CFD Markets News and Forecasts — 02-08-2022

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02.08.2022
23:56
Gold Price Forecast: XAU/USD bulls lurking but US dollar remains firm
  • Gold remains in bullish territory but it has lost some of its shine to the greenback.
  • The US dollar is picking up both a safe haven and Fed monetary policy bid. 

The gold price is pressured in Asia, falling 0.2% to a low of $1,756.19 from a high of $1,762.07 in the session so far. US bond yields had been waning in the wake of a less hawkish narrative surrounding the Federal Reserve which has been beneficial for the gold price.

However, US yields have rallied recently weighing on the gold price. The yield on the US 10-year note was last seen trading at 2.748 % after recovering from the lowest since early April and at the bottom of a daily broadening formation's daily range. Meanwhile, the US dollar rose off the lowest in nearly a month early on Tuesday, with the DXY index last seen up 0.10% to 106.445. Markets are trading cautiously around simmering US-China tensions over Taiwan as well as the ongoing concerns about a cooling global economy. 

''Fed Chair Powell catalyzed a short covering rally by tying another "unusually large" 75bp hike to data, which places a high bar for another jumbo-sized hike given the slowing trend in data. At the same time, the prevailing risk off tone in the market tied to US-China relations has further supported the yellow metal via modest haven flows,'' analysts at TD Securities said.

''Nonetheless, for further significant short covering from CTA trend followers to take place, gold prices would need to close north of $1820/oz to spark a change in trend signals. However, on the other hand, we see risks that Fed speakers can push back against market expectations for an early Fed pivot.''

US/Sino relations a concern

The greenback is in favour due to the concerns that a visit by U.S. House of Representatives Speaker Nancy Pelosi to Taiwan would further harm relations between China and the United States. China has threatened repercussions if Pelosi visited the self-ruled island, which Beijing claims as its territory. 

The US said on Monday it would not be intimidated by China. Consequently, US long-term Treasury yields dropped to a four-month low while the US dollar gained against a basket of currencies. Gold also picked up a bid, but that is being demolished with the sudden corrective spike in US yields. 

''Nonetheless, for further significant short covering from CTA trend followers to take place, gold prices would need to close north of $1820/oz to spark a change in trend signals,'' analysts at TD Securities argued.

''However, on the other hand, we see risks that Fed speakers can push back against market expectations for an early Fed pivot. In this sense, gold markets are faced with a massive amount of complacent length held by prop traders, which still hold the title as the dominant speculative force in gold.''

''We have yet to see capitulation in gold, suggesting the pain trade is still to the downside and we expect the recent rally will ultimately fade, facing a wall of offers.''

Gold technical analysis

As per the prior analysis, Gold Price Forecast: XAU/USD bulls are back in play, it was explained that the price was running higher in a correction of the weekly M-formation:

The rebound in yields is a weight on the yellow metal. Meanwhile, the US dollar rose off the lowest in nearly a month early on Tuesday, with the DXY index last seen up 0.72% to 106.166. 

US/Sino relations are the wild card for gold

To add insult to injury, the US dollar is attracting a safe haven bid on worries a visit by US House of Representatives Speaker Nancy Pelosi to Taiwan would further harm relations between China and the United States. China has threatened repercussions if Pelosi visited the self-ruled island, which Beijing claims as its territory. 

The US said on Monday it would not be intimidated by China. Consequently, US long-term Treasury yields dropped to a four-month low while the US dollar gained against a basket of currencies. Gold also picked up a bid, but that is being demolished with the sudden corrective spike in US yields. 

Gold technical analysis

As per the prior analysis, Gold Price Forecast: XAU/USD bulls are back in play, it was explained that the price was running higher in a correction of the weekly M-formation:

The grey area was a price imbalance that has now been mitigated by a 50% mean reversion:

There are prospects for further upside with the 68.2% Fibonacci meeting prior structure around $1,800. 

23:54
USD/CAD Price Analysis: Rejects fortnight-old bearish channel as bulls approach 1.2900
  • USD/CAD takes the bids to refresh intraday high during three-day uptrend.
  • Bullish MACD signals, successful break of two-week-old bearish channel’s resistance favors buyers.
  • 200-SMA acts as an additional upside filter while sellers have a bumpy road to return.

USD/CAD extends the previous upside momentum while ejecting the short-term bearish chart pattern during Wednesday’s Asian session. In doing so, the Loonie pair refreshes intraday high around 1.2890 during the three-day uptrend.

In addition to the clear upside break of the two-week-old descending trend channel, the bullish MACD signals also keep USD/CAD buyers hopeful.

However, the 200-SMA hurdle surrounding 1.2930 probes the upside momentum before highlighting the 1.3000 threshold for the bulls.

In a case where the USD/CAD prices remain firm past 1.3000, the previous monthly peak near 1.3225 will be in focus.

Alternatively, sellers need to wait for a sustained pullback below the resistance-turned-support line, near 1.2875 at the latest.

It’s worth noting, however, that the USD/CAD weakness past 1.2875 appears bumpy as multiple support levels around 1.2800 could challenge the bears before the stated channel’s lower line, close to 1.2750 at the latest.

During the quote’s weakness past 1.2750, the odds of witnessing a south-run towards June’s low near 1.2515 can’t be ruled out.

USD/CAD: Four-hour chart

Trend: Further upside expected

 

23:44
EUR/USD slides below 1.0200 on hawkish Fedspeak, US-China jitters EURUSD
  • EUR/USD takes offers to refresh weekly low, extends the previous day’s pullback from monthly top.
  • Fed policymakers appear hawkish, Bullard reiterated central bank’s commitment to inflation target.
  • China resents US House Speaker Nancy Pelosi’s Taiwan visit.
  • EU/US PMIs for July, Eurozone Retail Sales and US Factory Orders will decorate the calendar.

EUR/USD holds lower ground near 1.0150, refreshes weekly low, as bears cheer the market’s risk-off mood, as well as hawkish comments from the Fed policymakers during Wednesday’s Asian session. That said, the major currency pair dropped the most in more than a week, after taking a U-turn from the monthly high, the previous day.

Geopolitical tensions between the US and China, recently over Taiwan, exert more downside pressure on the market sentiment, as well as on the EUR/USD prices, especially at a time when the global economy is fragile. Also, the Federal Reserve (Fed) policymakers aren’t following Chairman Jerome Powell’s tunes and show no major signs of retreat from the rate-hike trajectory.

China showed irritation over US House Speaker Nancy Pelosi’s visit to Taiwan and raised fears that the tussles among the world’s top-two economies will have more negative consequences for the world amid recession fears. “US House of Representatives Speaker Nancy Pelosi arrived in Taiwan late on Tuesday on a trip she said shows an unwavering American commitment to the Chinese-claimed self-ruled island, but China condemned the highest-level U.S. visit in 25 years as a threat to peace and stability in the Taiwan Strait,” said Reuters.

Other than the Taiwan issue, talks of likely US restrictions on the chip-making machinery’s exports to China also magnified the Sino-American tussles. It’s worth noting that Beijing’s policymakers also showed a lack of confidence in this year’s Gross Domestic Product (GDP) and weighed on the EUR/USD prices, mainly due to the US dollar’s safe-haven demand.

Elsewhere, St. Louis Federal Reserve President James Bullard’s support for the hawkish Fed moves appeared to recently weigh on the EUR/USD prices. “Federal Reserve and the European Central Bank may both be able to execute a "relatively soft landing" that avoids a harsh recession for their respective economies as they raise interest rates to rein in inflation,” the policymaker said.

On Tuesday, San Francisco Fed President Mary Daly said that she is looking for incoming data to decide if they can downshift the rate hikes or continues at the current pace, as reported by Reuters. However, Chicago Fed President Charles Evans showed support for a 50 basis points (bps) rate hike for the September policy meeting if inflation does not improve, as reported by Reuters. Furthermore, Cleveland Fed President Loretta Mester, on the other hand, said she does not think the country is suffering a recession, adding that the labor market is in great shape. On inflation, however, she noted that it has not decreased "at all."

Amid these plays, Wall Street closed in the red and the US Treasury yields bounced off a four-month low.

Moving on, July month activity numbers from the Eurozone and the US will join German trade data and the Retail Sales from the bloc to entertain EUR/USD traders ahead of the US session. Following that, the US Factory Orders and ISM Services PMI will be crucial to watch for fresh directions.

Technical Analysis

EUR/USD confirms a rising wedge bearish chart pattern on breaking a three-week-old support line, now resistance around 1.0180, which in turn signals the pair’s further declines towards refreshing the yearly low surrounding 0.9950.

 

23:27
USD/JPY rallies above 133.40 on geopolitical jitters, Fed commentary
  • Safe-haven flows bolstered the greenback, a tailwind for the USD/JPY.
  • US House Rep. Pelosi’s trip to Taiwan escalates China-US tensions.
  • USD/JPY traders should be aware of Japan and US Services and Composite PMIs.

The USD/JPY begins Wednesday’s Asian session on the right foot, amidst a risk-off impulse spurred by geopolitical tensions between China and the US, triggered by the trip of US House Speaker Pelosi to Taiwan, alongside a hawkish push by Fed policymakers.

Therefore, the USD/JPY is trading at 133.48, after hitting a weekly low on August 2 at 130.39, with buyers stepping in around the 100-day EMA at 130.37, lifting the major to current price levels.

USD/JPY got bolstered by safe-haven flows

During the US session, Fed speakers pushed back against a so-called “dovish” tilt, according to the market’s reaction to the US central bank’s 75 bps rate hike. Nevertheless, the San Francisco Fed President, Mary Daly, said that work in inflation is nowhere near almost done, and there is still a long way to go. In the same tone, Cleveland’s Fed President Mary Daly said that she hadn’t seen anything suggesting that inflation is leveling off and foresees prices would not come down quickly.

In the meantime, Chicago’s Fed President Charles Evans said a 50 bps is reasonable in September, but he didn’t discount a 75 bps if inflation remains stubbornly sticky.

The US bond market reacted to Fed policymakers and sent US 2-year bond yields above the 3% threshold. In comparison, the US 10-year benchmark note rate stayed around 2.74%, further deepening the yield curve inversion as traders discount a US recession.

Late in the North American session, US President Joe Biden signed the US chip production bill, aimed to compete with China.

What to watch

The Japanese economic docket will feature the Jibun Bank Services and Composite PMIs for July on its final readings. Expectations lie at 51.2 and 50.6, respectively.

The US calendar will feature July’s ISM Non-Manufacturing Business Activity is expected to decelerate to 52.5, alongside Factory Orders and Fed speakers, led by Philadelphia’s Fed Patrick Harker.

USD/JPY Key Technical Levels

 

23:22
AUD/JPY recaptures 92.00 on upbeat Australian PMI data
  • AUD/JPY is attempting to extend its gains above 92.00 on higher-than-expected Australian PMI data.
  • Aussie’s S&P Global Services PMI has improved to 50.9 vs. 50.4 the prior release.
  • The rate hike announcement by the RBA has escalated RBA-BOJ policy divergence.

The AUD/JPY pair is attempting a rebound after a corrective move below 92.00 in the early Tokyo session. The risk barometer is upbeat on a broader note, therefore, the upside will remain favored. The asset is expected to catch bids as the IHS Markit has reported higher-than-expected S&P Global Services and Composite PMI data.

The Services PMI has landed at 50.9, higher than the estimates and the prior release of 50.4. While the Composite PMI has improved to 51.1 from the former figure of 50.6. In times, when the odds of a recession and demand worries in China are accelerating, an improvement in Services PMI numbers will support the aussie bulls.

On Tuesday, the asset rebounded firmly after the Reserve Bank of Australia (RBA) announced a rate hike by 50 basis points (bps). RBA Governor Philip Lowe accelerated the Official Cash Rate (OCR) to 1.85% as their prime responsibility is to bring price stability to the economy. A third consecutive 50 bps rate hike by the RBA has escalated RBA-Bank of Japan (BOJ) policy divergence.

Meanwhile, the yen bulls are likely to return to the bears’ pool as the BOJ will continue with its ultra-loose policy stance on interest rates. The Japanese economy is struggling to push the inflation rate higher without the support of volatile oil and food product prices. To keep the inflation rate above 2%, a higher move in the Labor Cost Index is critical.

 

23:16
NZD/JPY Price Analysis: Pokes key support line near 82.80 on dismal NZ employment data
  • NZD/JPY dropped 45 pips on New Zealand’s downbeat employment numbers.
  • NZ Q2 Unemployment Rate, Employment Change marked softer than expected and prior releases.
  • Ascending support line from late January defends buyers, 81.25 is a tough nut to crack for bears.

NZD/JPY holds lower ground near a 10-week low as sellers attack 82.80 support during the initial Asian session on Wednesday. That said, the cross-currency pair’s latest weakness could be linked to the downbeat New Zealand (NZ) employment data. However, an upward sloping support line from January 28, 2022 seems to challenge the pair sellers of late.

New Zealand employment numbers for the second quarter (Q2) raised concerns over the Reserve Bank of New Zealand’s (RBNZ) hawkish mood and drowned the New Zealand Dollar (NZD) on release. That said, NZ Unemployment Rate surprisingly grew to 3.3% versus 3.1% expected and 3.2% prior while the Employment Change dropped to 0.0% versus 0.4% market forecasts and 0.1% previous readings.

It should be noted that the bearish MACD signals and the pair’s sustained downside break of the 50-DMA keep sellers hopeful of breaking the nearby support line, at 82.80 by the press time.

In a case where the NZD/JPY prices drop below 82.80, a convergence of the 200-DMA and 50% Fibonacci retracement of January-April upside, near 81.25 will be a crucial support to watch for forecasting the next moves of the pair.

Alternatively, recovery remains elusive until the quote stays below the 100-DMA level of 84.33.

Following that, a downward sloping resistance line from April 20, near 86.15, will be important for the NZD/JPY bulls to watch before dominating further.

NZD/JPY: Daily chart

Trend: Further weakness expected

 

23:00
Fed's Bullard: Fed committed to inflation target

Federal Reserve and the European Central Bank may both be able to execute a "relatively soft landing" that avoids a harsh recession for their respective economies as they raise interest rates to rein in inflation, St. Louis Federal Reserve President James Bullard said on Tuesday.

"Since modern central banks have more credibility than their counterparts in the 1970s, it appears that both the Fed and the ECB may be able to disinflate in an orderly manner and achieve a relatively soft landing," Bullard said in slides prepared for the presentation.

  • The Federal Reserve is committed to inflation target.
  • Soft landing feasible if regime shift executed well.

US dollar catches a safe haven bid

Meanwhile, US stocks struggled for gains and the dollar and gold rallied on Tuesday in a flight for safety, Markets are trading cautiously around simmering US-China tensions over Taiwan as well as the ongoing concerns about a cooling global economy. DXY is 0.63% higher at 106.07 the high for the day so far.

23:00
Australia S&P Global Services PMI above forecasts (50.4) in July: Actual (50.9)
23:00
Australia S&P Global Composite PMI climbed from previous 50.6 to 51.1 in July
22:59
AUD/NZD bulls attack 1.1100 as New Zealand employment data disappoints
  • AUD/NZD takes the bids to extend the previous day’s rebound from one-week low.
  • New Zealand’s Unemployment Rate, Employment Change surprised markets.
  • Risk-aversion wave tames the pair’s upside momentum amid sluggish day-start.
  • US-China headlines, China’s Caixin Services PMI will be important for fresh impulse.

AUD/NZD justifies downbeat New Zealand (NZ) employment data while picking up bids to refresh daily tops near 1.1110 during early Wednesday morning in Asia. Even so, risk-off mood and a lack of major trading participation appeared to have tamed the cross-currency pair’s latest moves.

New Zealand employment numbers for the second quarter (Q2) raised concerns over the Reserve Bank of New Zealand’s (RBNZ) hawkish mood and drowned the New Zealand Dollar (NZD) on release. That said, NZ Unemployment Rate surprisingly grew to 3.3% versus 3.1% expected and 3.2% prior while the Employment Change dropped to 0.0% versus 0.4% market forecasts and 0.1% previous readings.

Elsewhere, the escalated geopolitical tension between the US and China, as well as hawkish comments from the Fed policymakers, also weighed on the AUD/NZD prices. It’s worth noting, however, that the the Reserve Bank of Australia’s (RBA) failure to lure the bulls, despite the fourth rate hike, challenge the pair buyers.

US House Speaker Nancy Pelosi’s visit to Taiwan, despite China’s multiple warnings, raised fears that the tussles among the world’s top-two economies will have more negative consequences for the world amid recession fears. “US House of Representatives Speaker Nancy Pelosi arrived in Taiwan late on Tuesday on a trip she said shows an unwavering American commitment to the Chinese-claimed self-ruled island, but China condemned the highest-level U.S. visit in 25 years as a threat to peace and stability in the Taiwan Strait,” said Reuters.

Other than Taiwan, talks of likely US restrictions on the chip-making machinery’s exports to China also magnified the Sino-American tussles. It’s worth noting that Beijing’s policymakers also showed a lack of confidence in this year’s Gross Domestic Product (GDP) and weighed on the AUD/USD prices, due to the strong China-Australia trade ties.

The RBA matched the market’s expectations of announcing 50 basis points (bps) rate hike, the fourth in 2022, while inflating the benchmark rate to 1.85%. However, the RBA Statement that says, “The central bank is not on the pre-set path in normalizing rates,” appeared to have lured the AUD/NZD bears the previous day.

Technical analysis

A daily closing below an ascending trend line from November 2021, around 1.1040 by the press time, becomes necessary for the AUD/NZD bears to take entry. Until then, the quote is expected to mark another attempt in challenging the 1.1200 threshold.

 

22:56
NZD/USD tumbles to near weekly lows around 0.6220 on vulnerable NZ employment data NZDUSD
  • NZD/USD has slipped swiftly to 0.6225 as Stats NZ has reported downbeat labor market data.
  • The NZ jobless rate has increased to 3.3% while Employment Change has landed at 0%.
  • A lower consensus for the US ISM Services PMI could fade the DXY’s rally.

The NZD/USD pair has witnessed a steep fall as Stats NZ has reported vulnerable NZ employment data. The Unemployment Rate has increased to 3.3% from the estimates of 3.1% and the prior release of 3.2%. Also, the Employment Change for the second quarter has landed at 0%, significantly lower than the estimates of 0.4% and the prior print of 0.1%.

Kiwi economy’s failure in creating employment opportunities is going to create more troubles for the Reserve Bank of New Zealand (RBNZ). This will force RBNZ Governor Adrian Orr to go light on policy tightening due to the unavailability of fundamental support from the labor market. However, the Labor Cost Index has improved significantly to 1.3%, much higher than the expectations of 1.1% and the former print of 0.7% on a quarterly basis.

Meanwhile, the US dollar index (DXY) has recovered some of its losses after a juggernaut rebound on Tuesday. The asset picked bids after printing a fresh three-week low at 105.05 as investors underpinned the risk-aversion theme on escalating US-China tensions over Taiwan. US House Speaker Nancy Pelosi supported the Taiwanese local government despite the death threats from China on her personal visit to Taiwan.

Going forward, the US Institute of Supply Management (ISM) will release the Services PMI data.  As per the market consensus, the Services PMI will land at 53.5, significantly lower than the prior release of 55.3. Apart from that, the US ISM Services New Orders Index data holds key importance as US big tech companies have lowered their guidance for the rest of the year. Also, they have ditched their recruitment process.

 

22:48
NZ Q2 Unemployment Rate 3.3%, higher than the expected 3.1%

The New Zealand Unemployment Rate released by the Statistics New Zealand has been released as follows:

  • New Zealand Q2 s/adj Unemployment rate 3.3% (Reuters poll 3.1%).
  • NZQ2 s/adj Employment growth 0.0% (Reuters poll +0.4%).
  • NZ Q2 Participation Rate 70.8% (Reuters poll 71.0%).
  • NZ Q2 lci private sector wages (ex-o'time) +1.3% on pvs qtr (Reuters poll +1.1%).

''Finding workers remains the #1 constraint facing Kiwi businesses and this situation is expected to worsen as Kiwis are attracted across the Tasman'', analysts at ANZ Bank said.

''Australia’s labour market is experiencing similar challenges to the New Zealand market but the higher wages on offer in certain sectors are expected to attract New Zealanders into some of these positions.''

Meanwhile, NZD/USD has been under pressure. The greenback has picked up a safe haven bid relating to tensions surrounding Taiwan between the US and China. The miss in the Unemployment Rate is weighing on the bird, down 0.23% on the day so far. 

About NZ Employment

Statistics New Zealand releases employment data on a quarterly basis. The statistics shed a light on New Zealand’s labor market, including unemployment and employment rates, demand for labor and changes in wages and salaries. These employment indicators tend to have an impact on the country’s inflation and Reserve Bank of New Zealand’s (RBNZ) interest rate decision, eventually affecting the NZD. A better-than-expected print could turn out to be NZD bullish.

