The US Dollar has been the only major currency safe enough to attract large investors in more than a year since the rest of the major economies of the globe have been weakening considerably since the beginning of last year. Majors sectors of different developed economies have fallen in stagnation or in contraction and the analysts are predicting that Germany will fall into recession now, after the recession we saw in Italy in Q2 of last year. Recession occurs when an economy contracts for two consecutive quarters.

So, the USD has been the only game in town, apart from safe haven currencies which attract investors in troubled times, although the economy of Japan and Switzerland are not doing great either. But in the last month or so, we have seen a bearish move in the USD after the US economic data turned soft as well. At a point, it seems like the USD was going to turn bearish in the long term as the FED was preparing to cut interest rates this month, but in the last two weeks, the situation has improved, since the G20 summit. As a result, the USD has turned higher again and in the last two days, we have seen some decent bullish moves in the USD. The buck has made considerable gains this week and GBP/USD has broken below 1.25, but FED Chairman Jerome Powell is holding a speech in a while, which might turn things around. If he hints at a rate cut this month, then it is likely that the USD will turn bearish for a week or two, but he might even postpone it further, which would turn the USD even more bullish.

The European Session

Italian Retail Sales – Retail sales have been negative in Italy towards the end of last year as the economy fell in recession. But they turned positive in the first two months of this year. In March, retail sales turned negative again and fell by 0.3% while in April they fell flat at 0.0%, as the report released last month showed. In May, retail sales were expected to have increased by 0.2%, but they missed expectations falling by 0.3% instead, so the tough times continue for the Italian economy.

• Ireland’s Donohoe is Hoping on EU for Support on Brexit – The Irish Finance Minister Paschal Donohoe said in a comment this morning that the prospect of a disorderly Brexit is now a significant risk. He added that he is very confident that new EU leaders will show support to Ireland in Brexit talks.

• Mixed Comments From China – China’s foreign ministry said early this morning that the US and China trade teams are communicating. That’s positive news, but Chinese officials also said a while later that the US arms sales to Taiwan violates international laws. China calls on the US to withdraw the sales. It seems that China wants to have total control on East/Southeast Asia which will likely open another issue between the two countries.

• Lagarde Will take Draghi’s Spot – The IMF President Christine Lagarde is set to replace Mario Draghi next October as the head of the European Central Bank. Finance ministers of the EU have signed the papers to appoint her. Her nomination will go to the ECB governing council and European Parliament for consultation but neither will be able to block her, which means that she takes the job.

The US Session

• QE is Back in the Game for the ECB – ECB’s Coeure commented a while ago saying that could theoretically resume QE again if circumstances warrant such a move. Lagarde is an excellent choice for ECB presidency, he added, and her IMF role makes her eminently qualified to be ECB president.

• Trump Feels Optimistic – US President Donald Trump is up and early again, tweeting about the economy. Here is the tweet: “Very good numbers on the economy. Much potential for growth. Trade deals being negotiated or being set up for negotiation. We have been treated very unfairly (to put it mildly) by other countries for many years, but that is changing!”
• FEDs Powell Speaks – The FED Chairman Jerome Powell will hold a speech shortly. He will deliver a speech at the Federal Reserve Bank of Boston. Audience questions are expected, so it will be interesting to see if he will confirm the rate cut this month or push it further down the line, as the US economy is improving a bit, considering the data in the last few weeks.

Trades in Sight

Bullish GBP/USD

• The trend has turned bearish in the last few weeks
• The 20 SMA is pushing the price lower
• Fundamentals are bearish
• The support at 1.25 has gone

The 20 SMA looks like a good place to sell this pair

GBP/USD has been pretty bearish throughout this year, but it turned bullish in the last two months as the USD turned bearish on increasing weak economic data from the US. But now it seems that the buyers gave up ahead of the G20 summit and this pair turned bearish again in the last week of June. The decline has accelerated in the last two weeks and today the sellers pushed below the big round support level at 1.25. the 20 SMA provided resistance last week and it pushed the price lower, so if you are looking to sell this pair, the 20 is a good place to do so on the H4 chart, but we should wait until it catches up again with the price.

In Conclusion

Powell’s speech will resume shortly. The USD is in the middle of a strong bullish move as buyers accumulate, although Powell might turn things around if he hints the markets for a rate cut this month. Otherwise, the USD might pick even more pace, but let’s see first.