The last week was unsuccessful for the greenback. The US Dollar Index went down below 95 points. There were enough reasons for that, from a political scandal involving Donald Trump's son to statistics on inflation. The data released were weak. The Consumer Price Index (y/y) decreased to 1.6% in June, and core retail sales declined by 0.2% in June. These statistics made investors wonder whether further tightening of monetary policy is, in fact, needed. It is also worth noting that during Janet Yellen's last testimony before Congress, the regulator's confidence seemed to have shaken. At least there is no more talk about reducing the balance.
Nevertheless, the current week may be also disappointing for the greenback. On Friday, data on US GDP will be released. Considering the dynamics of indicators, including the dynamics of retail sales, it is likely that the forecast will fail and the statistics will be worse-than-expected.
The SP500 index, on the contrary, succeeded to quit the sideways trend. Quotes reached new record highs at 2460. Moreover, a new target at 2500 is now significant for bulls.
The euro/dollar consolidated successfully above 1.1400 last week, and that's about it. The next key level at 1.15 is near, however traders prefer not to hurry and wait for this week's ECB meeting, particularly a press conference by Mario Draghi. Note that European politicians, unlike their overseas peers, have been lately hinting at potential turnabout. That served as a good catalyst for a rise of the euro, however its novelty has worn off. The idea of gradual cutting of the stimulus program in Europe has been factored in, and now the market needs new evidence and momentum.
On Friday, AUD/USD broke above 0.780 for the first time over the past two years. That was a remarkable event from a technical point of view, which potentially suggests a possibility for a rise to the next global target at 0.800. Moreover, the Australian dollar was affected by a local driver today, which stopped the beginning of a correction. China's GDP rose to 6.9% in the second quarter. Along with this, industrial production rose to 7.6% (y/y).
Nevertheless, AUD/USD rose by over 200 pips last week, and it could use a correction now. The pair may easily decline to 0.77 within a bullish scenario.
The ruble strengthened considerably over the past week. It rose by 1.7% against the US dollar, and by 1.1$ against the euro. The reason for such positive dynamics was mainly external drivers. An increase in oil prices occurred, plus weak data on US inflation were published, which forced investors to reconsider their expectations in regard to any change in the federal funds rate, this event triggered an increase in risky assets.
A rise of the ruble may continue this week, however external drivers are needed for support. Under a technical scenario, Brent oil has potential to test a local high at $49.90 per barrel, and in light of this the currency pair USD/RUB, keeping in mind a technical perspective, may continue its decline to a range of 58.30-58 within an ascending channel. The target in EUR/USD is at the 66.50 area.
A vast amount of macroeconomic data will be released this week: including data on inflation in Japan and the eurozone, statistics on US GDP. In case these important indicators are worse-than-expected, it may spur risky assets, including the ruble.
Ivan Kapustyanskiy, equity analyst at Forex Optimum