22:47
New Zealand Labour Cost Index (YoY) came in at 3.4%, above expectations (3.3%) in 2Q
22:46
New Zealand Employment Change below forecasts (0.4%) in 2Q: Actual (0%)
22:46
New Zealand Labour Cost Index (QoQ) registered at 1.3% above expectations (1.1%) in 2Q
22:46
New Zealand Participation Rate below expectations (71%) in 2Q: Actual (70.8%)
22:46
AUD/USD defends 0.6900 after the biggest daily fall in a month on US-China tussles, Fedspeak
  • AUD/USD holds lower ground as bears take a breather following the heavy downside move.
  • Sino-American jitters over Taiwan join hawkish comments from Fed policymakers to weigh on the quote.
  • RBA’s 0.50% rate hike couldn’t please bulls as shift in language in Rate Statement gained bear’s attention.
  • China’s Caixin Services PMI, US ISM Services PMI may entertain traders but risk catalysts are more important.

AUD/USD remains pressured around 0.6920, after posting the biggest daily slump in a month, as traders seek fresh clues during Wednesday’s initial Asian session.

That said, the Aussie pair’s latest fall could be linked to the escalated geopolitical tension between the US and China, as well as hawkish comments from the Fed policymakers. Further, the Reserve Bank of Australia’s (RBA) failure to lure the bulls, despite the fourth rate hike, also contributed to the AUD/USD pair’s weakness.

US House Speaker Nancy Pelosi’s visit to Taiwan, despite China’s multiple warnings, raised fears that the tussles among the world’s top-two economies will have more negative consequences for the world amid recession fears. “US House of Representatives Speaker Nancy Pelosi arrived in Taiwan late on Tuesday on a trip she said shows an unwavering American commitment to the Chinese-claimed self-ruled island, but China condemned the highest-level U.S. visit in 25 years as a threat to peace and stability in the Taiwan Strait,” said Reuters.

Other than Taiwan, talks of likely US restrictions on the chip-making machinery’s exports to China also magnified the Sino-American tussles. It’s worth noting that Beijing’s policymakers also showed a lack of confidence in this year’s Gross Domestic Product (GDP) and weighed on the AUD/USD prices, due to the strong China-Australia trade ties.

At home, the RBA matched the market’s expectations of announcing 50 basis points (bps) rate hike, the fourth in 2022, while inflating the benchmark rate to 1.85%. However, the RBA Statement that says, “The central bank is not on the pre-set path in normalizing rates,” appeared to have lured the AUD/USD bears.

Elsewhere, San Francisco Fed President Mary Daly said on Tuesday that she is looking for incoming data to decide if they can downshift the rate hikes or continues at the current pace, as reported by Reuters. However, Chicago Fed President Charles Evans showed support for a 50 basis points (bps) rate hike for the September policy meeting if inflation does not improve, as reported by Reuters. Furthermore, Cleveland Fed President Loretta Mester, on the other hand, said she does not think the country is suffering a recession, adding that the labor market is in great shape. On inflation, however, she noted that it has not decreased "at all."

In addition to the aforementioned catalysts, the risk-off mood and firmer US Treasury yields also underpinned the US Dollar Index's rebound from the monthly low and drowned the AUD/USD prices. To portray the mood, the Wall Street benchmarks posted losses while the US 10-year Treasury yields rose to 2.75% at the latest.

Moving on, AUD/USD traders should pay attention to China’s Caixin Services PMI and US ISM Services PMI for July for fresh impulse. However, major attention will be given to the risk catalysts, mainly concerning China and recession, for fresh impulse.

Technical analysis

A successful downside break of the three-week-old ascending trend line support, now resistance around 0.6975, directs AUD/USD prices towards the 21-DMA surrounding 0.6880 by the press time.

 

22:46
New Zealand Unemployment Rate above expectations (3.1%) in 2Q: Actual (3.3%)
22:39
EUR/JPY Price Analysis: Bounces off the 200-DMA, but sellers remain in control
  • The EUR/JPY rallied more than 150 pips and gained 0.25% on Tuesday.
  • A hammer in the EUR/JPY daily chart could open the door for further gains.
  • The cross faces solid resistance around 136.00-30 in the near term.

The EUR/JPY plunges to the 200-day EMA at 133.71, forms a hammer, and rallies above the August 1 daily close at 134.99, finishing the trading session at 135.37, as buyers regained control in a volatile session. As the Asian session begins, the EUR/JPY is trading at 135.20, almost flat.

EUR/JPY Price Analysis: Technical outlook

The EUR/JPY daily chart illustrates a hammer formed in the daily chart, right on the 200-day EMA. Nevertheless, the cross-currency closing below half of the August 1 price action exposes the pair to selling pressure. With the RSI sitting at negative territory, below the 7-day RSI’s SMA, and far from reaching the mid-line, it could keep the pair subject to market sentiment. If the EUR/JPY tumbles below 135.00, a re-test of the 200-day EMA could be possible due to the volatile price action in the last few days. On the other hand, the EUR/JPY upward moves could be capped at around 136.00.

EUR/JPY 1-hour chart

In the near term, the EUR/JPY bias is neutral to downwards, though the cross-currency pair is trading above the 20 and 50-hour EMAs. However, the pair struggled to crack 135.50, with significant resistance above it, at the confluence of the R1 daily pivot and the 100-hour EMA at 136.06. Any rallies could be capped at the previously mentioned area, alongside the weekly high at 136.34. On the flip side, the EUR/JPY first support would be 135.00-05 area, followed by the daily pivot at 134.72.

EUR/JPY Key Technical Levels

 

22:31
Australia AiG Performance of Construction Index declined to 45.3 in July from previous 46.2
22:18
AUD/NZD oscillates below 1.1070 ahead of NZ employment data
  • AUD/NZD is juggling in a 17-pips range as investors await NZ labor market data.
  • The NZ employment data is likely to remain upbeat amid decent employment generation in July.
  • The RBA announced a third consecutive 50 bps rate hike to contain price pressures.

The AUD/NZD pair is displaying back and forth moves in a narrow range of 1.1051-1.1068 in the early Tokyo session. The asset has turned sideways as investors are awaiting the release of the employment data by Stats NZ.

According to the preliminary estimates, the employment data is expected to remain upbeat as the Employment Change will improve significantly to 0.4% from the prior print of 0.1%. Also, the Unemployment Rate is likely to trim to 3.1% vs. 3.2% in the previous figure.

One thing is worth considering that the Labor Cost Index is expecting an improvement to 1.1% from 0.7% on a quarterly basis. The inflation rate is sky-rocketing in the kiwi zone and households need higher paychecks to offset the higher payouts to address personal expenditure. This will strengthen the Reserve Bank of New Zealand (RBNZ) to sound hawkish further unhesitatingly.

On the Aussie front, the antipodean is still digesting the third consecutive 50 basis points (bps) by the Reserve Bank of Australia (RBA). RBA Governor Philip Lowe has hiked the Official Cash Rate (OCR) to 1.85%. To contain price pressures in the Australian economy, the RBA is needed to tighten its policy continuously. Investors should be aware of the fact that the inflation rate has climbed to 6.1% in the second quarter of CY2022 vs. the prior release of 5.1%.

 

22:08
When is the New Zealand Q2 employment data and how could it affect NZD/USD?

New Zealand quarterly employment report overview

Early Wednesday in Asia, at 22:45 GMT Tuesday the world over, the global market sees the second quarter (Q2) 2022 employment data from Statistics New Zealand.

With the Reserve Bank of Australia’s (RBA) consecutive fourth rate lift, as well as robust inflation and hopes of tighter monetary policy from other major central banks, today’s jobs report becomes crucial for the NZD/USD traders, mainly due to the wage prices index data.

Market consensus suggests a slight reduction in the headline Unemployment Rate to 3.1% from 3.2% while the Employment Change figure is likely to increase to 0.4% from 0.1%. Further, the Participation Rate may also improve to 71.0% from 70.9% but the Labour Cost Index could rise to 3.3% QoQ from 3.1% prior.

Ahead of the data, ANZ said,

We anticipate the unemployment rate will hit a fresh record low of 2.8% in Q2 (down from 3.2% in Q1). Finding workers remains the #1 constraint facing Kiwi businesses and this situation is expected to worsen as Kiwis are attracted across the Tasman. Australia’s labor market is experiencing similar challenges to the New Zealand market but the higher wages on offer in certain sectors is expected to attract New Zealanders into some of these positions.

How could it affect the NZD/USD?

NZD/USD edges lower around 0.6250, extending the previous day’s downbeat performance led by the hawkish Fedspeak and the US-China tussles.

That said, the Kiwi pair is likely to mark a kneejerk positive reaction in case the New Zealand job numbers arrive strong, which more is likely considering the tight labor market in Auckland and higher demand from Australia. However, the NZD/USD prices may not remain firmer for long unless the data is extremely positive, mainly due to the current risk-off mood. Furthermore, the recent shift in the RBA’s language also raises doubts about the hawkish mood of the Reserve Bank of New Zealand (RBNZ) and could please sellers in case the data disappoints.

Technically, a clear downside break of the three-week-old ascending trend line, at 0.6270 by the press time, directs NZD/USD prices towards the 21-DMA support level near 0.6210 at the latest.

Key Notes

NZD/USD under pressure as US dollar resurges

New Zealand: Unemployment rate seen higher at 3.3% in Q2 2022 – TDS

About New Zealand unemployment rate and employment change

The quarterly report on New Zealand's unemployment rate and employment change is being released by Statistics New Zealand.

The unemployment rate is the number of unemployed workers divided by the total civilian labor force. If the rate is up, it indicates a lack of expansion within the New Zealand labor market. As a result, a rise leads to weaken the New Zealand economy. A decrease of the figure is seen as positive (or bullish) for the NZD, while an increase is seen as negative (or bearish).

On the other hand, employment change is a measure of the change in the number of employed people in New Zealand. Generally speaking, a rise in this indicator has positive implications for consumer spending which stimulates economic growth. A high reading is seen as positive (or bullish) for the NZ dollar, while a low reading is seen as negative (or bearish).

21:59
GBP/JPY Price Analysis: Rallies after hitting the double-top target, below 159.50
  • The GBP/JPY rallied after hitting a three-month fresh low at 159.44.
  • A risk-off impulse exacerbated GBP/JPY fall towards the double-top target.
  • The GBP/JPY is neutral biased, but a break above 162.00 puts the 163.00 targets in place; otherwise, a drop to 161.00 is on the cards.

The GBP/JPY rallied after touching the double-top target and the daily low at around 159.44, then hitting a daily high at 162.00 before retracing to current price levels. At the time of writing, the GBP/JPY is trading at 161.99 as the Asian session begins.

Investor’s sentiment shifted sour as tensions arose between China and the US. The visit of US House Rep. Nancy Pelosi was promptly condemned by China, saying it “has a severe impact on the political foundation of China-US relations, and seriously infringes upon China’s sovereignty and territorial integrity.”  Besides that, traders reconsidered the so-called Fed “dovish” pivot, with policymakers like Daly, Evans, and Mester reiterating Fed’s commitment to tackle inflation.

Also read: GBP/JPY Price Analysis: Double-top about to reach its target

GBP/JPY Price Analysis: Technical outlook

The GBP/JPY daily chart illustrates the pair as neutral biased once the double-top target was achieved when the pair hit 159.50. After that, the cross-currency rallied sharply, 250 pips, towards the daily highs, but short of August 1, open at 162.27, forming a hammer with bullish implications.

Therefore, the GBP/JPY first resistance would be 162.00. Break above will expose the August 1 high at 162.49, followed by the 100-day EMA at 162.73, and then the 163.00 mark.

GBP/JPY Key Technical Levels

 

21:57
Gold Price Forecast: XAU/USD plunges to $1,760 as risk-aversion returns, US ISM Services PMI eyed
  • Gold price has slipped swiftly to near $1,760.00 as market mood sours on US-China tensions.
  • Fed policymakers have renewed inflation fears but have trimmed the odds of a recession.
  • The US ISM Services PMI is likely to remain downbeat ahead.

Gold price (XAU/USD) has shifted into a correction phase after a juggernaut rally from yearly lows near $1,680.00 on Tuesday. The precious metal has plunged to near $1,760.00 as investors preferred the US dollar index (DXY) a better investment option after the market sentiment turned sour. The visit of US House Speaker Nancy Pelosi to Taiwan to support their local government despite the threat attempts of China spurred the risk-aversion theme.

The underpinned risk-aversion theme sent the risk-perceived currencies into the negative trajectory and improved the DXY’s appeal. The DXY displayed a sheer responsive buying action and reclaimed the crucial hurdle of 106.00. The asset extended its recovery and printed a high of 106.35 after commentary from Federal Reserve (Fed) policymakers.

Chicago Fed President Charles Evans dictated that the inflationary pressures are broadening out and favored a 50 basis point (bps) interest rate hike in September. While Cleveland Fed President Loretta Mester trimmed recession fears citing that the labor market is rock solid, however, price pressures have not decreased at all.

In today’s session, the entire focus will remain on the US ISM Services PMI data. A preliminary estimate for the economic data is 53.5, significantly lower than the prior release of 55.3. The US ISM Services New Orders Index data will be worth watching as US techs have lowered their guidance for the rest of the year.

Gold technical analysis

A rising channel formation by the gold prices on a four-hour scale advocates the continuation of an upside move on a broader bias. The upper portion of the above-mentioned chart pattern is placed from July 22 high at $1,739.37 while the lower portion is plotted from July 21 low at $1,681.87. The corrective wave in the chart pattern is likely to drag the gold prices below the 200-period Exponential Moving Average (EMA) at $1,748.57.

The precious metal has slipped below the crucial 50-EMA at $1,764.24, which signals more weakness ahead.

Also, the Relative Strength Index (RSI) (14) has slipped into the 40.00-60.00 range, which indicates that gold prices are not carrying bullish momentum for a while.

Gold four-hour chart

 

21:19
EUR/USD Price Analysis: Bulls could be about to make a move EURUSD
  • EUR/USD is carving out an inverse H&S.
  • The bulls are eyeing the price imbalance on the daily chart to the upside. 

EUR/USD has been offered while the dollar rallied as risk appetite was dampened by economic uncertainties and escalating US-China tensions. However, from a technical perspective, there could be some gas left in the bulls yet and the following illustrates a bullish scenario for the days ahead. 

EUR/USD daily chart

The euro is under pressure but could be on the verge of carving out an inverse head and shoulders. This is a bullish pattern that could lead to the price running higher into the area of price imbalance between 1.0293 and 1.0416. 

 

21:00
South Korea FX Reserves registered at 438.61B above expectations (438.24B) in July
20:42
United States Total Vehicle Sales: 13.35M (July) vs 13M
20:41
United States API Weekly Crude Oil Stock: 2.165M (July 29) vs -4.037M
20:17
NZD/USD under pressure as US dollar resurges NZDUSD
  • NZD/USD is under pressure as the US dollar bounces back.
  • Unemployment data will be an important feature on the NZ calendar. 

NZD/USD is down o the day by some 1.17% with the price falling from a high of 0.6343 to a low of 0.6253. The greenback has picked up a safe haven bid relating to tensions surrounding Taiwan between the US and China. 

''The Kiwi is lower this morning, having been sideswiped by a resurgence in the USD amid a stiff rise in US interest rates that was, in turn, fuelled by a plethora of hawkish comments by Fed officials, the essence of which was: inflation is still too high, it may not have turned, and the Fed’s job is far from done,'' analysts at ANZ Bank said.

''Whether that vibe is enough to bring about another more sustained bout of USD strength remains to be seen, but markets have certainly been very “glass half full” on both the US economy and the inflation/Fed hikes threat, and that wiped a few percent off the USD DXY last month.''

Looking ahead of the day, domestically, New Zealand's labour market will be important. The analysts at ANZ bank, who are calling for a 2.8% unemployment rate, say the ''data can be volatile, but if they beat expectations, that could see the NZD beat peers amid USD strength.'' 

 

20:03
Silver Price Forecast: XAGUSD dives below $20.00 on risk-aversion as US bond yields climb
  • Silver price drops on high yields as Fed policymakers push back against a dovish tilt.
  • US House Speaker Pelosi’s visit to Taiwan turned sentiment sour.
  • Silver Price Forecast (XAGUSD): Despite rallying $2 in the last five days, the bias is negative.

Silver price slides due to US Treasury yields rising as Fed officials pushed back markets’ expectations of a US central bank “dovish” pivot, which traders misread. At the same time, geopolitical jitters fueled flows towards safe-haven assets, which boosted the greenback. At the time of writing, XAGUSD is trading at $19.96.

Risk aversion originated from the visit of US House Speaker Nancy Pelosi, which rattled the financial markets. US equities are down, and the greenback is firm, as shown by the US Dollar Index at 106.183, up almost 0.80%. Meanwhile, US Treasury yields soared on Fed speaking, 16 basis points, yielding 2.743%, a headwind for precious metals prices.

XAGUSD drops on high yields and Fed speaking

Unleashed Fed officials have begun to cross wires led by San Francisco Fed President Mary Daly, saying that the Fed is “nowhere near” done in fighting inflation and added that “it would be premature to unwind all of that (Fed tightening) and say the job is done.”

Late in the morning, the Chicago Fed President Charles Evans said that going 50 bps “is a reasonable assessment, but 75 bps could also be okay.”

Loretta Mester, Cleveland’s Fed President, said that she has not seen inflation cool at all and is committed to bringing it under control. She added that she wants to see compelling evidence that inflation is moving down on a sustainable basis.

Data wise, US labor market data, namely JOLTs Job Openings for June, rose to 10.7 million, less than 11 million estimated by the streets. That suggests the labor market is easing amid growing economic pressures.

Silver Price Forecast (XAGUSD): Technical outlook

The XAGUSD illustrates the white metal as neutral-to-downward biased, as the $2 rally losses steam at $20.47, the 50-day EMA, further reinforced by the RSI, which turned down and aims towards the 50-midline. However, XAGUSD bears need a daily close below the $20.00 figure to extend the fall further, leaving silver exposed to selling pressure. If that scenario plays out, silver’s next support would be the 20-day EMA at $19.11. Otherwise, XAGUSD bulls could lick its wound before challenging the 50-day EMA for another time.

20:00
Argentina Tax Revenue (MoM) up to 1745.178B in July from previous 1680.901B
19:22
GBP/USD bears step in as the US dollar picks up a safe haven bid
  • GBP/USD is under pressure at the start of the week.
  • The US dollar picks up a safe haven bid over US/Sino tensions. 

GBP/USD is down on the day falling some 0.6% from a high of 1.2279 meeting a low of 1.2166 the low. The US dollar has been stronger against its major trading partners early Tuesday, apart from a further decline against the yen, in the midst of renewed Sino-US tensions over Taiwan. 

Federal Reserve officials are also emerging from the pre-Fed meeting blackout period with traders on the lookout for clues about the Fed's plans after a second straight 75 basis point rate increase last week. Evans, Mester, and Bullard spoke today.  Harker, Barkin, and Kashkari will speak tomorrow.

''Short-term we are focused on upcoming Fed speak and payrolls on Friday,'' analysts at TD Securities said. ''We see hawkish risks to the both which could help stabilize the USD. Tensions between US and China are likely to intensify given Pelosi's intended visit to Taiwan and the risk of an accident are likely underappreciated by markets, so we would tread cautiously on higher beta and equity-linked currencies.''

Meanwhile, the greenback has attracted a safe haven bid on worries a visit by US House of Representatives Speaker Nancy Pelosi to Taiwan would further harm relations between China and the United States. China has threatened repercussions if Pelosi visited the self-ruled island, which Beijing claims as its territory. The US said on Monday it would not be intimidated by China. Consequently, US long-term Treasury yields dropped to a four-month low while the US dollar gained against a basket of currencies. 

Domestically, doused in political and economic woes, the pound has been one of the laggards this year despite the Bank of England being out of the traps with policy tightening relatively early. 

Additionally, net short GBP positions edged lower for a second week with the market expecting more rate rises in the offing if Truss becomes the next UK PM in view of her tax-cutting agenda.

The latest YouGov / Times Tory members poll shows a 34 point lead for Truss:

  • 60% Truss
  • 26% Sunak

Nevertheless, the poor outlook for growth in the UK remains a significant concern for speculators.

''GBP has been trading under a cloud of negative sentiment for large swaths of this year,'' analysts at Rabobank noted. ''It was notable in May that the BoE’s (as expected) rate hike failed to stop the pound from falling as the market latched on to the Bank’s downside growth revision.''

''Around this time the OECD forecast that the UK would see no growth in 2023, a little worse than our house forecast of 0.2%.  The BoE, like most other central banks, is committed to reigning in inflation, even at the cost of growth. However, the absence of the latter has provided a strong headwind for the pound.''

 

19:13
Forex Today: Dollar stronger amid tensions between the US and China

What you need to take care of on Wednesday, August 3:

Risk-aversion returned and benefited the greenback. Tensions arose on news of US House Speaker Nancy Pelosi's visit to Taiwan. Pelosi supports the local government against China's will,  spurring geopolitical tensions between the two major economies.

Demand for the greenback temporarily eased early in the American session but resumed following comments from US Federal Reserve officials. Chicago Fed Charles Evans noted that inflationary pressures may be broadening out and that the jobless rate could increase to around 4.25%, but considered reasonable a 50 bps rate hike in September. Loretta Mester, on the other hand, said she does not think the country is suffering a recession, adding that the labour market is in great shape. On inflation, however, she noted that it has not decreased "at all."

The EUR/USD pair fell to 1.0170, settling some pips above the latter. The GBP/USD pair also settled in the red after a failed attempt to regain the 1.2200 threshold.

