The new COVID-19 cases are taking their toll at the global economy

The new COVID-19 cases are taking their toll at the global economy

OPEC+ members finally reached a consensus

The pace of global growth slows down after the significant boost it experienced in recent months, motivated by the stimulus policies implemented by governments and central banks. The increase of DELTA COVID-19 cases, mobility restrictions and activity closures are also influencing this slowdown.

Currencies correlated with commodities and the economic cycle are suffering decreases driven by this scenario, as is the case of the Australian dollar.

The AUD/USD pair fell for the third week in a row, trading near a new 2021 low at 0.7389.

Australia's economy has continued to worsen amid the pandemic that has affected many economic sectors. The country has extended some of the regional lockdown measures imposed in June as coronavirus cases continue to rise. Sydney, Victoria, South Wells and Queensland are among the cities with restrictions.

The effects of the closures on the economy were reflected in Australian macroeconomic figures released last week. NAB's business confidence in June contracted from 20 in the previous month to 11, while NAB's business conditions fell from 36 to 24. Consumer inflation expectations in the same month came in at 3.7%, below 4.4%. Finally, the country added just 29.1K new jobs in June, well below the previous jump of 115.2K.

The US Dollar

Meanwhile, the US dollar continued to rise, driven mainly by the market's risk aversion sentiment. Moreover, US Federal Reserve Chairman Jerome Powell, who testified before Congress on monetary policy, reiterated that it is likely that inflationary pressures are temporary. He promised to maintain the ultra-expansionary policy until the economy recovers completely, adding that Fed would continue to discuss the gradual reduction of bond purchases in the next meetings.

Investors seem not to share his dovish stance, so the dollar continued to benefit from expectations of an early start to stimulus withdrawals and interest rate hikes.

Technically the pair rests in an intermediate support zone at 0.7390. Below this zone, it finds its primary support at 0.7245. Although close to the oversold zone, the daily RSI indicators do not show signs of exhaustion of the current movement or divergences.

OPEC+ meeting & Oil

Another asset in the sights of investors is oil.

Finally, OPEC has reached an agreement to increase production in talks between Saudi Arabia and the Emirates. The output will increase to 2M BPD (barrels per day), which will be done gradually until December 2021. Oil had already anticipated this possibility with price falls in the last three days. Analysts consider this increase in supply not enough to meet current demand. Moreover, the sanctions on Iran will be lifted and contribute to a greater supply of crude in the market. Still, the restrictive measures due to the coronavirus could have a demand-reducing effect.

Technically, oil finds its first support at the levels around $71.3 and is still far from more critical support at the $67.2 area, below which the uptrend would be terminated.

Sources: Bloomberg.com, reuters.com

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