Bounce in stock indices fades; GBPUSD hits 10-week high above $1.30


  • Indices back under pressure after beginning brightly

  • Deutsche Boerse expects earnings boost from market volatility

  • GBPUSD hits 10-week high above $1.30

  • USDCAD gains after Canadian retail sales fall

  • Will the ECB eventually move the EURUSD?


There was a pretty decent recovery in stocks after some heavy selling yesterday with the US500 rallying back near the 2650 level after bouncing from a low of 2617. However, the markets have come back under pressure heading into the European close and the rally seen in recent weeks is now facing its first real test.


Deutsche Boerse (DB1.DE) is one of the DAX members proving to be more resilient to the downward pressure than its peers. The company announced new 2018 earnings guidance today. Thanks to increased volatility in the second half of 2018 Deutsche Boerse now expects a 17% increase in profits in comparison to 2017. Previous guidance pointed to a 10% increase. Moreover, company also expect this factor to support its performance throughout 2019.


There’s been further steady gains seen in the pound today, with the market moving up to its highest level of the week and breaking above the psychological $1.30 level. Reports that the Labour party are set to back an amendment designed to eliminate the prospect of a no-deal Brexit has provided more good news for sterling bulls, and ever since Theresa May’s deal was rejected the pound has been edging higher and latching onto good new while dismissing bad. The pound is now back trading at its highest level since November against both the US dollar and Euro, and while there’s lots that can go wrong and derail this rally, for now the path of least resistance appears to be higher.


The main piece of economic data this afternoon from North America has delivered a downbeat assessment of consumer spending in Canada and caused some selling in the Canadian dollar. Retail sales figures for November showed a larger than expected decline in month-on-month terms, coming in at -0.9% vs a median forecast of -0.6%. The prior reading was revised higher to +0.3% from +0.2% previously, but it still doesn’t fully offset the decline in the latest data. One area of particular interest is the level of total Cannabis sales, which came in at C$54M in November and reflects an additional component on consumer spending that was hitherto unrecorded in the data. USDCAD has moved higher after the data but the market still remains below potential resistance around the 38.2-41.4% fib retracement of the larger decline from 1.3365-1.3380. This region could be seen as a key swing level and unless price breaks above there then more downside can be expected.


The EURUSD has been stuck in a tight range for the past 3 months as economic conditions deteriorated in both US and EU. Such long period of calm often resulted in big directional swings in the past. Could the ECB be the trigger? Read our preview here.


Chart of the day - US100 (27.07.2021)
Economic calendar: CB Consumer Confidence, Big Tech earnings
Morning wrap (27.07.2021)
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