The dollar also appreciated against safe-haven rivals. USD/CHF trades around 0.9560 while USD/JPY is currently at around 132.80. Gold surged to an almost one-month high of $1,787.99, ending the day with modest losses at around $1,768.

Crude oil prices, on the other hand, recovered some ground and the barrel of WTI currently stands at $94.30.

US Treasury yields ticked higher. The yield on the 10-year Treasury note currently stands at 2.573%, while that on the 2-year note jumped to 3.07%. The yield curve is now the most inverted since 2000.

Finally, commodity-linked currencies weakened against the dollar in the American session amid the sour tone of Wall Street. AUD/USD trades near a relevant low of 0.6911, while USD/CAD stands at around 1.2850.

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: WallStreet'ss bait and switch

 


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18:37
EUR/GBP Price Analysis: Struggles around 0.8400 and trips down, on risk-off mood EURGBP
  • The EUR/GBP remains on the defensive as sellers eye a break below 0.8346.
  • The RSI in the EUR/GBP daily chart confirms the downward bias.
  • A tweezers-top in the hourly chart sent the EUR/GBP sliding 60 pips.

The EUR/GBP extended its losses in the week, falling for two days in a row and challenging the 0.8345 July 28 low, which, once broken, would open the door for further losses. A risk-off impulse keeps safe-haven peers rising, as geopolitical US-China frays keep traders jittery. At the time of writing, the EUR/GBP is trading at 0.8350.

EUR/GBP Price Analysis: Technical outlook

The EUR/GBP is downward biased once the exchange rate tumbled below the daily EMAs, particularly the 200-day EMA on July 26. Since then, the cross remains range-bound in the 0.8330-0.8400 area, unable to crack any of the up/down boundaries, despite that the Relative Strength Index (RSI) is headed downwards, which might open the door for lower prices.

EUR/GBP 1-hour chart

The EUR/GBP hourly chart further confirms the higher time-frame bias. Additionally, after hitting a daily high at 0.8399, a tweezers-top candlestick chart pattern emerged, sending the pair tumbling to its daily low at 0.8339. Although the cross jumped at the lows and breached the S1 daily pivot on top, EUR/GBP buyers need to achieve a daily close above 0.8353. Failure to do so, sellers remain in charge.

Therefore, the EUR/GBP first support would be the S1 daily pivot at 0.8351. Once cleared, the next support would be the S2 pivot point at 0.8329, followed by the 0.83000 figure.

EUR/GBP Key Technical Levels

 

18:28
Gold Price Forecast: XAU/USD bulls eye $1,800, but Taiwan is the wild card
  • Gold is back under pressure as US yields spike, but bulls are not far away.
  • There is room for further upside with the 68.2% Fibonacci meeting prior weekly structure around $1,800. 
  • Markets are cautious over US/Sino tensions over Taiwan.

The gold price is dipping below $1,770 in the midday US session from $1,788.12 the high that was scored in the New York open. XAU/USD is down some 0.18% on the day currently as it moves in on the lows of the day at $1,767.76.

The price has been driven by US bond yields that have been waning in the wake of a less hawkish narrative surrounding the Federal Reserve. This has lifted gold futures and for December delivery, the precious metals climbed back above $1,800 per ounce on Tuesday. 

The yield on the US 10-year note was last seen up 2.732 % after recovering from the lowest since early April and at the bottom of the broadening formation's daily range:

The rebound in yields is a weight on the yellow metal. Meanwhile, the US dollar rose off the lowest in nearly a month early on Tuesday, with the DXY index last seen up 0.72% to 106.166. 

US/Sino relations are the wild card for gold

To add insult to injury, the US dollar is attracting a safe haven bid on worries a visit by U.S. House of Representatives Speaker Nancy Pelosi to Taiwan would further harm relations between China and the United States. China has threatened repercussions if Pelosi visited the self-ruled island, which Beijing claims as its territory. 

said on Monday it would not be intimidated by China. Consequently, US long-term Treasury yields dropped to a four-month low while the US dollar gained against a basket of currencies. Gold also picked up a bid, but that is being demolished with the sudden corrective spike in US yields. 

''Nonetheless, for further significant short covering from CTA trend followers to take place, gold prices would need to close north of $1820/oz to spark a change in trend signals,'' analysts at TD Securities argued.

''However, on the other hand, we see risks that Fed speakers can push back against market expectations for an early Fed pivot. In this sense, gold markets are faced with a massive amount of complacent length held by prop traders, which still hold the title as the dominant speculative force in gold.''

''We have yet to see capitulation in gold, suggesting the pain trade is still to the downside and we expect the recent rally will ultimately fade, facing a wall of offers.''

Gold technical analysis

As per the prior analysis, Gold Price Forecast: XAU/USD bulls are back in play, it was explained that the price was running higher in a correction of the weekly M-formation:

The grey area was a price imbalance that has now been mitigated by a 50% mean reversion:

There is room for further upside with the 68.2% Fibonacci meeting prior structure around $1,800. 

17:27
USD/CHF Price Analysis: Bounces from multi-month lows, approaching the 100-DMA
  • The USD/CHF stages recovery after hitting a four-month low at 0.9470.
  • Sentiment remains negative, bolstering appetite for the greenback.
  • In the long-term, the USD/CHF is neutral biased, but short-term is tilted upwards, opening the door for a test of the 0.9600 mark.

The USD/CHF rebounded from under the June 29 swing low at 0.9495 and climbed to the daily high at  0.9559s, amidst a sour market mood, on US-China tussles, while also Fed speakers continued to push back against the market’s reaction to the FOMC 75 bps rate hike. At the time of writing, the USD/CHF is trading at 0.9551, up 0.67%.

USD/CHF Price Analysis: Technical outlook

The USD/CHF is neutral biased on sellers’ failure to hold the exchange rate below 0.9495, which would have paved the way towards the 200-day EMA at 0.9412. Instead, the USD/CHF edged higher, forming a bullish-engulfing chart pattern, a reversal pattern indicating buyers outweigh sellers, keeping risks skewed to the upside. Besides, the Relative Strength Index (RSI) is about to cross over its 7-day RSI’s SMA, which would open the door for higher prices.

Therefore, the USD/CHF first ceiling level would be the 100-day EMA at 0.9614. Break above will expose the major for further upside. Otherwise, a breach under 0.9500 could send the pair towards 0.9412, the 200-day EMA.

USD/CHF 1-hour chart

The USD/CHF is neutral-upward biased but faced solid resistance at a fifteen-day-old downslope trendline, which capped the rally at 0.9559. However, with the spot price above the 20, 50, and 100-hour EMAs, alongside the Relative Strength Index (RSI) aiming higher. That could open the door for a USD/CHF re-test of 95.60, which would lift the major towards the 200-hour EMA at 0.9592.

USD/CHF Key Technical Levels

 

17:10
Fed's Mester: We'll be growing below trend this year

Loretta J. Mester, president of the Federal Reserve Bank of Cleveland, joins Washington Post global economics correspondent David J. Lynch to discuss the Fed’s plan to tamp down on inflation and the concerns that it could induce a recession.

Key quotes

We'll be growing below trend this year.

We are not in a recession.

Haven't seen inflation cool ‘at all,’ reiterates commitment to bringing inflation under control.

Have to take Fed's models with ‘some caution’.

No slowdown in US labour markets, looking very healthy right now.

US dollar catches a safe haven bid

Meanwhile, US stocks struggled for gains and the dollar and gold rallied on Tuesday in a flight for safety, Markets are trading cautiously around simmering US-China tensions over Taiwan as well as the ongoing concerns about a cooling global economy. DXY is 0.63% higher at 106.07 the high for the day so far.

16:47
EUR/USD plunges on risk-aversion as safe-haven flows bolstered the US dollar
  • The shared currency struggled near 1.0300 and tumbled below 1.0200 before regaining the price level.
  • Risk aversion keeps traders’ flows into safe-haven peers, like the greenback.
  • EUR/USD Price Analysis: Failure to hold above 1.0200, the EUR/USD could dive towards 1.0100; otherwise, a rally to 1.0300 is on the cards.  

The common currency remains heavy and falls on Tuesday, as risk-aversion dominates traders’ mood. Geopolitical tensions are arising from the visit of US House’s Nancy Pelosi to Taiwan, as news flows emerging from China condemned the visit. Besides that, Fed speaking commentary, saying that the US central bank is “nowhere near” to be done fighting inflation, keeps investors uneasy.

The EUR/USD is trading at 1.0200, after hitting a daily high at 1.0293, but flows to safety, augmented demand for the greenback.

EUR/USD creeps lower on haven flows

Newswires from China signaling increasing military drills around Taiwan would likely keep the sentiment sour. Aside from this, US labor market data, namely JOLTs Job Openings for June, rose to 10.7 million, less than 11 million estimated by the streets. That suggests the labor market is easing amid growing economic pressures.

Fed speakers have begun to cross wires led by San Francisco Fed President Mary Daly, saying that the Fed is “nowhere near” done in fighting inflation and added that “it would be premature to unwind all of that (Fed tightening) and say the job is done.”

Late, the Chicago Fed President Charles Evans said that going 50 bps “is a reasonable assessment, but 75 bps could also be okay.”

Whereas in the Eurozone, Spain reported data, with the July Consumer Confidence slowing to 55.5, less than estimates at 60.1, and lower than June’s 65.8. Though data was mainly ignored, the euro is feeling the pain from falling German bunds yields, with the 10-year bund rate down from 0.885% to 0.820%, higher than its daily low at 0.678%.

The US Dollar Index, a gauge of the greenback’s value vs. a basket of peers, rises 0.05% and sits at 105.882, underpinned by haven flows, as geopolitical tensions uprise, weighing on the Loonie.

What to watch

The EU economic docket will feature Germany’s Trade Balance and a tranche of S&P Global Services and Composite PMIs from Eurozone countries and the bloc. That, alongside EU, France, and Italy’s Retail Sales, would be some data to digest for EUR/USD traders.

On the US front, further Fed speakers will shed light on the future of further Fed tightening. On Wednesday, the docket will unveil S&P Global PMIs, ISM Non-Mfg. PMIs, and Factory Orders for June.

EUR/USD Price Analysis: Technical outlook

The EUR/USD is downward biased, even though it bounced off YTD lows, reached on July 14. Nevertheless, EUR/USD buyers could not crack above the 1.0300 mark, exposing the pair to selling pressure. Therefore, the EUR/USD first support would be the 20-day EMA at 1.0157. Once cleared, it would open the door for a dive towards 1.0100. Otherwise, if the EUR/USD breaks above 1.0300, it could send the pair towards the 50-day EMA at 1.0405.

16:42
USD/ZAR: Not yet convinced that the worst is over for the South African rand – MUFG

The USD/ZAR is rising 1% on Tuesday at 16.650, amid a strong US dollar versus emerging market currencies. Analysts at MUFG Bank see that the recovery seen during the last week of the South African rand so far is just a “temporary reflief”. They forecast USD/ZAR at 17.250 by the end of the third quarter and at 16.500 by the end of the first quarter of 2023. 

Key Quotes:

“The combination of tighter Fed policy and lower commodity prices is an unfavourable combination for the rand. In recent weeks there has been some temporary relief for the rand as global equity markets have staged a modest rebound and US yields have corrected lower. However, we are not yet convinced that the worst is over for the rand. It is premature to expect the Fed stage a dovish pivot in the near-term even as evidence continues to build that the US economy is slowing.”

“The SARB (South African central bank) has recently sped up the pace of rate hikes that is helping to provide more support for the rand. USD/ZAR broke back below the 17.000-level after the SARB delivered a larger 75bps hike on 21st July. It follows a further pick-up in the headline rate of inflation to 7.4% in June. On the other hand, the SARB has become more pessimistic over the outlook for growth next year (+1.3%). Tighter monetary policy and rolling energy blackouts, with outages hitting record levels so far this year, are increasing downside risks to the growth outlook.”
 

16:31
AUD/USD holds above critical support, climbs to 0.6965 AUDUSD
  • Australian dollar recovers after falling sharply following the RBA meeting.
  • US dollar posts mixed results, and receives support from higher US yields.
  • AUD/USD finds support again around 0.6910.

The AUD/USD extended the recovery after the RBA slide and climbed to 0.6965. It is hovering around 0.6950/55, down 60 pips for the day, the worst performance since July 11.

From the RBA to higher US yields

The Reserve Bank of Australia raised the key interest rate by 50 basis points. The guidance offered by the central bank was seen as “dovish” and pushed the aussie to the downside. The AUD/USD dropped to 0.6910. After reaching a fresh daily high at 0.6909, it started to recover.

Since the beginning of the American session it recovered more than fifty pips. At the same time, the AUD/NZD that bottomed at 1.1007, the lowest in two weeks, rebounded and as of writing, it trades at 1.1055/60.

The move to the upside took place as equity prices in Wall Street turned positive and as the greenback lost momentum versus commodity currencies, even amid higher US yields.

The AUD/USD chart shows the pair still moving sideways around 0.6970. The 0.6910 zone has become a critical support that if broken should clear the way to more losses, targeting first the 20-day Simple Moving Average at 0.6878.

Analysts at Rabobank, see scope for another bout of broad-based USD strength to push AUD/USD lower on a 1 to 3 month view but then they see a recovery. “We expect AUD/USD to rise to the 0.74 area on a 12 month view.”

Technical levels

 

 

16:15
Fed's Evans: 50 bps rate hike reasonable assessment for September meeting

Chicago Fed President Charles Evans said on Tuesday that a 50 basis points rate hike would be a reasonable assessment for the September policy meeting if inflation does not improve, as reported by Reuters.

Additional takeaways

"75 bps increase is also okay; I doubt a 100 bps hike is called for."

"I am still hopeful we can do 50 bps hike in September and then continue with 25 bps rate hikes until the beginning of the second quarter of 2023."

"There’s still a reasonable expectation that monetary tightening into next year will lead to a restrictive setting but allow for a reasonably strong labor market."

"I see policy rate between 3.75 and 4% by end of next year."

"I see path to unemployment rate remaining below 4.5% with economic growth near trend."

"If we don’t see improvement in inflation over next few months, we may have to rethink rate path a little higher."

"It is possible we get a soft landing, but there are a lot of risks."

"A recession is unhealthy; so is such high inflation."

"Important to keep eye on where monetary policy has to go over medium term."

"Wouldn’t be surprising for unemployment rate to rise to region of 4.25%."

"I think unemployment rate will stay below 4% this year."

"I have downgraded my economic growth predictions somewhat for this year, probably looking at 1% or lower."

"We need to start getting less ugly inflation reports soon."

"We have to be mindful that inflationary pressures may be broadening out."

"A gentler incline once we have got slightly restrictive level would be a good path, but depends on the data."

Market reaction

The US Dollar Index showed no immediate reaction to these comments and was last seen rising 0.45% on the day at 105.88.

15:45
USD/JPY rebounds from eight week lows, rises to 132.00 USDJPY
  • USD/JPY finds support before 130.00 and breaks a negative streak.
  • US dollar gains momentum as US yields rebound.

The USD/JPY rose more than a hundred pips during the last hours, recovering sharply from the lowest level in almost two months. The pair bottomed at 130.36 and recently printed a fresh daily high slightly above 132.00.

The dollar is rising across the board for the first time after falling for four consecutive days boosted by higher US yields. The 10-year rose from month lows at 2.54% to 2.67%, and the 30-year from 2.87% to 2.95%.

Equity prices are falling on Wall Street but off lows. The S&P 500 trimmed losses and is down by just 0.06%, the Dow Jones drops 0.47% and the Nasdaq is up by 0.21%.

The improvement in risk sentiment added pressure on the yen. The Japanese currency is the worst performer of the American session while the DXY is holding onto gain, rising for the first time out of the last five days.

Yen’s rally: is it over?

The reversal in USD/JPY on Tuesday could point to the end of the rally of the yen. Still, with many critical reports ahead, including July payroll on Friday, it appears too early to consider the pair is ready to resume the upside.

From a technical perspective, USD/JPY rose back above the 131.00 area (a critical support) and also rebounded at the 20-week Simple Moving average.

Technical levels

 

15:24
USD/CAD hovers above the 50-day EMA as US House Speaker Pelosi lands in Taiwan USDCAD
  • USD/CAD jumped on risk-off impulse, spurred by geopolitical jitters between the US and China.
  • In the FX space, safe-haven peers like the USD, the JPY, and the CHF appreciate.
  • Fed Daly: Fed needs to keep committed to bringing inflation down.

The USD/CAD climbs above the 50-day EMA, due to several factors, including the visit of US House Speaker Nancy Pelosi to Taiwan and increasing tensions between the US and China. That alongside expectations of the Federal Reserve pushing back against a perceived “dovish” tilt when Chair Powell acknowledged that spending and production softened.

The USD/CAD is trading at 1.2857 after hitting a daily low of 1.2835, then bouncing off the daily lows and climbing to its daily high at 1.2887.

USD/CAD advanced on risk aversion

Global equities remain under pressure. Albeit a hiccup upwards, as reports that the plane of House speaker Pelosi landed, the dust begins to settle down, and equities are back in the red. Earlier, US data showed signs of constraints in the labor market, as the US JOLTS Openings reported that vacancies fell to 10.7 million, its lowest since September 2021.

In the meantime, the US Dollar Index, a gauge of the greenback’s value vs. a basket of peers, rises 0.05% and sits at 105.882, underpinned by haven flows, as geopolitical tensions uprise, weighing on the Loonie.

Fed officials have begun to cross wires. The San Francisco Fed President, Mary Daly, said so far, is “pleased” with the Fed decisions, but the Fed is “nowhere near” being almost done in fighting inflation. She added that the Fed needs to “keep committed until we actually see it in the data.”

On the Canadian side, the S&P Global Manufacturing PMI remains in the expansionary territory around 52.5, much lower than the forecasted, and trailed June’s 54 figure.

Elsewhere, crude oil prices begin to rise, putting a lid, on the rise of the USD/CAD, due to the CAD’s positive correlation with oil. WTI is trading at $94.00 PB, slightly up 0.25%.

What to watch

Additional Fed speakers will cross wires through the day, led by Charles Evans, Loretta Mester and James Bullard.

USD/CAD Key Technical Levels

 

15:04
China Foreign Ministry: Pelosi's visit to Taiwan seriously violates China's sovereignty

In response to US House of Representatives Speaker Nancy Pelosi's arrival in Taiwan, China's Foreign Ministry said that Pelosi's visit seriously violated China's sovereignty and territorial integrity, as reported by Reuters.

Market reaction

These comments don't seem to be having a significant impact on risk perception. As of writing, the S&P 500 Index was down 0.05% on a daily basis at 4,116.

Additional takeaways

"Pelosi's visit to Taiwan severely impacts political foundation of Sino-US relations."

"Pelosi's visit to Taiwan seriously damages peace, stability in Taiwan Strait."

"Those who play with fire will perish by it."

"Urging US to stop interfering with c-China's internal affairs, not to continue in the wrong and dangerous path."

"China will definitely take all necessary measures to resolutely safeguard sovereignty, territorial integrity in response to Pelosi's visit."

"All consequences are to be borne by US side, Taiwan pro-independence forces."

15:00
Denmark Currency Reserves: 533.4B (July) vs previous 533.8B
14:20
New Zealand GDT Price Index below expectations (0.1%): Actual (-5%)
14:11
US: JOLTS Job Openings fall to 10.7 million in June
  • US JOLTS Job Openings declined sharply in June.
  • US Dollar Index extends its recovery toward 106.00. 

The number of job openings decreased to 10.7 million on the last business day of June, the US Bureau of Labor Statistics reported in its Job Openings and Labor Turnover Summary (JOLTS) on Tuesday. This print came in slightly lower than the market expectation of 11 million and followed May's reading of 11.3 million. 

"Hires and total separations were little changed at 6.4 million and 5.9 million, respectively," the publication further read. "Within separations, quits (4.2 million) and layoffs and discharges (1.3 million) were little changed."

Market reaction

The US Dollar Index continues to push higher and was last seen rising 0.55% on the day at 105.98.

14:00
United States JOLTS Job Openings came in at 10.698M below forecasts (11M) in June
13:55
Fed's Daly: Work on inflation is nowhere near almost done

San Francisco Fed President Mary Daly said on Tuesday that she is looking for incoming data to decide if they can downshift the rate hikes or continues at the current pace, as reported by Reuters.

Additional takeaways

"Work on inflation is nowhere near almost done."

"We are still resolute and completely united on achieving price stability."

"We have a long way to go on that task."

"Gas price drop is going to provide some relief, housing market slowing is also a good sign."

"Getting too confident that we've already solved the problem would be a mistake."

"My modal outlook is we raise interest rates and hold them there for a while."

Market reaction

The US Dollar Index extended its rebound and was last seen gaining 0.35% on the day at 105.78.

13:53
Australia: Real Q2 retail sales to increase by a robust pace of 2.0% q/q – TDS

Analysts at TD Securities (TDS) offered a brief preview of the final version of the monthly retail sales figures from Australia, scheduled for release during the Asian session on Wednesday. The data might influence the aussie and provide some impetus to the AUD/USD pair.

