Remember… Last Summer The information presented in this publication is communicated to you for informational purposes only and does not constitute investment advice, an offer to sell, or a solicitation to buy, and should not be considered as a basis or incentive to engage in any investment whatsoever. The macro point Remember…last summerThe Macro PointWhen it comes to the pandemic, the summers of 2020 and 2021 are strangely similar: the number of new Covid cases is rising among young people, Florida (United States) and Catalonia (Spain) are once again concerning specialists, outbreaks are appearing in nightclubs, and Australia is once again in lockdown. In detail, in France, it is the 20-29 age group that is driving the epidemic up – which could lead to the announcement of new pandemic control measures as early as this week, particularly at the borders. The delta variant, which concerns authorities, is on the verge of becoming dominant in the country. It now represents 40% of new cases compared to about 20% a week ago, and 10% fifteen days ago. It is highly likely that it will exceed the 50% threshold of new cases in the coming days. It should also be noted that the pandemic is experiencing a very strong resurgence in Catalonia, particularly in Barcelona, as was the case in July 2020 due to the massive arrival of tourists. Finally, the lockdown season has resumed for major Australian cities (here, it is summer but there, it is winter). A lockdown of at least three weeks has been established in Sydney where a "zero covid" policy is applied (that is, a lockdown is implemented as soon as new cases are identified). For comparison, in 2020, the lockdown lasted nearly four months in Melbourne (the country’s second-largest city). The only notable difference from last summer is that we have found a vaccine and, in developed countries, vaccination saw an impressive surge in the spring – even though now we are seeing a deceleration in the vaccination rate. Although the return of restrictions on a case-by-case basis in the fall cannot be ruled out, it is nevertheless likely that the strict lockdowns of the third and fourth quarters of 2020 belong to the past thanks to vaccination and the miracles of science.In other words, even if the pandemic and variants remain a certain risk for the health of the most vulnerable, it is unlikely that they will significantly derail the economic recovery that has been noticeable in developed countries for several months now. The latest statistics released last week (PMI indicators in several European countries, industrial orders in Germany, or the ZEW index) all corroborated the fact that the recovery is solid, notably supported by strong demand and a level of unemployment contained compared to previous crises. It doesn't take an economist to realize this. You just need to walk down the street to notice that people want to enjoy life and consume. In short, resume a semblance of normal life.On the other hand, disruptions at the supply level persist. This explains the sharp rise in the cost of maritime transport. According to figures revealed by the Wall Street Journal last week, the average cost to transport a standard 40-foot container has quadrupled over a year, reaching the astronomical sum of 8,399 dollars in early July. If we project ourselves over an even shorter time frame, the rise is just as spectacular: the average price has surged by 53.5% since the first week of May 2021. In the short and medium term, supply disruptions will continue to fuel price tensions, particularly in the United States, which is likely to intensify discussions about the tapering of the American Federal Reserve. Technical point In the foreign exchange market, trading volumes at the beginning of last week were very low due to the American national holiday and the onset of vacation season which invariably results in a reduction in the number of traders operating in the market. This did not prevent the EUR/USD from experiencing some turbulence. The pair hit a three-month low of 1.1785 last Thursday in Asian trading. From a technical analysis perspective, the trend remains negative for the euro. The next support to watch is at 1.1735. A break of this level would open the door to 1.16 in the medium term. The EUR/CHF pair, which has been known for its stability for several quarters, also experienced some turbulence. The pair collapsed during last Thursday’s session to a four-month low of 1.0820. Now that the European Central Bank (ECB) has changed its inflation target (raising it to 2% from below but close to 2% previously), the Swiss National Bank has the lowest inflation target among major central banks (inflation below 2%). This is likely to increase upward pressure on the Swiss franc in the medium term. In any case, this is the only rational explanation to justify the movements observed on the EUR/CHF these last few sessions. Even during periods of renewed volatility and somewhat erratic movements, some things do not change. As in recent weeks, volatility is low on the EUR/GBP pair which remains within its three-month fluctuation range between 0.85 and 0.87. The supports and resistances displayed below indicate the respective lows and highs within which prices should evolve during the week.SUPPORTSHEBDORESISTANCES HEBDO S2S1R1R2EUR/USD1.16641.17351.19381.2010EUR/GBP 0.84290.84790.86390.8692EUR/CHF 1.07381.08001.09681.1010EUR/CAD 1.45091.45671.49911.5020EUR/JPY 128.50129.00132.35132.97For personalized advice on trends and currency hedging, contact our trading room: Announcements to follow This week will essentially be devoted to inflation with several figures on the agenda: consumer price index and producer price index in the United States (respectively Tuesday and Wednesday) and inflation in the eurozone (Friday). However, it will be important not to overinterpret the data that will be published, even if they could produce a bit of volatility in the exchanges in case of publication far from consensus. We know that in terms of monetary policy, central banks observe inflation dynamics and do not base their decisions on a single monthly statistic. Note, to conclude, the meeting of the Canadian central bank on Wednesday which should be a non-event for the EUR/CAD. The status quo is expected by analysts. Below you will find publications and events that should have a major impact on the evolution of currency rates.DAYTIMECOUNTRYINDICATORWHAT TO EXPECT?13/0714:30Core CPI (June)Expected decrease to 0.4% month-on-month from 0.7% previously.14/0714:30PPI (June)Month-on-month decrease to 0.5% from 0.8% previously.16:00Central bank meetingUnchanged monetary policy.15/0714:30Philadelphia Fed Manufacturing Index (July)Slight contraction expected by consensus at 29.8 but the dynamic remains positive.16/0711:00CPI (June)The final estimate is expected at 1.9% year-on-year.Did you like this content? Share it!