability has grown significantly. The zone of 1.1750/1900 is too viscous for the euro to jump over it on one impuls, the long-term channel boundary passed here, and the correction is technically ready. The nearest support zone is 1.1710/25 and the next one is 1.1610/20. Thus, you need to be ready for profit taking and a pullback down.

GBP/USD

Although the macroeconomic indicators came out better than forecasted last week, the pound continues to experience pressure that may lead to a downward reversal in the very near future.

CBI reported retail sales in July are up by 4%, which is significantly better than expected. The volume of consumer lending has grown. There is a strong increase in approved applications for mortgages, contrary to forecasts, the prices for housing are growing - all these are signs of a recovering consumer demand.

At the same time, the net short position in the pound increased immediately by 854 million, the target price went below the long-term average after an attempt to resume growth, which increases the chances of a top formation and a downward reversal.

The Bank of England meeting will take place on August 6. A strong increase in volatility is possible if the BoE is too cautious and remains likely to cut rates. Considering the fact that based on CFTC reports, large speculators are fixing profits, the chances of continued growth to 1.35 are minimal. It is likely to move to the side range, We have support at 1.2950/70 followed by 1.2810/30.