Key Quotes:

“Nominal Q2 retail sales was strong, up 3.2% q/q, albeit boosted by higher prices of goods and services. Nonetheless, we expect real Q2 retail sales to still increase by a still-robust pace of 2.0% q/q (cons: 1.2%, Q1: 1.2%) which should give a boost to Q2 GDP. “

“If real retail sales surprise strongly to the upside, this gives RBA room to continue its aggressive pace of rate hikes given the underlying strength in consumer spending. We expect the RBA to hike by another 50bps at the September meeting.”

13:47
USD/TRY in fresh yearly tops just shy of 18.00
  • USD/TRY resumes the upside and approaches 18.00.
  • Renewed buying interest in the dollar lifts the pair.
  • Investors’ attention shifts to the release of July CPI on Wednesday.

The Turkish lira resumes its depreciation and lifts USD/TRY to new 2022 highs closer to the 18.00 hurdle on Tuesday.

USD/TRY now looks to CPI results

 After two consecutive daily pullbacks, USD/TRY regains upside traction and trades closer to the key 18.00 hurdle, or new YTD tops, on Tuesday.

The re-emergence of the risk aversion on US-China jitters props up the better tone in the greenback and the safe haven universe, putting in consequence the EM FX space back under extra pressure.

In addition, investors are expected to remain wary in the next hours ahead of the release of inflation figures in Türkiye for the month of July on Wednesday, with consensus expecting the CPI to surpass the 80.0% mark over the last twelve months.

What to look for around TRY

The upside bias in USD/TRY remains unchanged and stays on course to revisit the key 18.00 zone.

In the meantime, the lira’s price action is expected to keep gyrating around the performance of energy prices, which appear directly correlated to developments from the war in Ukraine, the broad risk appetite trends and the Fed’s rate path in the next months.

Extra risks facing the Turkish currency also come from the domestic backyard, as inflation gives no signs of abating, real interest rates remain entrenched in negative figures and the political pressure to keep the CBRT biased towards low interest rates remain omnipresent. In addition, there seems to be no Plan B to attract foreign currency in a context where the country’s FX reserves dwindle by the day.

Key events in Türkiye this week: Inflation Rate, Producer Prices (Wednesday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress (or lack of it) of the government’s new scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Structural reforms. Presidential/Parliamentary elections in June 23.

USD/TRY key levels

So far, the pair is gaining 0.50% at 17.9491 and faces the immediate target at 17.9545 (2022 high August 2) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the other hand, a breach of 17.1903 (weekly low July 15) would pave the way for 17.0110 (55-day SMA) and finally 16.0365 (monthly low June 27).

 

13:41
Canada: S&P Manufacturing PMI drops to 52.5 in July vs. 55.7 expected
  • Canada S&P Global Manufacturing PMI declined in July.
  • USD/CAD clings to small daily gains above 1.2850.

The business activity in Canada's manufacturing sector expanded at a softer pace in July than in June with the S&P Global Manufacturing PMI dropping to 52.5 from 54.6. This print came in weaker than the market expectation of 55.7.

Commenting on the data, "latest PMI data revealed another slowdown in operating conditions in Canada's manufacturing sector with the PMI at its lowest point for just over two years," said Shreeya Patel, Economist at S&P Global Market Intelligence. "Behind the latest moderation were contractions in both output and new orders which fell for the first time since the pandemic began in the first half of 2020."

Market reaction

The USD/CAD pair edged slightly higher with the initial reaction and was last seen rising 0.12% on the day at 1.2860.

13:40
Gold Price Forecast: XAU/USD sticks to gains near multi-week high, around $1,780 area
  • Gold gains traction for the fifth straight day and climbs to a four-week high on Tuesday.
  • Declining US bond yields and the risk-off mood continue to offer support to the XAU/USD.
  • A goodish USD bounce from a multi-week low is acting as a headwind for the commodity.

Gold builds on last week's bullish breakout momentum through the $1,745-$1,750 resistance zone and gains traction for the fifth successive day on Tuesday. The momentum remains uninterrupted through the early North American session and lifts spot prices to a four-week high, around the $1,788 region.

The ongoing decline in the US Treasury bond yields continues to offer some support to the non-yielding gold. In fact, the yield on the benchmark 10-year US government bond drops to a four-month low amid reduced bets for larger interest rate hikes by the Federal Reserve. It is worth recalling that the Fed last week hinted that it could slow the pace of the current rate hike cycle at some point. Furthermore, the Advance US GDP report released last Thursday confirmed a technical recession and forced investors to scale back expectations for a more aggressive policy tightening by the Fed.

Apart from this, the prevalent risk-off mood further benefits the safe-haven precious metal. The market sentiment remains fragile amid growing worries about a global economic downturn. Furthermore, mounting diplomatic tensions over US House Speaker Nancy Pelosi's Taiwan visit temper investors' appetite for perceived riskier assets. In fact, Wang Yi, senior Chinese diplomat and the Foreign Minister, warned on Tuesday that the US politicians are openly playing with fire with the Taiwan issue. This, in turn, is driving flows towards traditional safe-haven assets, including the XAU/USD.

That said, a goodish US dollar bounce from a four-week trough touched earlier this Tuesday is acting as a headwind for the dollar-denominated gold. That said, the aforementioned factors should continue to lend some support to the XAU/USD ahead of the next key data point from the US, the monthly jobs report (NFP) on Friday. This makes it prudent to wait for strong follow-through selling before confirming that the recent recovery from a 15-month low, around the $1,680 region touched in July, has run out of steam. In the absence of any major market-moving economic releases, the US bond yields, the broader risk sentiment and the USD price dynamics would continue to influence spot prices.

Technical levels to watch

 

13:30
Canada S&P Global Manufacturing PMI below expectations (55.7) in July: Actual (52.5)
13:15
EUR/USD Price Analysis: A break of 1.0300 should lead to further gains EURUSD
  • EUR/USD comes under pressure after faltering ahead of 1.0300.
  • Further upside is seen once 1.0300 is cleared.

EUR/USD advanced to levels just shy of 1.0300 the figure and sparked a corrective downside soon afterwards.

Ideally, the pair should clear the area of recent peaks to allow for the continuation of the rebound in the near term. That said, above the 1.0300 zone the pair should meet the next up barrier at the 55-day SMA, today at 1.0423.

Beyond the latter emerges the 6-month support line around 1.0440, above which the downside pressure is predicted to mitigate.

In the longer run, the pair’s bearish view is expected to prevail as long as it trades below the 200-day SMA at 1.0949.

EUR/USD daily chart

 

13:06
OPEC+ JTC lowers 2022 oil market surplus forecast to 800,000 bpd – Reuters

Citing two OPEC+ delegates, Reuters reported on Tuesday that the OPEC+ Joint Technical Committee (JTC) lowered its oil market surplus forecast for 2022 by 200,000 barrels per day (bpd) to 800,000 bpd.

According to sources, the JTC did not discuss the output policy ahead of the ministerial meeting of OPEC+ on Wednesday.

Market reaction

Crude oil prices continue to edge lower following this report. As of writing, the barrel of West Texas Intermediate was trading at $93.35, where it was down 0.73% on a daily basis.

13:01
GBP/USD Price Analysis: Bounces back above 1.2200, keeps the red amid modest USD strength GBPUSD
  • GBP/USD edges lower on Tuesday and erodes a part of the overnight gains to a one-month high.
  • Jitters ahead of Pelosi's Taiwan visit boost the safe-haven USD and exert downward pressure.
  • The formation of an ascending channel supports prospects for the emergence of some dip-buying.

The GBP/USD pair witnesses some selling on Tuesday and extends the overnight modest pullback from the vicinity of the 1.2300 mark, or over a one-month high. Spot prices, however, show some resilience below the 1.2200 mark and have now managed to rebound a few pips from the daily low.

The US dollar draws some haven flows amid mounting diplomatic tensions over US House Speaker Nancy Pelosi's Taiwan visit and stages a goodish bounce from a fresh multi-week low. This turns out to be a key factor that exerted some downward pressure on the GBP/USD pair through the first half of the European session.

The anti-risk flow, along with expectations that the Fed would not increase rates as aggressively as previously estimated, continues to drag the US Treasury bond yields lower. This is acting as a headwind for the buck. Apart from this, rising bets for a 50 bps rate hike by the Bank of England have helped limit losses for the GBP/USD pair.

Looking at the broader picture, the recent recovery from the lowest level since March 2020 witnessed over the past two-and-half weeks or so has been along an upward sloping trend channel. This points to a well-established short-term bullish trend and supports prospects for the emergence of some dip-buying at lower levels.

Hence, any subsequent decline below the daily swing low, around the 1.2185 region, is likely to stall near the lower end of the ascending channel. The said support is currently pegged near the 1.2100 mark and is closely followed by the 200-period SMA on the 4-hour chart, around the 1.2080 region, which should act as a pivotal point.

On the flip side, the 1.2245 area could provide a hurdle ahead of the 1.2280 supply zone. Sustained strength beyond should allow the GBP/USD pair to surpass the 1.2300 mark and test the ascending channel resistance, currently around the 1.2315 region. Some follow-through buying would be seen as a fresh trigger for bulls.

GBP/USD 4-hour chart

fxsoriginal

Key levels to watch

 

13:00
Singapore Purchasing Managers Index meets forecasts (50.1) in July
12:55
United States Redbook Index (YoY) up to 15.5% in July 29 from previous 13.3%
12:24
Dollar gets haven bid as China talks tough on Taiwan – BBH

According to Win Thin, Global Head of Currency Strategy at BBH, the US dollar draws some support from haven flows on Tuesday amid mounting diplomatic tensions in the wake of the planned Taiwan visit by US House Speaker Nancy Pelosi. He further sticks to his medium-term USD bullish outlook ahead of Fed speakers and important US macro data this week.

Key Quotes:

“The dollar is getting some limited traction as risk off sentiment takes hold.  DXY is up for the first time after four straight down days and trading near 105.541 as House Speaker Pelosi’s  Taiwan visit has led to tensions with China. We maintain our strong dollar call and believe that markets are misreading the Fed’s commitment to lowering inflation. However, the greenback is unlikely to get much traction in the absence of strong economic data.  This week’s U.S. data will be key for the medium-term dollar outlook.”

“Fed speakers will be closely scrutinized this week. We do not think Fed officials are very happy with the market’s dovish take on its decision last week and they are likely to push back this week.  As such, prepare for comments that tilt decidedly hawkish.  Evans, Mester, and Bullard speak today.  Harker, Barkin, and Kashkari speak tomorrow.  Mester speaks again Thursday and Barkin speaks again Friday.”

“Over the weekend, uber-dove Kashkari reiterated that the Fed is focused on lower inflation, noting that “We are committed to bringing inflation down and we’re going to do what we need to do.  We are a long way away from achieving an economy that is back at 2% inflation, and that’s where we need to get to.”  We concur.”

12:10
Indonesia: Inflation accelerated in July – UOB

Enrico Tanuwidjaja, Economist at UOB Group, comments on the latest inflation figures in Indonesia.

Key Takeaways

“July’s headline inflation jumped to 4.9% y/y, breaching Bank Indonesia (BI)’s 4% target upper bound for the second month in a row and currently at 7-year high, while core inflation rose to 2.9% y/y, a 28-month high, from June’s 2.6%.”

“Inflation in July continued to be driven by upward pressures from food services and restaurants and transport, in addition to housing, water, electricity and household fuel.”

“We revised our 2022 inflation forecast now to average 4% viz. 3.3% previously and for BI to hike rates now in Sep instead of in Jul.”

12:10
Silver Price Analysis: Bulls look to seize control near 50% Fibo., move beyond 50-DMA awaited
  • Silver reverses modest intraday downtick to the $20.00 neighbourhood.
  • The technical setup supports prospects for additional near-term gains.
  • Bulls might still wait for sustained strength beyond the 50-day SMA.

Silver attracts some dip-buying near the $20.15-$20.10 area on Tuesday and inches back closer to a one-month peak touched the previous day. The white metal climbs back above the 50% Fibonacci retracement level of the $22.52-$18.15 slide, though bulls might wait for a sustained move beyond the 50-day SMA before placing fresh bets.

Technical indicators on the daily chart, meanwhile, are holding comfortably in the positive territory and have also eased from the slightly overbought territory on the 4-hour chart. This, in turn, supports prospects for an eventual break through the aforementioned barrier around the mid-$20.00s and a further near-term appreciating move.

The XAG/USD might then aim to surpass the 61.8% Fibo. level, around the $20.85 region, and reclaim the $21.00 round figure. The momentum could further get extended and lift spot prices towards the next relevant hurdle near the $21.40-$21.50 area en route to the $22.00 mark and the 100-day SMA, currently around the $22.10-$22.15 region.

On the flip side, any meaningful slide might continue to find decent support ahead of the $20.00 psychological mark. This is followed by the 38.2% Fibo. level, around the $19.80 region. Failure to defend the said support levels would suggest that the recovery from the YTD low has run out of steam and shift the bias in favour of bearish traders.

The subsequent decline has the potential to drag the XAG/USD towards the 23.6% Fibo. level, around the $19.15-$19.10 area, en-route the $19.00 mark. Some follow-through selling would expose the $18.50 intermediate support, below which spot prices could slide further to retesting the YTD low, around the $18.15 region touched on July 14.

Silver daily chart

fxsoriginal

Key levels to watch

 

12:06
US Dollar Index Price Analysis: Below 105.00 comes the 55-day SMA
  • DXY attempts a corrective bounce after flirting with 105.00.
  • Next on the downside emerges the 55-day SMA at 104.79.

DXY manages to reverse the initial drop of the boundaries of the 105.00 mark on Tuesday.

Despite the ongoing rebound, the index remains under pressure after breaching the multi-session pre-FOMC consolidative theme.

That said, further decline remains well on the cards and the loss of the 105.00 yardstick should leave the door open to a probable visit to the 6-month support line around 104.00.

While above the latter, the dollar’s short-term constructive outlook is expected to persist.

In addition, the broader bullish view remains in place while above the 200-day SMA at 99.55.

DXY daily chart

 

12:01
Brazil Industrial Output (YoY) below expectations (-0.2%) in June: Actual (-0.5%)
12:00
Brazil Industrial Output (MoM) below expectations (-0.2%) in June: Actual (-0.4%)
11:32
EUR/JPY Price Analysis: Outlook negative below the 200-day SMA EURJPY
  • EUR/JPY drops further and challenges the key 200-day SMA.
  • Below the latter, the cross could risk a deeper retracement.

EUR/JPY extends the bearish move well south of the 134.00 mark on Tuesday.

In the meantime, price action in the cross remains entrenched in the negative territory, losing ground for the fourth consecutive session so far.

A break below the key 200-day SMA, today at 133.69, carries the potential to accelerate losses and shift the outlook to negative.

Immediately to the downside now emerges the May low at 132.65 (May 12).

EUR/JPY daily chart

 

11:01
China's Yi: US politicians openly play with fire with Taiwan issue

Wang Yi, senior Chinese diplomat and the Foreign Minister, said on Tuesday that the US politicians are openly playing with fire with the Taiwan issue, as reported by Reuters.

"Those US politicians will come to no good end," Yi added.

Meanwhile, US House of Representatives Speaker Nancy Pelosi's delegation is reportedly scheduled to arrive in Taiwan at around 1420 GMT.

Market reaction

Markets remain risk-averse following these comments and the US stock index futures were last seen losing between 0.7% and 0.9% on the day.

10:55
China: Business Sentiment worsened in July – UOB

Economist at UOB Group Ho Woei Chen, CFA, reviews the latest set of data results in the Chinese economy.

Key Takeaways

“China’s official manufacturing PMI unexpectedly slumped to 49.0 in Jul (Bloomberg est: 50.3; Jun: 50.2), highlighting the fragility of China’s recovery. The Caixin manufacturing PMI also eased by a larger than expected pace to 50.4 (Bloomberg est: 51.5; Jun: 51.7) but stayed in expansion.”

“The non-manufacturing PMI eased to 53.8 in Jul (Bloomberg est: 53.9; Jun: 54.7) but remained in expansion for the second straight month as strengthening construction (59.2 from 56.6 in Jun) led by local government frontloading infrastructure spending which offset weaker services activity index (52.8 from 54.3 in Jun).”

“The resurgence in COVID infections (in cities including Shenzhen), turmoil in the domestic property market, high global inflation and weakening global demand outlook are all dampening China’s recovery in 2H22.”

“This suggests increasing downside risk to our 4.1% GDP growth forecast for China this year, which assumes 5.3% growth in 2H22 (from 2.5% y/y in 1H22).”

 

 

10:30
USD/JPY Price Analysis: Defends 100-DMA, bears still have the upper hand below mid-131.00s USDJPY
  • USD/JPY now seems to have entered a bearish consolidation phase near a two-month low.
  • Slightly oversold RSI on the daily chart helped spot prices to defend the 100-DMA support.
  • Acceptance below the 131.45 resistance-turned-support continues to favour bearish traders.

The USD/JPY pair is seen oscillating in a range around the 131.00 mark through the mid-European session and consolidating its recent slide to a nearly two-month low.

The US dollar stages a modest bounce from its lowest level since July 5 touched earlier this Tuesday and offers some support to the USD/JPY pair. That said, the recent narrowing of the US-Japan yield differential, along with the prevalent cautious mood, continues to underpin the safe-haven Japanese yen. This, so far, has failed to assist spot prices to register any meaningful recovery.

From a technical perspective, RSI (14) on the daily chart is flashing slightly oversold conditions. This, in turn, assists the USD/JPY pair to find some support near the 100-day SMA and stall its post-FOMC decline witnessed over the past one week or so. That said, acceptance below a previous strong resistance breakpoint, around the 131.45 region, supports prospects for further losses.

The aforementioned resistance-turned-support should act as a pivotal point, which if cleared decisively could trigger a short-covering around the USD/JPY pair. Spot prices could accelerate the recovery move and reclaim the 132.00 round-figure mark. Some follow-through buying beyond the 132.15 area would suggest that the recent downfall has run its course and pave the way for additional gains.

On the flip side, bearish traders might now wait for a sustained break below the 100-day SMA, currently around the 130.20 region, before positioning for an extension of the depreciating move. The USD/JPY pair might then turn vulnerable to weaken further below the 130.00 psychological mark and accelerate the fall towards testing the next relevant support around the 129.60 horizontal zone.

USD/JPY daily chart

fxsoriginal

Key levels to watch

 

10:08
New Zealand: Unemployment rate seen higher at 3.3% in Q2 2022 – TDS

Analysts at TD Securities (TDS) offer their expectations on New Zealand’s labor market report due on the cards on Wednesday.

Key quotes

“Contrary to consensus, we expect the labor market to soften slightly with the Q2'22 unemployment rate rising to 3.3% (cons: 3.1%, Q1'22: 3.2%).”

“While employment growth is likely to remain robust at 0.5% q/q (Q1: 0.1%), an increase in labor supply from the reopening of international borders may drive the unemployment rate higher.”

“Omicron-related disruptions may also persist in Q2 and is a downside risk to employment growth.”

“On wages, we expect a 1.2% q/q increase in the Labor Cost Index (RBNZ: 1.2%, Q1: 0.7%), bringing the annual growth rate to 3.4% y/y given the tightness in the labor market.”

“With the labor market holding up and annual inflation staying 7%, we expect the RBNZ to continue hiking by 50bps at its August meeting.”

10:03
Outcome of OPEC+ meeting uncertain – Commerzbank

Carsten Fritsch - Analyst Energy, Agriculture, Precious Metals at Commerzbank - offered a brief preview of the OPEC+ meeting on Wednesday to decide the production volume for September. The markets expect a further gradual increase of the production targets, which should help crude oil prices to stabilise.

Key Quotes:

“The noticeable price slide since yesterday could make OPEC+ more cautious because it was attributable to renewed demand concerns in the wake of disappointing economic data from China, the world’s second-largest oil consumer country. The news that oil production in Libya has regained its normal level for the first time in nearly four months could also argue against any further expansion of production. After all, this will see around 600,000 barrels per day of Libyan oil return to the market – oil that was still missing in June and July.”

“That said, in its July monthly report that is based on oil production in June, OPEC is still predicting a supply deficit of more than 1 million barrels per day in the second half of the year. Only if it turns out that OPEC+ stepped up its oil production by around 650,000 barrels per day as planned in July and August, and if Libya maintains its oil production at a constant 1.2 million barrels per day until the end of the year – both of which are very unlikely given what we have seen in recent months – would the oil market be sufficiently supplied.”

“We therefore find the outcome of the OPEC+ meeting impossible to predict, though there is more to suggest that the current production volume will be left unchanged, which should help prices to stabilise.”

09:50
ECB: Euro area fiscal aid boosts growth and lowers inflation in 2022

In a pre-release of its economic bulletin published on Tuesday, the European Central Bank (ECB) revealed that the fiscal support provided to the euro area economies amidst the Russia-Ukraine war is boosting the bloc’s GDP while temporarily lowering inflation, per Bloomberg.

Key takeaways

“The total stimulus measures in response to the war are estimated to have an impact of almost 0.4 percentage points on overall growth and a limited impact of just over 0.1 percentage point on inflation.”

“Efforts should be made to increasingly target energy-related measures to vulnerable segments of the population.”

Market reaction

At the time of writing, EUR/USD is off the 1.0215 low but remains 0.24% lower on the day at 1.0234. The pair bears the brunt of risk aversion market conditions, thanks to the escalating US-China tensions over Nancy Pelosi’s visit to Taiwan.

Meanwhile, EUR bears retain control, as money markets now suggest the ECB will be forced to stop before it reaches 100 basis points, compared with bets for more than 200 basis points overall as recently as July 21. The change in the market’s expectations for potential ECB tightening is based on the renewed recession fears and persisting European gas crisis.

09:48
USD/CHF pares modest intraday recovery gains, up a little around 0.9500 mark USDCHF
  • USD/CHF stages an intraday bounce from a multi-month low amid a modest USD uptick.
  • A combination of factors holds back bulls from positioning for any meaningful recovery.
  • Traders look forward to the US JOLTS Job Openings data for short-term opportunities.

The USD/CHF pair stages a goodish intraday bounce from the 0.9470 area, or its lowest level since April touched earlier this Tuesday and snaps a five-day losing streak. The pair, however, trims a part of its recovery gains and retreats to the 0.9500 mark during the first half of the European session.

A modest US dollar recovery from a four-week low set this Tuesday turns out to be a key factor offering support to the USD/CHF pair. That said, a combination of factors is holding back bullish traders from positioning from any meaningful upside and capping the upside for spot prices, at least for now.

Growing recession fears, along with mounting diplomatic tensions ahead of the planned Taiwan visit by US House Speaker Nancy Pelosi, continue to weigh on investors' sentiment. This is evident from a softer tone around the equity markets, which, in turn, extends support to the safe-haven Swiss franc.

The anti-risk flow, along with expectations that the Fed would not hike interest rates as aggressively as estimated, exerts some follow-through pressure on the US Treasury bond yields lower. This seems to act as a headwind for the greenback and further contribute to capping gains for the USD/CHF pair.

Hence, it would be prudent to wait for strong follow-through buying before confirming that the USD/CHF pair has formed a near-term bottom and positioning for any meaningful recovery. Traders now look forward to the JOLTS Job Openings data for some impetus later during the early North American session.

Technical levels to watch

 

09:41
Australia's housing loses momentum in June – ANZ

Analysts at Australia and New Zealand (ANZ) banking group offer their views on the Australian housing sector in the coming months.

Key quotes

“Housing lending fell 4.4% m/m in June, with declines across owner-occupier lending (-3.3% m/m) and investor lending (-6.3% m/m).”

“Residential building approvals fell just 0.7% m/m in June, barely reversing any of the very strong revised uplift in May of +11.2% m/m. After a jump of 34.6% m/m in May, a fall in unit approvals (-5.7% m/m) drove the June decline.”

“We expect rising interest rates and high inflation to push down demand for home building and borrowing in the coming months.”

09:30
United Kingdom 10-y Bond Auction fell from previous 2.145% to 1.782%
09:26
AUD/USD Price Analysis: Teasing a rising wedge breakdown amid US-China woes AUDUSD
  • AUD/USD remains sold-off into dovish RBA tone and US-China woes over Taiwan.
  • RBA hikes key rates by 50 bps but says it's not on a pre-set tightening path.
  • A potential rising channel breakdown on the 1D targets 21 DMA at 0.6873.

AUD/USD is holding the lower ground above 0.6900, losing nearly 1.50% on the day, as the AUD bulls continue to face a double-whammy this Tuesday.

Risk-aversion remains at full steam, as markets stay anxious ahead of the expected visit of US House of Representatives Speak Nancy Pelosi to Taiwan around 1430 GMT. The US remains unintimidated by the Chinese threats but Beijing and Taipei have stepped up their military responses in a show of strength, as Pelosi visits the self-ruled island claimed by the dragon nation.

Another reason for the aussie sell-off is the dovish signal from the Reserve Bank of Australia (RBA) during its monetary policy meeting. The RBA raised the key rate by 50 bps to 1.85% this month, as widely expected. However, the central bank noted that they are not on a pre-set tightening path, in a way abandoning the forward guidance, which triggered a fresh downfall in the aussie dollar.

All eyes now remain on Pelosi’s arrival to Taipei, which could see a fresh risk-aversion wave spelling out in the early American session. Meanwhile, the pair also remains exposed to downside risks, given that it is on track to confirm a rising wedge breakdown on the daily chart.

AUD/USD has breached the horizontal 50-Daily Moving Average (DMA) support at 0.6966, which has opened up the additional downside.

A daily closing below the rising trendline support at 0.6952 will validate the bearish channel.

The next relevant downside cap is pegged at 0.6873, which is the horizontal 21 DMA.

The 14-day Relative Strength Index (RSI) is attacking the midline, suggesting that there is more room southwards.

AUD/USD: Daily chart

Recapturing the 50 DMA is critical to initiating any meaningful recovery towards 0.7000.

The intraday high of 0.7034 will emerge as a tough nut to crack for AUD bulls.

AUD/USD: Additional levels to consider

 

09:15
RBA: Slow is smooth and smooth is fast – TDS

The Reserve Bank of Australia (RBA) sounded dovish in its monetary policy statement, despite delivering the third straight 50bps hike, according to strategists at TD Securities. 

Key Quotes:

“Despite the fact that inflation is now expected to stay elevated at 4% by Q4' 2023, above the Bank's 2-3% target inflation band, markets focused on the addition of the Bank's guidance that the policy normalisation ahead is not on a pre-set path.”

The monetary policy statement suggested that “the Bank has dialled down its focus on returning headline inflation back into the 2-3 percent target range "next year" (as was noted in Statements earlier this year) and it has now shifted to achieve this "over time". In contrast, inserting "keeping the economy on an even keel" suggests the Bank is placing more emphasis on growth and hence engineering a soft landing.”

“If the Bank really wanted to get on top of inflation and return it back into the 2-3% target band next year, it could raise rates aggressively. However the fact that it expects inflation to remain well above its target band in 2023 at 4% implies the Bank is in no pressing rush to normalise monetary conditions rapidly. In other words, rapid 50bps hikes are becoming less likely, as hiking aggressively could adversely impact growth.”

09:09
USD/CNH now looks to 6.8100 – UOB

Further upside in USD/CNH could see the 6.8100 level revisited in the near term, comment FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “We did not anticipate the strong rise in USD to 6.7905 yesterday (we were expecting USD to trade between 6.7350 and 6.7650). Strong upward momentum suggests USD could strengthen further to 6.8000, possibly 6.8100. Support is at 6.7800 followed by 6.7700.”

Next 1-3 weeks: “Our latest narrative was from last Thursday (28 Jul, spot at 6.7525) where USD is likely to consolidate and trade between 6.7280 and 6.7800. Yesterday, USD cracked 6.7800 and soared to a high of 6.7905. Strong surge in upward momentum suggests that USD is likely to advance to 6.8100. Looking ahead, a break of 6.8100 would shift the focus to the year-to-date high near 6.8390. The upside risk is intact as long as USD does not move below the ‘strong support’ level, currently at 6.7500.”

09:02
EUR/USD comes under pressure and threatens 1.0200 EURUSD
  • EUR/USD’s upside momentum falters ahead of the 1.0300 mark.
  • The dollar looks bid amidst renewed risk-off sentiment.
  • German 10y Bund yields drop to new 4-month lows near 0.70%.

Sellers now drag EUR/USD back to the 1.0230 region following an earlier bull run to the area just below 1.0300 the figure on Tuesday.

EUR/USD weaker on USD-buying

EUR/USD now trades on the defensive for the first time after four consecutive daily advances and following an unsuccessful attempt to retest the 1.0300 mark earlier in the session.

The re-emergence of the risk aversion lends support to the greenback and encourages the US Dollar Index (DXY) to make a U-turn and return to the positive territory following 4-week lows in the vicinity of the 105.00 yardstick.

The pair’s corrective move comes in tandem with the relentless downtrend in the German 10y Bund yields, this time retreating to levels last seen back in mid-April around the 0.68% zone.

In the domestic calendar, the Unemployment Change in Spain increased by 3.230K persons in July following June’s marked drop. Still in Spain, the Consumer Confidence gauge for the month of July is due later.

What to look for around EUR

EUR/USD’s rebound came short of the 1.0300 region so far on Tuesday amidst a moderate recovery in the greenback, which appears in turn propped up by the re-emergence of the risk aversion.

Price action around the European currency, in the meantime, is expected to closely follow dollar dynamics, geopolitical concerns, fragmentation worries and the Fed-ECB divergence.

On the negatives for the single currency emerges the so far increasing speculation of a potential recession in the region, which looks propped up by dwindling sentiment readings among investors and the renewed downtrend in some fundamentals.

Key events in the euro area this week: Germany Balance of Trade, Final Services PMI (Wednesday) – Germany Construction PMI (Thursday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle. Italian elections in late September. Fragmentation risks amidst the ECB’s normalization of monetary conditions. Impact of the war in Ukraine on the region’s growth prospects and inflation.

EUR/USD levels to watch

So far, spot is retreating 0.20% at 1.0240 and faces the next support at 1.0096 (weekly low July 26) seconded by 1.0000 (psychological level) and finally 0.9952 (2022 low July 14). On the upside, a breakout of 1.0293 (monthly high August 2) would target 1.0423 (55-day SMA) en route to 1.0615 (weekly high June 27).

08:59
GBP/USD retreats further from multi-week high, slides below 1.2200 amid rebounding USD GBPUSD
  • GBP/USD slips back below the 1.2200 mark on Tuesday amid a goodish USD rebound.
  • Recession fears, US-China tensions over Taiwan drive safe-haven flows towards the USD.
  • Sliding US bond yields might cap the USD and lend support to the pair ahead of the BoE.

The GBP/USD pair witnessed a turnaround from the 1.2275-1.2280 region on Tuesday and retreats further from its highest level since June 27 touched the previous day. The steady intraday descent extends through the early part of the European session and drags spot prices below the 1.2200 mark in the last hour.

The US dollar stages a goodish rebound from a four-week low set earlier this Tuesday, which turns out to be a key factor exerting downward pressure on the GBP/USD pair. The market sentiment remains fragile amid growing worries about a global economic downturn. Apart from this, mounting diplomatic tensions ahead of the planned Taiwan visit by US House Speaker Nancy Pelosi tempers investors' appetite for riskier assets and benefits the safe-haven greenback.

The anti-risk flow, along with expectations that the Fed would not hike interest rates as aggressively as estimated, continue to drag the US Treasury bond yields lower. This might hold back the USD bulls from positioning for any meaningful upside. Apart from this, rising bets for a 50 bps rate hike by the Bank of England should continue to lend support to the British pound. The combination of factors could lend support to the GBP/USD pair and limit the downside.

Investors might also prefer to wait on the sidelines ahead of this week's central bank event risk and important US macro data. The BoE is scheduled to announce its monetary policy decision on Thursday, which would play a key role in influencing the near-term sentiment surrounding sterling. Investors would further take cues from the closely-watched US monthly jobs report (NFP) on Friday to determine the next leg of a directional move for the GBP/USD pair.

In the meantime, Tuesday's US economic docket, featuring the only release of JOLTS Job Openings data might provide some impetus later during the early North American session. Apart from this, the US bond yields and the broader risk sentiment would drive the USD demand, allowing traders to grab short-term opportunities around the GBP/USD pair. Nevertheless, it would be prudent to wait for strong follow-through selling before confirming that spot prices have topped out.

Technical levels to watch

 

08:49
China: Feeling worse but looking better in July – Standard Chartered

Economists at Standard Chartered offer their review of the Chinese economic performance for the month of July.

Key quotes

“Official manufacturing PMI fell to 49 in July, showing m/m production contraction and softer demand.”

“CPI inflation likely rose to 3% y/y on surging pork prices; trade surplus may have stayed sizeable.”

“We think infrastructure investment growth accelerated; catering sales may have resumed growth.”

“M2 growth likely slowed due to tax payments and net liquidity withdrawal by the People’s Bank of China (PBoC).”

“We expect CNY loan growth to have eased on reduced loan demand. Government bond financing may have declined significantly as the local government special bond issuance quota was largely used.”

“Meanwhile, total social financing (TSF) growth likely picked up to 11% y/y mainly due to a low base.”

08:44
Gold Price Forecast: XAU/USD bulls keep their sight on $1,786 amid Taiwan tensions – Confluence Detector
  • Gold price eases but upside remains favored amid escalating US-China tensions.
  • The expected visit of US’ Pelosi to Taipei rattles markets amid China warnings.
  • XAU/USD bulls remain on track to test the critical resistance area at $1,786.

Gold price seems positioned for a renewed upswing, with all eyes set on the $1,786 barrier en route to the $1,800 mark. The buying interest in the yellow metal remains unabated, despite the latest rebound in the US dollar, as investors prefer holding gold as a store of value amid escalating US-China tensions over Taiwan. US House of Representatives Speaker Nancy Pelosi is due to arrive in Taiwan at 1420 GMT. Both China and Taiwan have strengthened their military resources, as she is visiting the self-ruled island claimed by Beijing. Intensifying geopolitical tensions have ramped up risk-off flows into traditional safe havens such as the bullion and the US government bonds, weighing negatively on the Treasury yields. The ongoing slump in the yields is likely to remain a drag on the dollar. Looking forward, the absence of top-tier US economic data will keep the market’s attention on the Taiwan tensions.

Also read: Gold Price Forecast: XAU/USD outshines amid panic, targets $1,794

Gold Price: Key levels to watch

The Technical Confluence Detector shows that the gold price is looking to find fresh upside traction, as it flirts with the $1,771 support area. That level is the convergence of the Fibonacci 23.6% one-day and SMA5 four-hour.

Defending the latter could fuel a bounce back towards the previous day’s high of $1,775. The next significant resistance is aligned at the pivot point one-day R1 at $1,779.

Bulls need to crack the confluence of the pivot point one-week R1 and pivot point one-day R2 at $1,786 to unleash a sustained move towards the $1,800 mark.

On the flip side, if sellers manage to find a strong foothold below the abovementioned support, then bears will challenge a strong cushion around $1,768, where the previous week’s high, SMA10 four-hour and Fibonacci 38.2% one-day coincide.  

The Fibonacci 61.8% one-day at $1,765 will come to buyers’ rescue, below which the Fibonacci 61.8% one-month at $1,763 will be probed.

The next downside targets are placed at the previous day’s low of $1,758 and the all-important Fibonacci 23.6% one-week at $1,755.

Here is how it looks on the tool

fxsoriginal

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

08:30
Hong Kong SAR Retail Sales climbed from previous -1.7% to -1.2% in June
08:23
USD/CAD climbs to multi-day high amid sliding oil prices, modest USD rebound
  • A combination of supporting factors pushes USD/CAD higher for the second straight day.
  • Weaker oil prices undermine the loonie and offer support amid a modest USD rebound.
  • Recession fears weigh on investors’ sentiment and seem to benefit the safe-haven buck.

The USD/CAD pair builds on the overnight goodish bounce from its lowest level since June 10 and gains traction for the second successive day on Tuesday. The momentum lifts spot prices to a four-day high, around the 1.2875-1.2880 region during the early North American session, though lacks follow-through.

Crude oil prices remain on the defensive near a two-and-half-week low, which continues to undermine the commodity-linked loonie and act as a tailwind for the USD/CAD pair. The worsening global economic outlook, along with the recent COVID-19 outbreak in China, raises concerns about the fuel demand and is weighing on the black liquid.

The US dollar, on the other hand, stages a modest bounce from its lowest level since July 5 and offers additional support to the USD/CAD pair. The market sentiment remains fragile amid recession fears and mounting diplomatic tensions ahead of US House Speaker Nancy Pelosi's planned Taiwan visit. This, in turn, benefits the safe-haven buck.

The anti-risk flow, along with expectations that the Fed would not hike interest rates as aggressively as estimated, continued dragging the US Treasury bond yields lower. This might hold back the USD bulls from positioning for any further recovery and keep a lid on any meaningful upside for the USD/CAD pair, at least for the time being.

Market participants now look forward to the release of the US JOLTS Job Openings data. This, along with the US bond yields and the broader risk sentiment, might influence the USD and provide some impetus to the USD/CAD pair. Traders would also take cues from oil price dynamics to grab short-term opportunities around the USD/CAD pair.

Technical levels to watch

 

08:23
USD/JPY: A deeper pullback is likely below 130.00 – UOB USDJPY

According to FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, USD/JPY risks a move lower if the pair breaches the 130.00 support.

Key Quotes

24-hour view: “We highlighted yesterday that USD could ‘weaken to 132.00 before stabilization is likely’. The anticipated weakness exceeded our expectations as USD dropped to 131.58 before extending its decline during early Asian hours. Solid downward momentum suggests further USD weakness would not be surprising. However, it is left to be seen if the next major support at 130.00 would come into the picture today (there is another support at 130.50). Resistance is at 131.45 followed by 131.90.”

Next 1-3 weeks: “We turned negative USD last Thursday (28 Jul, spot 135.90). In our latest narrative from yesterday (01 Aug, spot at 132.90), we highlighted that USD is likely to continue to weaken. We indicated the support levels are at 132.00 and 131.70. The pace and extent of the anticipated decline exceeded our expectations as USD subsequently plummeted to 131.58 before extending its decline during Asian hours. We continue to expect USD to weaken. A break of 130.00 could trigger further decline to 128.00. Overall, only a break of 132.90 (‘strong resistance’ level was at 134.55 yesterday) would indicate that the current weakness has stabilized.”

 

08:00
Brazil Fipe's IPC Inflation registered at 0.16%, below expectations (1.02%) in July
07:48
US Dollar Index regains the smile and climbs to daily highs near 105.70
  • The index reverses part of the recent pullback and tests 105.70.
  • The risk aversion prevails in the global markets and bolsters the dollar.
  • Chicago Fed C.Evans will speak later in the NA session.

The greenback manages to regain some balance and lifts the US Dollar Index (DXY) back to the 105.70 region on turnaround Tuesday.

US Dollar Index looks supported near 105.00

The index reverses the earlier drop to the proximity of the 105.00 mark and triggers a corrective upside to daily highs around 105.70 on Tuesday.

The move higher in the dollar comes on the back of the pick-up in the risk aversion mood among market participants, which appears also reflected in the persistent demand for bonds and the so far unabated downtrend in US yields across the curve.

Minor releases in the US calendar will include JOLTs Job Openings and the usual weekly report by the API on US crude oil inventories, all ahead of the speech by Chicago Fed C.Evans (2023 voter, centrist).

What to look for around USD

The index seems to have met some decent support near 105.00 so far in the first half of the week, as the re-emergence of some risk aversion underpins the ongoing recovery in the dollar.

The very-near-term outlook for the dollar has deteriorated somewhat in recent sessions, particularly following the latest US GDP figures and the prospects for further tightening by the Fed in the next months, which carry the potential to drag further the economy into the contraction territory.

Among the positives for the buck still emerge the Fed’s divergence vs. most of its G10 peers (especially the ECB) in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: MBA Mortgage Applications, Factory Orders, ISM Non-Manufacturing (Wednesday) – Balance of Trade, Initial Claims (Thursday) – Non-Farm Payrolls, Unemployment Rate, Consumer Credit Change (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Escalating geopolitical effervescence vs. Russia and China. Fed’s more aggressive rate path this year and 2023. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is gaining 0.20% at 105.61 and a break above 107.42 (weekly high post-FOMC July 27) would expose 109.29 (2022 high July 15) and then 109.77 (monthly high September 2002). On the flip side, initial support emerges at 105.04 (monthly low August 2) seconded by 104.79 (55-day SMA) and finally 103.67 (weekly low June 27).

07:42
Forex Today: Escalating geopolitical tensions weigh on sentiment

Here is what you need to know on Tuesday, August 2:

Markets have turned risk-averse amid escalating geopolitical tensions on Tuesday. The dollar stays relatively resilient against its major rivals and global equity indexes stay on the back foot. The Shanghai Composite Index lost more than 2%, the Euro Stoxx 600 Index is down 0.7% after the opening bell and US stock index futures are falling between 0.55% and 0.9%. JOLTS Job Openings will be the only data featured in the US economic docket and investors will pay close attention to political developments. Chicago Fed President Charles Evans and St. Louis Fed President James Bullard will be speaking later in the day as well.

Reports of US House of Representatives Speaker Nancy Pelosi planning to visit Taiwan caused safe-haven flows to dominate the financial markets in the Asian session. “There will be serious consequences if she insists on making the visit," Chinese foreign ministry spokesperson Zhao Lijian said. Additionally, Global Times commentator Hu Xijin tweeted out that Beijing has formulated a series of countermeasures, including military actions. in response to Pelosi's possible visit to Taiwan.

Earlier in the day, the Reserve Bank of Australia (RBA) announced that it raised its policy rate by 50 basis points (bps) to 1.85% as expected. In its policy statement, the RBA said the hike was a further step in the "normalization" of policy but removed the term "extraordinary" stimulus from its policy statement. This change of language cause the AUD to come under heavy pressure and AUD/USD was last seen losing 1.4% on the day at 0.6925.

Pressured by risk-aversion, EUR/USD has erased a large portion of Monday's gains and extended its slide toward 1.0200.

GBP/USD dropped below 1.2200 in the early European session on Tuesday and was last seen losing 0.5% on a daily basis.

Despite falling US Treasury bond yields, gold is struggling to preserve its bullish momentum and trading in negative territory near $1,770.

Bitcoin is edging lower as market mood sours and trades below $23,000. Ethereum continues to push lower toward $1,500 after having closed the last four trading days in the red.

07:39
NZD/USD weakens further below 0.6300 mark amid cautious mood, modest USD rebound NZDUSD
  • NZD/USD witnesses selling on Tuesday and snaps a four-day winning streak to a multi-week high.
  • The cautious market mood exerts pressure on the risk-sensitive kiwi amid a modest USD bounce.
  • Diminishing odds for aggressive Fed rate hikes, sliding US bond yields could cap gains for the USD.
  • Investors eye US Job Openings for some impetus ahead of NZ employment figures on Wednesday.

The NZD/USD pair attracts some selling on Tuesday and erodes a major part of the previous day's gains to the highest level since June 21. Spot prices weaken further below the 0.6300 mark during the early European session and for now, seem to have snapped a four-day winning streak.

The prevalent cautious mood is turning out to be a key factor that acted as a headwind for the risk-sensitive kiwi. The market sentiment remains fragile amid growing worries about a global economic downturn. Apart from this, jitters about the impact of an impending visit to Taiwan by US House of Representatives Speaker Nancy Pelosi further temper investors' appetite for riskier assets.

The anti-risk flow assists the US dollar to stage a modest recovery from its lowest level since July 5, which further contributes to exerting downward pressure on the NZD/USD pair. That said, expectations that the Fed would not hike rates as aggressively as previously estimated, along with declining US Treasury bond yields, might cap the USD recovery. This, in turn, could lend support to the NZD/USD pair.

This makes it prudent to wait for a strong follow-through selling before confirming that the NZD/USD pair's recent rally from the 0.6060 area, or over a two-year low touched in July has run out of steam. Market participants now look forward to the US economic docket, featuring the release of the June JOLTS Job Openings data for some impetus later during the early North American session.

This, along with the US bond yields, might influence the USD price dynamics. Traders would further take cues from the broader market risk sentiment for short-term opportunities around the NZD/USD pair ahead of the quarterly employment figures from New Zealand, due on Wednesday. The focus, however, would remain glued to the closely-watched US monthly jobs report - popularly known as NFP on Friday.

Technical levels to watch

 

07:30
Switzerland SVME - Purchasing Managers' Index came in at 58, above expectations (57.9) in July
07:02
USD/JPY off two-month low amid modest USD rebound, keeps the red around 131.00 USDJPY
  • USD/JPY continues losing ground for the fifth straight day and drops to a nearly two-month low.
  • The narrowing US-Japan yield spread, the cautious mood underpins the JPY and exerts pressure.
  • A modest US bounce from its lowest level since July 5 offers support to the pair, at least for now.

The USD/JPY pair extends its decline for the fifth straight day and drops to a nearly two-month low on Tuesday. Spot prices, however, find some support ahead of the 100-day SMA and bounce back to the 131.00 mark during the early European session.

Despite a more dovish stance adopted by the Bank of Japan, the recent yield compression globally makes the Japanese yen more attractive. It is worth recalling that the Federal Reserve last week hinted that it could slow the pace of the rate hike campaign at some point. Furthermore, the Advance US GDP report released last Thursday confirmed a technical recession and fueled speculations that the Fed would not hike rates as aggressively as previously estimated. This, in turn, drags the yield in the benchmark 10-year US government bond to its lowest level since April. Conversely, the Japanese government bond yields aren't moving because of the BoJ's yield curve control policy.

Apart from this, a generally weaker risk tone is also driving some safe-haven flows towards the JPY, which turns out to be a key factor exerting downward pressure on the USD/JPY pair. The market sentiment remains fragile amid growing worries about a global economic downturn. Apart from this, jitters about the impact of an impending visit to Taiwan by US House of Representatives Speaker Nancy Pelosi further temper investors' appetite for riskier assets. That said, a modest US dollar bounce from its lowest level since July 5 offers some support to the major. The fundamental backdrop, however, suggests that any meaningful recovery attempt runs the risk of fizzling out rather quickly.

Hence, a strong follow-through buying is needed to confirm that the USD/JPY pair has formed a near-term bottom. Conversely, bearish traders might now wait for a sustained break below the 100-day SMA support, currently around the 130.20 region, before positioning for any further depreciating move. Market participants now look forward to the release of the US JOLTS Job Openings. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the USD/JPY pair. Traders would further take cues from the broader market risk sentiment to grab short-term opportunities, though the focus remains on the US monthly jobs report (NFP) on Friday.

Technical levels to watch

 

07:01
Spain Unemployment Change increased to 3.23K in July from previous -42.409K
07:00
Switzerland SECO Consumer Climate (3m) fell from previous -27.4 to -41.7 in 3Q
06:56
USD/TRY rebound approaches 18.00 amid risk-aversion, focus on Turkish inflation, US NFP
  • USD/TRY picks up bids to snap two-day downtrend around the yearly top.
  • US dollar bears take a breather as chatters surrounding Sino-American tussles, recession weigh on sentiment.
  • Turkish CPI, US NFP will be crucial data to watch for clear directions.

USD/TRY prints the first daily gains in three as buyers attack 18.00 threshold heading into Tuesday’s European session. In doing so, the Turkish lira (TRY) pair justifies the market’s rush toward the US dollar amid a risk-off mood.

That said, the chatters surrounding the US-China tussle over US House Secretary Nancy Pelosi’s visit to Taiwan and the likely hardships for Chinese chipmakers appear to weigh on the market sentiment. On the same line could be the dragon nation’s readiness for a military drill in Bohai, South China Sea. Furthermore, headlines suggesting Chinese policymakers’ lack of confidence in this year's Gross Domestic Product (GDP) forecasts also contribute to the risk-off mood and drown the quote.

Elsewhere, fears of economic slowdown take clues from the latest PMIs from the US and Europe, which in turn roils the market’s mood and amplifies the risk-aversion wave. Also challenging the sentiment could be Fed Chair Jerome Powell’s indirect signals that the hawks are running out of steam.

In addition to the risk-off mood, the market’s fears of higher inflation in Turkiye and the government’s push for a no rate hike also propel the USD/TRY prices.

As a result, Wednesday’s Turkish Consumer Price Index (CPI) for July, expected 80.5% YoY versus 78.62 prior, appears an important data for the USD/TRY traders to watch. Following that, the US employment data for July, up for publishing on Friday, will be crucial to watch for clear directions. Meanwhile, the Fedspeak and the US ISM Services PMI for July could entertain traders.

Technical analysis

While the 10-DMA restricts short-term USD/TRY downside around 17.82, an upward sloping resistance line from July 08, at 18.11 by the press time, challenges the pair buyers before directing them to the year 2021 peak surrounding $18.36.

06:46
NZD/USD: Further upside favoured on a close above 0.6365 – UOB NZDUSD

NZD/USD could extend the upside bias once 0.6365 is cleared, note FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “We expected NZD to ‘trade within a range of 0.6240/0.6320’ yesterday. However, NZD rose to a high of 0.6352 before closing on a firm note at 0.6332 (+0.66%). Further NZD strength is not ruled but as upward momentum is not exactly strong, a break of 0.6365 is unlikely. Support is at 0.6310 followed by 0.6290.”

Next 1-3 weeks: “Yesterday (01 Aug, spot at 0.6290), we shifted from a positive to neutral view on NZD and expected it to trade between 0.6210/0.6340. We did not expect the rapid manner by which NZD rose above 0.6340 (high of 0.6352). Shorter-term upward momentum has improved somewhat but NZD has to break 0.6365 first before further advance is likely. The chance for NZD to break 0.6365 would remain intact as long as it does not move below 0.6260 within these couple of days. Looking ahead, the next resistance above 0.6365 is at 0.6395.”

06:40
Natural Gas Futures: Scope for extra gains

CME Group’s flash data for natural gas futures markets noted open interest rose for the second session in a row on Monday, now by around 3.1K contracts. In the same line, volume reversed three consecutive daily pullbacks and went up by 59K contracts.

Natural Gas targets the 2022 high at $9.75

Prices of natural gas started the week in a positive fashion and closed above the $8.00 mark with certain conviction and amidst increasing open interest and volume. Against that, further rebound seems likely in the very near term and therefore natural gas keeps targeting the YTD high at $9.75 per MMBtu (July 26).

06:33
FX option expiries for August 2 NY cut

FX option expiries for August 2 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

  • 1.0125 320m
  • 1.0240 329m  

- AUD/USD: AUD amounts  

  • 0.7100 251m
  • 0.7160 641m

- USD/CAD: USD amounts       

  • 1.2900 547m

- NZD/USD: NZD amounts

  • 0.6550 380m

- EUR/GBP: EUR amounts

  • 0.8645 481m
  • 0.8665 443m
06:31
Silver Price Analysis: XAG/USD bears cheer Monday’s Doji below 50-DMA to target $20.00
  • Silver extends the previous day’s pullback from monthly low, grinds lower of late.
  • RSI retreat, bearish candlestick keep sellers hopeful below $20.50 DMA hurdle.
  • The previous resistance line from April puts a floor under the prices.

Silver price (XAG/USD) holds lower ground near $20.25, down 0.56% intraday heading into Tuesday’s European session.

In doing so, the bright metal justifies the previous day’s Doji candlestick after failing to cross the 50-DMA.

Also keeping the XAG/USD bears hopeful is the RSI (14) line that appears to have lost the further upside momentum.

However, the 23.6% Fibonacci retracement of the April-July downside, near $20.00, could restrict the quote’s immediate downside ahead of the resistance-turned-support line from April 18, close to $19.15 at the latest.

Should the commodity price drop below $19.15, the yearly low of $18.14 marked in July will regain the market’s attention.

On the contrary, recovery remains elusive until staying beyond the 50-DMA level surrounding $20.50.

Following that, the mid-June swing low near $20.90 and the $21.00 threshold may entertain silver buyers ahead of the highlighting the $22.15-20 resistance confluence including the 100-DMA and 50% Fibonacci retracement level.

To sum up, XAG/USD remains on the bear’s radar and can refresh yearly low but the south-run appears bumpy.

Silver: Daily chart

Trend: Further downside expected

 

06:31
Australia RBA Commodity Index SDR (YoY) registered at 14.1%, below expectations (20.1%) in July
06:31
Australia RBA Commodity Index SDR (YoY) came in at 1114.1%, above expectations (20.1%) in July
06:24
RBA no longer withdrawing “extraordinary” support – ANZ

Analysts at Australia and New Zealand (ANZ) banking group offer their afterthoughts on the Reserve Bank of Australia’s (RBA) expected 50 bps rate hike decision.

Key quotes

“The RBA tightened by 50bp at its August meeting. The key change from July is that there is no longer any reference to the withdrawal of “extraordinary [our emphasis] monetary support”.”

“This could be a signal that the RBA Board may be thinking about reducing the size of the monthly increases to 25bp in September. We think a 50bp increase is still the most likely choice.”

“The RBA’s updated forecasts have inflation peaking at 7¾% and only dropping to “around” 3% through 2024. This is despite growth slowing below 2% in 2023 and 2024. We will be very interested to see what interest rate assumption is part of that forecast mix.”

06:17
GBP/USD: Further gains could revisit 1.2335 ahead of 1.2400 – UOB GBPUSD

FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang noted the upside in GBP/USD carries the potential to advance to the 1.2335 levels ahead of 1.2400 in the next few weeks.

Key Quotes

24-hour view: “The strong rise in GBP to a high of 1.2292 yesterday came as a surprise (we were expecting GBP to trade within a range of 1.2110/1.2230). The rapid rise appears to be running ahead but there is scope for GBP to move above 1.2300 first before the risk of a pullback would increase. For today, the major resistance at 1.2335 is unlikely to come into the picture. Support is at 1.2225 followed by 1.2190.”

Next 1-3 weeks: “Last Thursday (28 Jul, spot at 1.2165), we held the view that GBP is likely to trade with an upward bias towards 1.2240. After GBP rose to a high of 1.2245 and retreated, we highlighted yesterday (01 Aug, spot at 1.2170) that the bias for GBP is still on the upside but we were of the view that the major resistance at 1.2245 may not be easy to break. We did not expect the subsequent strong rise as GBP cracked 1.2245 and soared to a high of 1.2292. The boost in momentum is likely to lead to further GBP strength towards 1.2335, possibly as high as 1.2400. Support is at 1.2190 but only a break of 1.2135 would indicate that the current upward pressure has eased.”

06:10
Crude Oil Futures: Further decline in store near term

Considering preliminary readings from CME Group for crude oil futures markets, traders increased their open interest positions for the third straight session at the beginning of the week, this time by around 11.5K contracts. Volume followed suit and added around 89.3K contracts to the previous daily build.

WTI: Next on the downside comes $90.58

Prices of the barrel of WTI dropped to multi-day lows on Monday against the backdrop of increasing open interest and volume. Against that, the commodity could see its decline accelerated in the very near term and with immediate target at the July low at $90.58 per barrel (July 14).

06:08
AUD/USD extends post RBA losses to 0.6950, teases weekly bullish channel breakdown AUDUSD
  • AUD/USD takes offers to renew intraday low, pullback from 1.5-month high.
  • RBA’s rate hike couldn’t impress bulls amid uncertainty over the next move.
  • US-China jitters, economic slowdown fears amplify risk-aversion and exert downside pressure on the quote.
  • 200-SMA adds to the downside filters, oscillators hints at further weakness.

AUD/USD bears ignore the Reserve Bank of Australia’s (RBA) Interest Rate Decision while extending pullback from the monthly high ahead of Tuesday’s European session. That said, the Aussie pair takes offers to refresh daily low near 0.6950 by the press time.

The RBA matched the market’s expectations of announcing 50 basis points (bps) rate hike, the fourth in 2022, while inflating the benchmark rate to 1.85%. However, the RBA Statement that says, “The central bank is not on the pre-set path in normalizing rates,” appeared to have lured the AUD/USD bears.

On a different page, chatters surrounding the US-China tussle over US House Secretary Nancy Pelosi’s visit to Taiwan and the likely hardships for Chinese chipmakers appear to weigh on the market sentiment, as well as on the AUD/USD prices. On the same line could be the dragon nation’s readiness for a military drill in Bohai, South China Sea. Furthermore, headlines suggesting Chinese policymakers’ lack of confidence in this year's Gross Domestic Product (GDP) forecasts also contribute to the risk-off mood and drown the quote.

Elsewhere, fears of economic slowdown take clues from the latest PMIs from the US and Europe, which in turn roils the market’s mood and favors AUD/USD sellers. Also challenging the sentiment could be Fed Chair Jerome Powell’s indirect signals that the hawks are running out of steam.

While portraying the mood, shares in the Asia-Pacific zone and the US stock futures print losses. However, US 10-year bond coupon declines 5.5 basis points (bps) to 2.55% at the latest and challenges the bears, by way of the US dollar weakness. That said, the US Dollar Index (DXY) refreshed the monthly low before bouncing off 105.00.

Looking forward, Fedspeak and headlines surrounding China may entertain AUD/USD traders ahead of Friday’s RBA Rate Statement and the US employment data for July.

Technical analysis

AUD/USD sellers attack the lower line of a one-week-old bullish trend channel amid bearish MACD signals and the downbeat RSI (14). That said, the quote’s inability to cross the 61.8% Fibonacci retracement of the June-July downside joins downbeat oscillators to keep sellers hopeful.

However, a clear downside break of 0.6950 becomes necessary for the AUD/USD bears before targeting the 200-SMA level surrounding 0.6885.

During the quote’s weakness past 0.6885, the 0.6770 and 0.6720 may act as buffers before directing the sellers towards the yearly low marked in July near 0.6680.

Alternatively, recovery moves may aim for the 0.70000 threshold ahead of again challenging the aforementioned key Fibo. level near 0.7055.

Even if the quote rises past 0.7055, the upper line of the mentioned channel, at 0.7060 by the press time, will precede the mid-June swing high near 0.7070 to challenge short-term AUD/USD buyers.

AUD/USD: Four-hour chart

Trend: Further weakness expected

 

06:04
GBP/USD sees downside below 1.2240 as investors turn cautious on US-China tensions GBPUSD
  • GBP/USD is likely to shift below 1.2240 as the market mood sours on escalating US-China tensions.
  • The Taiwanese economy has observed China’s military activity around the median line of the Taiwan strait.
  • A slump in UK’s overall demand may force the BOE to sound less hawkish.

The GBP/USD pair has corrected gradually to near 1.2240 in early London after printing after failing to tap Monday’s high at 1.2293. The cable is likely to display losses if it drops below the immediate support of 1.2240 as market sentiment is turning jittery on the escalation US-China tensions ahead of the arrival of US House of State Nancy Pelosi in Taiwan.

Some military activity by Chinese warplanes has been observed around the median line of the Taiwan strait, as per Reuters. Also, China’s General Administration of Customs suddenly banned the import of more than 100 food products from Taiwan. The happening of an aforementioned event may cause serious damage to the country’s food industry, agriculture, and fisheries, per Chinese media outlets.

Broadly, investors are focusing on the interest rate decision by the Bank of England (BOE), which is due on Thursday. As per the market consensus, BOE Governor Andrew Bailey will elevate the interest rates by 25 basis points (bps).

A less-hawkish commentary from the BOE will keep the pound bulls on tenterhooks. Average Hourly Earnings have remained lower in the UK area, which resulted in a slump in Retail Sales, and also the downbeat employment data are not supporting the BOE for a higher rate hike unhesitatingly.

On the dollar front, Wednesday’s US Institute of Supply Management (ISM) Services PMI data will hog the limelight. A preliminary estimate for the economic data is 53.5, significantly lower than the prior release of 55.3. The US ISM Services New Orders Index data will be worth watching as US techs have lowered their guidance for the rest of the year.

 

06:00
United Kingdom Nationwide Housing Prices s.a (MoM) below forecasts (0.3%) in July: Actual (0.1%)
06:00
United Kingdom Nationwide Housing Prices n.s.a (YoY) below forecasts (11.5%) in July: Actual (11%)
05:58
India: RBI expected to hike rates this week – UOB

Economist at UOB Group Lee Sue Ann suggests the RBI could raise its repo rate at its meeting later this week.

Key Quotes

“With the policy priority on containing inflationary pressures from second-round effects of supply side shocks and anchoring long term inflation expectations, there is more room for the RBI in its rate hike trajectory.”

“After kicking off with the surprise unscheduled 40bps move on 4 May and the 50bps Jun hike, we think that the RBI will add on another 75bps rate increases in the rest of 2022 to bring the repo rate to 5.65% by the end of this year.”

05:53
Gold Futures: Correction in the offing?

Open interest in gold futures markets shrank for the second session in a row on Monday, this time by more than 4K contracts according to advanced prints from CME Group. In the same line, volume dropped for the third consecutive session, now by around 10.5K contracts.

Gold looks capped by $1,780

Monday’s uptick in gold prices was amidst shrinking open interest and volume, which is indicative that a probable corrective downside could be shaping up in the very near term. So far, price action in the yellow metal looks limited by the $1,780 mark per ounce troy.

05:40
Steel price struggles to cheer China’s output curbs amid sour sentiment
  • Steel price grind higher around monthly top as China eyes further production cuts.
  • China’s NDRC, CISA aim for further steel production cuts to rein in emissions.
  • Sino-American tussles, and fears of economic slowdown weigh on risk appetite.

Steel price remains pressured around the one-month high flashed earlier in the day as buyers battle with the risk-off mood heading into Tuesday’s European session. That said, China’s recent steps to restrict metal production join the previously halted manufacturing due to the lower commodity prices to keep the metal buyers hopeful despite the economic slowdown fears.

While portraying the steel market’s mood, the most active rebar futures on the Shanghai Futures Exchange (SFE) seesaws around 4,041 yuan per metric tonne ($596.00), down more than 1.0% intraday. That said, prices of stainless steel drop near 0.2% daily and hot-rolled coils slump 1.3% at the latest.

“China's state planning agency, the National Development and Reform Council (NDRC) and industry group China Iron & Steel Association (CISA) met last week mandating further crude steel production cuts for the second half of 2022, according to Navigate Commodities,” said Reuters. The news also mentioned that China aims to cut annual steel production for a second straight year to curb emissions. The first-half output was down 6.5% from the same period last year.

Elsewhere, US House Secretary Nancy Pelosi’s visit to Taiwan and the likely hardships for Chinese chipmakers due to the American consideration of limiting shipments of American chipmaking equipment also weigh on the market sentiment. On the same line could be the news from a Chinese media report suggesting the dragon nation’s readiness for a military drill in Bohai, South China Sea.

Furthermore, Bloomberg’s piece signaling no hard boundaries for Beijing’s Gross Domestic Product (GDP) also appears to weigh on the market’s risk appetite. The news quotes people familiar with the matter as said, “China's top leaders told government officials last week that this year's economic growth target of "around 5.5%" should serve as guidance rather than a hard target that must be hit.”

It should be observed that the recent disappointing US PMIs tracked the last week’s US Q2 Gross Domestic Product (GDP) to portray economic fears. Also weighing on the mood could be Fed Chair Jerome Powell’s indirect signals that the hawks are running out of steam.

While portraying the mood, the US Dollar Index (DXY) refreshed the monthly low before bouncing off 105.00. Further, shares in the Asia-Pacific zone and the US stock futures print mild losses. However, US 10-year bond coupon declines 5.5 basis points (bps) to 2.55% at the latest.

Moving on, headlines surrounding China and the recession will be crucial for steel prices as the output cuts appeared to have failed in impressing the metal buyers.

05:39
Beijing has formulated a series of countermeasures, including military actions – Global Times

Hu Xijin, a commentator at the highly-influential Chinese state media, Global Times, tweeted out on Tuesday, “based on what I know, in response to Pelosi's possible visit to Taiwan, Beijing has formulated a series of countermeasures, including military actions.”

This comes as diplomatic tensions mount ahead of an expected Taiwan visit by US House of Representatives Speaker Nancy Pelosi this Tuesday.

Also read: China bans over 100 Taiwanese food factories from importing products

Market reaction

The market mood remains risk averse, as investors refrain from placing bets on high-beta assets amid escalating tensions between China and Taiwan over the planned visit by Pelosi to Taipei. The US S&P 500 futures are down 0.52% on the day while AUD/USD is facing a double-whammy from a less hawkish RBA rate hike and China concerns, falling towards 0.6950.

05:36
EUR/USD: Extra gains expected above 1.0300 – UOB EURUSD

In the opinion of FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, gains in EUR/USD could accelerate once 1.0300 is cleared.

Key Quotes

24-hour view: “We expected EUR to ‘trade between 1.0160 and 1.0260’ yesterday. However, EUR rose to a high of 1.0275 before closing on a firm note at 1.0261 (+0.42%). Upward momentum is beginning to build and the bias for today is tilted to the upside. However, it is left to be seen if EUR could break the major resistance at 1.0300 (there is another resistance at 1.0285). Support is at 1.0230 but only a break of 1.0205 would indicate that the build-up in momentum has fizzled out.’

Next 1-3 weeks: “We have held the same view since last Thursday (28 Jul, spot at 1.0205) where the current movement in EUR appears to be part of a consolidation phase and it is likely to trade between 1.0100 and 1.0285. EUR rose to a high of 1.0275 yesterday before closing on a firm note at 1.0261 (+42%). Shorter upward momentum is beginning to build and the risk appears to be shifting to the upside. That said, EUR has to break 1.0300 first before a sustained advance is likely. At this stage, the chance for EUR to break 1.0300 is on the high side as long as it does not move below 1.0165 (‘strong support’ level) within these couple of days. Looking ahead, the next resistance above 1.0300 is at 1.0360.”

05:28
EUR/USD turns sideways around 1.0280 as US-China tensions on Taiwan escalate EURUSD
  • EUR/USD has turned sideways as risk sentiment is likely to sour on US-China tensions over Taiwan.
  • The DXY has remained vulnerable to lower expectations for US NFP.
  • A subdued Eurozone Retail Sales could weaken the shared currency bulls.

The EUR/USD pair is displaying back and forth moves in a narrow range of 1.0261-1.0283 in the early European session. The asset has faced selling pressure above 1.0280 and is likely to remain volatile as the market mood is expected to turn sour on escalating US-China tensions ahead of US House Speaker Pelosi's arrival in Taiwan.

The market sentiment is turning negative as China’s threats to Pelosi's personal safety if she visits Taiwan could escalate global tensions. Also, news wires that several Chinese warplanes fly close to the median line of the Taiwan strait on Tuesday morning, as per Reuters have bolstered the risk-on fade in the global market.

Meanwhile, the US dollar index (DXY) displayed a sideways move after a less-confident rebound. The DXY printed a fresh three-week low at 105.05 this morning on expectations of vulnerable US Nonfarm Payrolls (NFP) data. As per the market expectations, the US economy has managed 250k job additions in the labor force in July. Many big tech companies in the US have ditched the recruitment process for a while, whose multiplier effects could be witnessed in the payrolls data.

On the Eurozone front, investors await the release of the Retail Sales data. A preliminary estimate for the Eurozone Retail Sales is -1.7%, extremely lower than the prior release of 0.2%. Households in Europe are facing the headwinds of higher price pressures, which are forcing them to higher consumption expenditure despite a minor change in quantity purchased. Therefore, the Retail Sales data should be higher. And, a lower estimate for the economic demand indicates a serious fall in the retail demand.

 

 

05:21
Gold Price Forecast: XAU/USD retreats towards $1,750 as risk-aversion precedes NFP
  • Gold price pares daily gains while easing from 11-week-old resistance.
  • Recession, China weigh on market sentiment but US dollar fails to cheer risk-off mood amid mixed concerns.
  • Fedspeak, news surrounding Sino-American ties could entertain traders ahead of US NFP.

Gold price (XAU/USD) extends pullback from the nearly three-month-old resistance line as it drops to $1,773 during Tuesday’s initial European session. Even so, the precious metal prints a five-day uptrend around the highest levels since  July 05.

The metal’s early-day run-up could be linked to the broad US dollar weakness while tracking the Treasury yields. However, headlines surrounding China and escalating fears of the economic slowdown appeared to have pressured the XAU/USD prices afterward.

That said, US House Secretary Nancy Pelosi’s visit to Taiwan and the likely hardships for Chinese chipmakers due to the American consideration of limiting shipments of American chipmaking equipment also weigh on the market sentiment and the Aussie treasury yields. On the same line could be the news from a Chinese media report suggesting the dragon nation’s readiness for a military drill in Bohai, South China Sea.

Furthermore, Bloomberg’s piece signaling no hard boundaries for Beijing’s Gross Domestic Product (GDP) also appears to weigh on the market’s risk appetite. The news quotes people familiar with the matter as said, “China's top leaders told government officials last week that this year's economic growth target of "around 5.5%" should serve as guidance rather than a hard target that must be hit.”

It should be noted that China is among the world’s top gold consumers and negative headlines surrounding the same could weigh on gold prices.

Elsewhere, the recently disappointing US PMIs tracked the last week’s US Q2 Gross Domestic Product (GDP) to portray economic fears. Also weighing on the mood could be Fed Chair Jerome Powell’s indirect signals that the hawks are running out of steam.

While portraying the market’s sentiment, shares in the Asia-Pacific zone and the US stock futures print mild losses. However, US 10-year bond coupon declines 5.5 basis points (bps) to 2.55% at the latest and challenges the gold bears, by way of the US dollar weakness. That said, the US Dollar Index (DXY) refreshed the monthly low before bouncing off 105.00.

Looking forward, headlines surrounding China and the recession, as well as speeches from Chicago Fed President Charles L. Evans and President of the Federal Reserve Bank of St. Louis James Bullard will be important for intraday traders of gold.

Technical analysis

Gold price justifies the strength of a downward sloping resistance line from April 18 as the quote retreats to $1,773 after refreshing the monthly high near $1,780.

That said, the bullish MACD signals and the firmer RSI (14), not overbought, appear to favor the XAU/USD bulls targeting the metal’s run-up beyond the immediate trend line hurdle surrounding $1,780.

It’s worth noting that May’s low near $1,787 and the 50-DMA level near $1,794 could also challenge the short-term gold buyers.

On the flip side, an upward sloping support line from July 21, close to $1,741 by the press time, precedes the 21-DMA support near $1,733 to restrict the bullion’s short-term downside.

Overall, the gold price is likely to witness further upside even if the room to the north appears a shorter one.

Gold: Daily chart

Trend: Further upside expected

 

04:53
Australia’s 10-year Treasury yields drop to 14-week low after RBA’s rate hike
  • Australia’s bond yields track US counterparts to refresh multi-day low.
  • RBA’s rate hike fails to impress Aussie bulls amid indecision over the next move.
  • Fears of recession, headlines surrounding China add strength to the risk-off mood.

Australian bond markets cheer the Reserve Bank of Australia’s (RBA) Interest Rate Decision while refreshing the 3.5-month low during early Tuesday morning in Europe. That said, the benchmark 10-year Treasury yields slump to 3.00%, the lowest levels since April 27 by press time.

The RBA matched the market’s expectations of announcing 50 basis points (bps) rate hike, the fourth in 2022, while inflating the benchmark rate to 1.85%. It’s worth noting, however, that the indecision over the next move of the Aussie central bank, amid recession fears and as the rate approaches the policymakers’ “neutral rate of 2.5%”, appear to drown the Aussie treasury yields. The same could be linked to the RBA Statement that says that the central bank is not on the pre-set path in normalizing rates.

Earlier in the day, firmer prints of the Australia Building Permits for June contrasted with the downbeat Aussie Home Loans and Investment Lending for Homes for the said month to weigh on the Australian markets. That said, the ASX 200 printed mild losses around 6,983 level at the latest, down 0.20% by the press time.

It’s worth noting that US House Secretary Nancy Pelosi’s visit to Taiwan and the likely hardships for Chinese chipmakers due to the American consideration of limiting shipments of American chipmaking equipment also weigh on the market sentiment and the Aussie treasury yields. On the same line could be the news from a Chinese media report suggesting the dragon nation’s readiness for a military drill in Bohai, South China Sea. Furthermore, Bloomberg’s piece signaling no hard boundaries for Beijing’s Gross Domestic Product (GDP) also appears to weigh on the market’s risk appetite. The news quotes people familiar with the matter as said, “China's top leaders told government officials last week that this year's economic growth target of "around 5.5%" should serve as guidance rather than a hard target that must be hit.”

On a broader front, the recently disappointing US PMIs tracked the last week’s US Gross Domestic Product (GDP) to portray economic fears. Also weighing on the mood could be Fed Chair Jerome Powell’s indirect signals that the hawks are running out of steam.

Moving on, Friday’s RBA Rate Statement will be crucial as traders remain unconvinced of the Aussie central bank’s latest moves. Additionally, monthly prints of the US employment data, up for publishing on Friday, will also be crucial to watch for clear directions.

04:46
AUD/NZD plummets to near 1.0500 as RBA hikes interest rates by 50 bps
  • A sheer downside move has resulted in a fresh two-week low at 1.1050 for AUD/NZD.
  • The announcement of an OCR hike by 50 bps is in line with the expectations.
  • This week, the NZ employment data will remain in focus.

The AUD/NZD pair has dropped swiftly after the Reserve Bank of Australia (RBA) announced a rate hike by 50 basis points (bps) in the Asian session. The announcement has remained in line with the estimates and the Official Cash Rate (OCR) has stepped up to 1.85%.

To contain price pressures, RBA Governor Philip Lowe has tightened the monetary policy further. The inflation rate in Australia has increased to 6.1% in the second quarter of CY2022 much higher than the prior figure of 5.1%. A higher inflation rate is likely to persist for longer, however, the RBA is committed to bringing price stability to the economy.

On the NZ front, investors are focusing on the release of the employment data, which is due on Wednesday. The employment data is expected to remain upbeat as the Employment Change is likely to improve significantly to 0.4% from the prior print of 0.1%. Also, the Unemployment Rate is expected to trim to 3.1% vs. 3.2% in the previous figure.

One thing is worth considering that the Labor Cost Index is expecting an improvement to 1.1% from 0.7% on a quarterly basis. The inflation rate is sky-rocketing in the kiwi zone and households need higher paychecks to offset the higher consumer expenditure.

 

04:37
AUD/USD tumbles below 0.7000 as RBA announces a rate hike by 50 bps AUDUSD
  • AUD/USD has surrendered the crucial support of 0.7000 on the 50 bps rate hike announcement by the RBA.
  • The RBA has elevated its OCR by 50 bps to 1.85%.
  • The lower consensus for US NFP is responsible for the vulnerable performance by the DXY.

The AUD/USD pair has slipped below the psychological support of 0.7000 swiftly as the Reserve Bank of Australia (RBA) announced an interest rate hike. RBA Governor Philip Lowe has elevated its Official Cash Rate (OCR) by 50 basis points (bps). After the rate hike announcement, RBA’s OCR stands at 1.85%.

The decision has remained in line with the market expectations. Price pressures are heating in the Australian economy due to volatile oil and food products. Last week, the Australian Bureau of Statistics reported the inflation rate for the second quarter of CY2022 at 6.1%, higher by 100 bps than the first quarter’s print. To contain the roaring inflation, tightening policy measures were highly required by the RBA.

It is worth noting that the Australian economy generated 88.4k jobs in June, significantly higher than the consensus and the prior print, which bolstered the RBA to feature a rate hike unhesitatingly.

Meanwhile, the US dollar index (DXY) has turned sideways after refreshing its three-week low at 105.05 in the Asian session. The DXY is performing vulnerable ahead of the US Nonfarm Payrolls (NFP) data.  As per the preliminary estimates, the US economy created 250k jobs in July, lower than the prior release of 372k. Soaring interest rates and a halt in the recruitment process by big tech firms have trimmed job opportunities.

 

04:35
AUD/JPY slumps to fresh two-month low despite RBA’s 50 bps rate hike
  • AUD/JPY extends early Asian session losses to refresh multi-day low.
  • RBA matches market expectations of fourth rate hike in 2022 with 50 bps move.
  • Market’s risk-off mood also exerts downside pressure on the pair.
  • Recession, China join chatters surrounding Japan’s wage hike and yields to keep sellers hopeful.

AUD/JPY stands on a slippery ground as it refreshes the two-month low near 91.35 after the Reserve Bank of Australia’s (RBA) Interest Rate Decision. That said, the cross-currency pair’s latest weakness could be linked to the indecision over the RBA’s next move, as well as the risk-off mood.

RBA matches market’s forecast of announcing a 50 basis points (bps) of rate hike, the fourth in 2022, while inflating the benchmark rate to 1.85%. It’s worth noting, however, that the indecision over the next move of the Aussie central bank, amid recession fears and as the rate approaches the policymakers’ “neutral rate of 2.5%”, appear to challenge AUD/JPY bulls of late. The same could be linked to the RBA Statement that says that the central bank is not on pre-set path in normalising rates.

Also contributing to the AUD/JPY pair’s weakness could be the sour sentiment, mainly due to headlines concerning China. US House Secretary Nancy Pelosi’s visit to Taiwan and the likely hardships for Chinese chipmakers due to the American consideration of limiting shipments of American chipmaking equipment appear main challenges to the market sentiment. On the same line could be the news from a Chinese media report suggesting the dragon nation’s readiness for a military drill in Bohai, South China Sea.

Additionally, Bloomberg’s piece signaling no hard boundaries for Beijing’s Gross Domestic Product (GDP) also appears to weigh on the market’s risk appetite. The news quotes people familiar with the matter as said, “China's top leaders told government officials last week that this year's economic growth target of "around 5.5%" should serve as guidance rather than a hard target that must be hit.”

On a different page, chatters surrounding a jump in the Japanese wages and challenges for the Bank of Japan's (BOJ) easy money policies, mainly due to the broad inflation fears, also appeared to have drowned the USD/JPY prices. Recently, Japanese media Nikkei said that the average minimum wage in Japan is set to rise by a record 3.3% in the current fiscal year, which ends in March 2023. “A Japanese panel is seeking to raise the average minimum wage by 31 yen,” the news also mentioned.

Amid these plays, the US 10-year bond coupon declines 6.9 basis points (bps) to 2.54% at the latest. Further, Wall Street closed with mild losses while the S&P 500 Futures extend the previous day’s pullback from a two-month high.

Looking forward, AUD/JPY is considered the market’s risk-barometer pair and it will perform its role during the rest of the day, amid a lack of major data/events from either Australia or Japan. As a result, the qualitative factors that affect the sentiment, including headlines from China and relating to economic slowdown, will be important to watch for clear directions.

However, major attention will be given to Friday’s RBA Rate Statement as traders remain unconvinced of the Aussie central bank’s latest moves.

Technical analysis

In addition to the clear downside break of the 100-DMA and an upward sloping trend line from early January, around 92.65, the bearish MACD signals and the downbeat RSI (14) also keep AUD/JPY sellers hopeful.

 

04:34
RBA: To take further steps in process of normalising monetary conditions over months ahead

Following are the key headlines from the August RBA monetary policy statement, via Reuters, as presented by Governor Phillip Lowe.

Board expects to take further steps in the process of normalising monetary conditions over the months ahead.

Not on a pre-set path.

Global factors explain much of the increase in inflation, but domestic factors are also playing a role.

Board committed to doing what is necessary to ensure inflation returns to target over time.

There are widespread upward pressures on prices from strong demand, a tight labour market and capacity constraints in some sectors of the economy.

Rate increase a further step in the normalisation of monetary conditions.

Inflation is expected to peak later this year and then decline back towards the 2–3 percent range.

Key source of uncertainty continues to be the behaviour of household spending.

Bank's central forecast is for cpi inflation to be around 7¾ per cent over 2022, a little above 4 per cent over 2023 and around 3 per cent over 2024.

Labour market remains tighter than it has been for many years.

Economy is expected to continue to grow strongly this year, with the pace of growth then slowing.

Some increase in unemployment is expected as economic growth slows.

Bank's central forecast is for GDP growth of 3¼ per cent over 2022 and 1¾ per cent in each of the following two years.

  • AUD/USD tumbles below 0.7000 as RBA announces a rate hike by 50 bps

  • AUD/JPY slumps to fresh two-month low despite RBA’s 50 bps rate hike

04:31
Australia RBA Interest Rate Decision meets expectations (1.85%)
04:31
Breaking: RBA raises OCR by 50 bps to 1.85%, AUD/USD drops AUDUSD

The Reserve Bank of Australia (RBA) board members decided to increase the official cash rate (OCR) by 50 basis points (bps) from 1.35% to 1.85% at its August 2 monetary policy meeting.

The central bank said the hike was a further step in the "normalization" of policy, dropping a previous reference to removing "extraordinary" stimulus in its policy statement. 

The RBA was forecast to raise the cash rate by 50 basis points to 1.85% at its Aug. 2 meeting, according to 32 of 34 economists surveyed by Reuters during July 22-28.

AUD/USD reaction

The AUD/USD pair came under renewed selling pressure in an immediate reaction to the expected 50 bps RBA rate hike.

At the time of writing, the aussie is down 0.40% on the day at 0.6994, having eroded 25 pips on the outcome.

About RBA rate decision

RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.

04:20
Asian Stock Market: Bears return to the desks amid US-China jitters, recession woes
  • Asian equities retreat as fears surrounding Sino-American tussles, China’s growth join broad economic slowdown woes.
  • US Treasury yields refreshed four-month low to amplify risk-aversion wave.
  • Oil prices fail to cheer softer USD, gold prints five-day uptrend near one-month high.

Asia-Pacific shares remain pressured during early Tuesday, reversing the latest gains, as fears emanating from China join recession woes ahead of the key US employment data for July. While portraying the mood, MSCI’s index of Asia-Pacific shares outside Japan drops 1.62% intraday while Japan’s Nikkei 225 declines 1.57% daily heading into Tuesday’s European session.

US House Secretary Nancy Pelosi’s visit to Taiwan and the likely hardships for Chinese chipmakers due to the American consideration of limiting shipments of American chipmaking equipment appear main challenges to the market sentiment. On the same line could be the news from a Chinese media report suggesting the dragon nation’s readiness for a military drill in Bohai, South China Sea.

Furthermore, Bloomberg’s piece signaling no hard boundaries for Beijing’s Gross Domestic Product (GDP) also appears to weigh on the market’s risk appetite. The news quotes people familiar with the matter as said, “China's top leaders told government officials last week that this year's economic growth target of "around 5.5%" should serve as guidance rather than a hard target that must be hit.”

Elsewhere, disappointing US PMIs joined the last week’s US Gross Domestic Product (GDP) and Fed Chair Jerome Powell’s cautious comments to portray recession woes. On Monday, the US ISM Manufacturing PMI dropped to the lowest since 2020 in July as the activity gauge dropped to 52.8 versus 53.0 prior.

That said, Chinese equity benchmarks are down between 2.0% and 3.0% whereas shares in Australia drop 0.40%. However, New Zealand’s NZX 50 remains indecisive ahead of Wednesday’s NZ jobs report. Further, South Korea’s KOSPI and Indonesia’s IDX Composite also decline nearly 1.0% daily at the latest but India’s BSE Sensex stays mildly offered as traders await Thursday’s Reserve Bank of India (RBI) interest rate decision.

On a broader front, the US Dollar Index (DXY) refreshed the monthly low before bouncing off 105.00. The greenback’s weakness could be attributed to the downbeat US Treasury yields as the benchmark 10-year US bond coupon declines 6.9 basis points (bps) to 2.54% at the latest. Further, Wall Street closed with mild losses while the S&P 500 Futures extend the previous day’s pullback from a two-month high.

Additionally, WTI crude oil remains pressured around monthly low while gold price prints five high as bulls attach $1,780 hurdle.

To sum up, China contributes to the recent risk-off mood but major attention will be given to speeches from Chicago Fed President Charles L. Evans and President of the Federal Reserve Bank of St. Louis James Bullard for fresh impulse.

04:04
GBP/USD Price Analysis: Pullback remains elusive above 50-DMA near 1.2200 GBPUSD
  • GBP/USD grinds higher after refreshing the monthly peak the previous day.
  • Bullish MACD signals, sustained break of 50-DMA favor buyers.
  • Previous resistance line from February, two-week-old support trend line add to the downside filters.
  • 38.2% Fibonacci retracement, 100-DMA lures buyers ahead of May’s top.

GBP/USD bulls struggle to keep reins around the monthly top during early Tuesday morning in Europe. That said, the Cable pair takes rounds to 1.2250-60 by the press time.

Even so, the pair buyers remain hopeful amid the bullish MACD signals and a clear upside break of the descending trend line from February, as well as the 50-DMA.

It’s worth noting that the pair’s declines below the 50-DMA and the resistance-turned-support line, respectively around 1.2200 and 1.2140, need validation from a fortnight-long support line, close to 1.2090 by the press time, to convince GBP/USD bears.

Following that, a downward trajectory towards June’s low of 1.1933 and the recent multi-month bottom surrounding 1.1760 can’t be ruled out.

On the contrary, the GBP/USD pair’s further upside could aim for the mid-June swing high near 1.2410.

However, the 38.2% Fibonacci retracement level of February-July downside and the 100-DMA, around 1.2485 and 1.2510 in that order, will challenge the pair buyers before directing them to the May month high of 1.2669.

GBP/USD: Daily chart

Trend: Further upside expected

 

04:00
AUD/NZD Price Analysis: Juggles after a modest rebound above 1.1080 ahead of RBA policy
  • A downside break of inventory distribution ahead of RBA policy signals weakness in the cross.
  • The death cross, represented by 50-and 200-EMAs adds to the downside filters.
  • A downside move to near 1.1100 looks visible if the asset surrenders intraday low at 1.1071.s

The AUD/NZD pair has displayed a less-confident rebound after defending weekly lows at around 1.1076 in the Asian session. The cross has remained in the grip of bears for the past week after failing to sustain above the critical hurdle of 1.1170.

A downside break of the inventory distribution in a range of 1.1090-1.1135 is advocating a downside momentum ahead. Usually, an inventory distribution after a downside move indicates the initiation of fresh shorts by investors, which prefer to enter an auction after the establishment of a downside bias.

A death cross, represented by the 50-and 200-period Exponential Moving Averages (EMAs) at 1.1104, strengthens the odds of a bearish reversal.

The Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which indicates a consolidation ahead.

A decisive move above the 200-EMA at 1.1104 will send the cross towards July 29 high at 1.1135. A breach of the latter will unleash the aussie bulls, which will drive the asset towards the previous week’s high at 1.1180.

On the flip side, the kiwi bulls could drive drag the asset further to July 20 low at 1.1036 and the psychological support at 1.1000 if the cross drops below Tuesday’s low at 1.1071.

AUD/NZD hourly chart

 

03:58
China bans over 100 Taiwanese food factories from importing products

Ahead of US House Speaker Nancy Pelosi’s visit to Taiwan, China’s General Administration of Customs suddenly banned the import of more than 100 food products from Taiwan, which may cause serious damage to the country’s food industry, agriculture and fisheries, per Chinese media outlets.

The move by China is seen as a retaliation for Pelosi’s visit to Taiwan.

Beijing sources said the "target was very clear" in the rush to make the big decision late in the day and night. 

The sources admitted that the Department of Hong Kong, Macao and Taiwan Affairs of the Ministry of Commerce of the Mainland and the Economic Bureau of the Taiwan Affairs Office of the State Council already knew about the matter, and the Mainland also understood the impact of this matter on cross-strait trade.

Related reads

  • Chinese warplanes fly close to median line of Taiwan strait on Tuesday morning
  • USD/CNH Price Analysis: Oscillates near 6.7850 key resistance
03:49
USD/CAD fades bounce off two-month low near 1.2850 amid risk-off mood USDCAD
  • USD/CAD retreats from intraday high, pares the biggest daily gains in over a week.
  • Oil prices remain pressured around fortnight low amid recession fears.
  • Headlines surrounding China add strength to the risk-aversion wave.
  • Fedspeak, PMIs can entertain traders ahead of Friday’s US/Canada jobs report.

USD/CAD struggles to extend the week-start rebound as the Canadian traders return from the long weekend on Tuesday. That said, the Loonie pair eases back to 1.2850, following the initial run-up to refresh the intraday high near 1.2865.

The quote’s recent weakness could be linked to the markets’ risk-off mood, as well as the anxiety ahead of the key employment data from the US and Canada.

Headlines surrounding the US-China tussles over US House Secretary Nancy Pelosi’s visit to Taiwan and the likely hardships for Chinese chipmakers due to the American consideration of limiting shipments of American chipmaking equipment appear main challenge to the sentiment. On the same line could be the news from a Chinese media report suggesting the dragon nation’s readiness for a military drill in Bohai, South China Sea.

Furthermore, Bloomberg’s piece signaling no hard boundaries for Beijing’s Gross Domestic Product (GDP) also appears to weigh on the market’s risk appetite.         The news quotes people familiar with the matter as said, “China's top leaders told government officials last week that this year's economic growth target of "around 5.5%" should serve as guidance rather than a hard target that must be hit.”

It should be noted that the recent disappointing US PMIs joined the last week’s US Gross Domestic Product (GDP) to portray recession woes. On Monday, the US ISM Manufacturing PMI dropped to the lowest since 2020 in July as the activity gauge dropped to 52.8 versus 53.0 prior. However, the actual figures were better than the 52.0 market forecast. Also, final readings of the US S&P Manufacturing PMI eased below 52.3 initial estimates to 52.2, compared to 52.7 prior.

Against this backdrop, the US Dollar Index (DXY) fails to cheer the risk-aversion wave as it dropped to the fresh low in a month as bears approached the 105.00 mark before recently printing the 105.30 level. The greenback’s weakness could be attributed to the downbeat US Treasury yields as the benchmark 10-year US bond coupon declines 6.9 basis points (bps) to 2.54% at the latest. Further, Wall Street closed with mild losses while the S&P 500 Futures extend the previous day’s pullback from a two-month high.

Moving on, speeches from Chicago Fed President Charles L. Evans and President of the Federal Reserve Bank of St. Louis James Bullard will be important for fresh impulse. Also, Canada’s S&P Global Manufacturing PMI for July, expected 55.7 versus 54.6 prior, could offer additional directions to the USD/CAD pair traders.

Technical analysis

The 50-DMA hurdle surrounding 1.2860 challenges USD/CAD buyers cheering an upside break of the two-week-old descending trend line and the 100-DMA, close to 1.2775 by the press time.

 

03:31
USD/INR Price News: Indian rupee stays below 79.00 as bulls approach 50-DMA ahead of RBI
  • USD/INR remains depressed around one-month low, down for the fourth consecutive day.
  • A clear downside break of three-month-long ascending trend line joins bearish MACD to favor sellers.
  • Tops marked during early June, late May could act as additional downside filters.
  • Market players expect RBI to increase Repo rate.

USD/INR extends the previous week’s bearish trajectory as it renews the monthly low near 78.95 during Tuesday’s Asian session. In doing so, the Indian rupee (INR) pair justifies Friday’s downside break of the ascending trend line from May amid bearish MACD signals.

That said, the USD/INR bulls await the Reserve Bank of India’s (RBI) next move to tame inflation. It’s worth noting that the Reuters poll suggests an increase in the RBI’s Repo rate with a forecast range of 25-50.  “26 of 63 respondents predict 50 bps hike,” the poll also mentioned.

Given the clear downside break of the previously important support and the bearish MACD signals, the USD/INR prices are likely to remain pressured towards the 50-DMA support near 78.70.

However, tops marked during early June and late May, around 78.40 and 78.12 in that order, could challenge the pair bears afterward. Also acting as the key downside support is the convergence of the 100-DMA and an ascending support line from January, around 77.60.

Alternatively, USD/INR buyers remain away unless witnessing a clear upside break of the support-turned-resistance line, at 79.60 by the press time.

Even so, the 79.80 and the 80.00 hurdles could challenge the upside momentum before directing them to the recently flashed record high of 80.20.

USD/INR: Daily chart

Trend: Further weakness expected

 

03:21
Gold Price Forecast: XAU/USD corrects from $1,780, upside remains favored on weaker DXY
  • Gold price is testing the upside break of the consolidation formed in a $1,764.45-1,775.35 range.
  • A slippage in US ISM New Orders Index data indicates the downside risk of demand ahead.
  • The US NFP is likely to slip to 250k from the prior release of 372k.

Gold price (XAU/USD) has corrected t near $1,774.65 after printing a high of $1,780.58 in the early Tokyo session. The precious metal is likely to rebound again as an upside break of consolidation is followed by a low-volume test of the breakout. Earlier, the bright metal displayed an upside break of the consolidation formed in a $1,764.45-1,775.35 range.

Meanwhile, the US dollar index (DXY) has found a modest rebound after refreshing the three-week low at 105.05 at the open. The DXY has shifted into a negative trajectory as forward demand by retailers and producers has trimmed significantly. The US agency reported a vulnerable US Institute of Supply Management (ISM) Manufacturing New Orders Index data on Monday.

The economic data indicates forward demand by the retailers and producers. The data remained lower than the estimates of 52 and the prior print of 49.2 at 48. A meaningful trim in the demand forecast indicator resulted in a steep fall in the DXY.

Going forward, investors’ entire focus will remain on the mega event of the US Nonfarm Payrolls (NFP), which is due on Friday. As per the market consensus, the US economy has generated 250k jobs in July lower than June’s print of 372k. This will strengthen the gold price against the greenback.

Gold technical analysis

A rising channel formation by the gold prices on an hourly scale advocates the continuation of an upside move. The upper portion of the above-mentioned chart pattern is placed from July 22 high at $1,739.37 while the lower portion is plotted from July 21 low at $1,681.87.

Advancing 50-and 200-Exponential Moving Averages (EMAs) at $1,765.40 and $1,742.85 respectively adds to the upside filters.

Meanwhile, the Relative Strength Index (RSI) (14) is attempting to reclaim 60.00 levels. An occurrence of the same will warrant a fresh bullish impulsive wave.

Gold hourly chart  

 

 

 

02:47
USD/JPY Price Analysis: Plunges to near 100-EMA for the first time in 11-months
  • USD/JPY has continued its four-day losing streak after surrendering 131.60.
  • The yen bulls have dragged the asset to near 100-EMA for the first time in 11 months.
  • A bearish range shift by the RSI (14) adds to the downside filters.

The USD/JPY pair carry-forwarded its four-day losing streak on Tuesday after violating Monday’s low at 131.60 in the early Tokyo session.  The pair has surrendered around 6.4% from its recent high of 139.39 printed on July 14.

The asset is declining sharply after a breakdown of the rising wedge on the daily scale. Usually, a rising wedge indicates a loss of momentum in an uptrend that advocates a vertical downside move.

The pair has plunged to a near 100-period Exponential Moving Average (EMA) at 130.29 for the first time in 11 years. Also, the 20-EMA at 135.26 has turned towards the south, which adds to the downside filters.

Meanwhile, the Relative Strength Index (RSI) (14) has established in the bearish range of 20.00-40.00, which indicates more downside ahead.

For more downside, the yen bulls need to push the asset below Tuesday’s low at 139.30 decisively. This will drag the asset towards May 23 high at 128.06, followed by the round-level support at 127.00.

Alternatively, the greenback bulls could regain their glory if the asset scales above the 50-EMA at 134.00, which will send the asset towards July 11 low at 135.95. A breach of the latter will drive the major towards July 22 high at 137.95.

USD/JPY daily chart

 

 

02:37
Chinese warplanes fly close to median line of Taiwan strait on Tuesday morning

Citing a source briefed on the matter, Reuters reports that several Chinese warplanes fly close to the median line of the Taiwan strait on Tuesday morning.

Several Chinese warships have stayed close to the median line of the Taiwan strait since Monday, the source said.

In response to this, Taiwan's military said it will not be raising its alert level but will strengthen its readiness for combat from today until Thursday.

Tensions are intensifying between the US and China over Taiwan as US House Speaker Pelosi is said to be arriving in Taiwan on Tuesday evening local time to visit the country's President. China has made threats to Pelosi's personal safety if she visits Taiwan.

Market reaction

Risk sentiment remains in a weaker spot so far this Thursday, reflective of the 0.50% drop in the US S&P 500 futures. The Chinese proxy, the AUD/USD pair, is down 0.16% on the day at 0.7010, unable to benefit from hawkish RBA expectations.

02:34
Chinese leaders say GDP goal is guidance, not a hard target – Bloomberg

"China's top leaders told government officials last week that this year's economic growth target of "around 5.5%" should serve as guidance rather than a hard target that must be hit,” Bloomberg reports, citing people familiar with the matter.

Additional takeaways

"Leaders held meetings with ministerial and provincial-level officials last week, during which they were told the target won't be used to evaluate their performance and there won't be penalties for failing to achieve it."

"The leaders also acknowledged that the chances of meeting the target were slim."

This comes as policymakers are starting to concede that it is unlikely that the country's GDP growth will be hit in 2022.

  • USD/CNH Price Analysis: Oscillates near 6.7850 key resistance

02:30
Commodities. Daily history for Monday, August 1, 2022
Raw materials Closed Change, %
Silver 20.356 0.6
Gold 1772.01 0.39
Palladium 2190.59 3.51
02:22
EUR/USD: Risk-aversion pokes bulls at monthly top below 1.0300, Fedspeak, US NFP eyed EURUSD
  • EUR/USD retreats from one-month high, pares gains during three-day uptrend.
  • Treasury yields drown the US dollar amid “technical recession”, mixed US data.
  • China-linked headlines, economic fears surrounding the bloc probe upside momentum.
  • Speeches from Fed’s Evans, Bullard could entertain traders but US NFP is the key.

EUR/USD bulls struggle to keep reins despite refreshing one-month high near 1.0300 during Tuesday’s mid-Asian session, retreating to 1.0260 by the press time. In doing so, the major currency pair justifies the market’s risk-off mood while also keeping the broad US dollar weakness in mind ahead of important data/events.

That said, the US Dollar Index (DXY) fails to cheer the risk-aversion wave as it dropped to the fresh low in a month as bears approached the 105.00 mark before recently printing the 105.30 level. The greenback’s weakness could be attributed to the downbeat US Treasury yields as the benchmark 10-year US bond coupon declines 6.9 basis points (bps) to 2.54% at the latest.

The recently disappointing US PMIs joined the last week’s US Gross Domestic Product (GDP) to portray economic fears for the US and drowned the US dollar. On the same line could be Fed Chair Jerome Powell’s indirect signals that the hawks are running out of steam.

On Monday, the US ISM Manufacturing PMI dropped to the lowest since 2020 in July as the activity gauge dropped to 52.8 versus 53.0 prior. However, the actual figures were better than the 52.0 market forecast. Also, final readings of the US S&P Manufacturing PMI eased below 52.3 initial estimates to 52.2, compared to 52.7 prior.

It’s worth noting, however, that the downbeat German Retail Sales, to -8.8% YoY versus -8.0% expected and an upwardly revised 1.1% prior, appeared to have put a floor under the US dollar’s decline. Additionally challenging the greenback bears could be the bloc’s energy crisis and the risk-negative headlines from China.

Reuters quotes three sources familiar with the matter to mention that US House of Representatives Speaker Nancy Pelosi was set to visit Taiwan on Tuesday as the United States said it wouldn't be intimidated by Chinese threats to never "sit idly by" if she made the trip to the self-ruled island claimed by Beijing. Furthermore, the news suggests that the US is considering limiting shipments of American chipmaking equipment to memory chip makers in China. Additionally, a Chinese media report suggesting the dragon nation’s readiness for a military drill in Bohai, South China Sea, also raises alarms of the fresh Sino-American tussles over the diplomatic issue.

Against this backdrop, Wall Street closed with mild losses while the S&P 500 Futures extend the previous day’s pullback from a two-month high.

Looking forward, headlines surrounding China and the recession will be important for the market sentiment ahead of today’s speeches from Chicago Fed President Charles L. Evans and President of the Federal Reserve Bank of St. Louis James Bullard will be important for intraday directions. However, major attention will be given to headlines surrounding China and the recession.

Technical analysis

Although the first daily closing beyond the 21-day EMA since late June keeps EUR/USD buyers hopeful, a two-month-old resistance line, at 1.0375 by the press time, challenges the upside momentum. Also important hurdle is the convergence of the 50-day EMA and an upward sloping trend line from mid-May, close to 1.0365-75.

Alternatively, a downside break of the 21-day EMA, close to 1.0235 at the latest, needs validation from a three-week-old ascending support line, at 1.0160 by the press time, to convince EUR/USD bears.

 

02:08
GBP/JPY Price Analysis: Bears run into a key daily support, bulls could be lurking
  • GBP/JPY is under pressure due to a strong yen.
  • The bulls could be encouraged to move in at this juncture. 

GBP/JPY is challenging a familiar horizontal support area on the daily chart following a strong bearish impulse. The price, however, could be due for a correction as the following analysis illustrates. 

The daily chart shows that the price has been riding along trendline support but has failed to take off beyond 168.90s. Consequently, the price has been pressured into a family horizontal support guarding the trendline. 

GBP/JPY M-formation

GBP/JPY has left behind an M-formation which is a reversion pattern. This exposes the M-formation's neckline to a potential retest for the days ahead should the bulls commit from this prior area of support. 

01:57
Japan’s Suzuki: Recent yen moves have been rapid

Japanese Finance Minister Shunichi Suzuki is out on the wires in the last minutes, expressing his concerns about the exchange rate value.

Key quotes

Recent yen moves have been rapid.

It is important for FX rates to moves stably, reflecting fundamentals.

more to come ....

01:52
Saudi will push OPEC+ to increase oil production at their meeting on August 3

Citing a source with knowledge of the meeting between President Biden and Saudi King, a Fox News reporter tweeted out on Tuesday, saying that the source “tells me Saudis will push OPEC+ to increase oil production at their meeting on Wednesday.”

“Source says the Saudi King made the assurance to President Biden during their face-to-face meeting on July 18,” the Fox News reporter added.

The OPEC and non-OPEC Ministerial Meetings are due to be held on August 3, Wednesday.

Market reaction

Amid the talks of a potential oil output hike, WTI is flirting with daily lows of $92.27, down nearly 1% on the day.

01:51
When is the RBA Interest Rate Decision and how could it affect AUD/USD?

After announcing consecutive three rate increases in the last meetings, the Reserve Bank of Australia (RBA) is up for another hawkish monetary policy outcome during the scheduled Interest Rate Decision around 04:30 AM GMT on Tuesday.

The RBA is expected to lift the benchmark interest rate by 50 basis points (bps) to 1.85%, mainly to fight inflation and match the tune with major central banks.

With this, the Aussie central bank could reach near the monetary policy hawks like the Fed and RBNZ, not to forget the BOE and BOC, even as the domestic numbers have been softer of late, which in turn makes today’s RBA rate hike interesting. The same makes the RBA Rate Statement will be more important to watch and forecast near-term AUD/USD moves.

Ahead of the event Westpac said,

Westpac anticipates that the cash rate will rise to 3.10% by year end and then peak at 3.35% in February 2023. The expected path is another 50bps in September, and then 25bps moves at each meeting thereafter (with no meeting in January).

On the other hand, FXStreet’s Valeria Bednarik says,

A smaller-than-anticipated hike should have a negative impact on the Australian dollar, sending AUD/USD sharply lower, particularly if the market sentiment deteriorates ahead of the announcement. A 75 bps hike, on the other hand, could fuel gains towards the 0.7100 figure. Whether gains will be sustainable or if the rally will be seen as a selling opportunity will depend on investors’ perception of risk.

How could the RBA decision affect AUD/USD?

AUD/USD retreats from the 1.5-month high as intraday sellers attack the 0.7000 threshold while refreshing the daily lows, snapping a two-day uptrend. The quote’s recent weakness could be linked to the market’s fears of recession and risk-negative headlines surrounding China.

Recently, Reuters quoted three sources familiar with the matter to mention that US House of Representatives Speaker Nancy Pelosi was set to visit Taiwan on Tuesday as the United States said it wouldn't be intimidated by Chinese threats to never "sit idly by" if she made the trip to the self-ruled island claimed by Beijing.

Additionally, the second consecutive quarterly decline in the US Gross Domestic Product (GDP) triggered a “technical recession” the previous week and weighed on the US dollar. On the same line were Fed Chair Jerome Powell’s indirect signals that the hawks are running out of steam.

It’s worth noting that the RBA’s hawkish path has limited upside scope considering the economic challenges for the biggest customer China, as well as recently mixed data at home. However, the latest easy inflation in Australia and strong employment data keep AUD/USD bulls hopeful.

Hence, AUD/USD prices may remain firmer until the RBA signals slower rate hikes moving forward.

Technically, a joint of the 100-day EMA and the downward sloping trend line from April 20, around 0.7045-50, restricts immediate AUD/USD upside. Alternatively, pullback moves below 0.6910 could direct the bears towards the lows marked during mid-June and May, respectively around 0.6850 and 0.6830.

Key quotes

AUD/USD Price Analysis: Further upside hinges on 0.7045-50 resistance break, RBA 

AUD/USD bulls take a breather below 0.7050 ahead of RBA Interest Rate Decision

Reserve Bank of Australia Preview: How aggressive can it be?

About the RBA interest rate decision

RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.

01:37
USD/CNH Price Analysis: Oscillates near 6.7850 key resistance
  • USD/CNH retreats from 11-week high as buyers flirt with horizontal hurdle stretched from May 13.
  • Sustained trading beyond 21-DMA, two-month-old support line favor buyers.
  • May’s top, 61.8% FE lure bulls amid firmer RSI line.

USD/CNH takes a U-turn from its 11-week high as an important resistance line challenge buyers during Tuesday’s Asian session.

However, the firmer RSI (14) and the quote’s successful trading above the 21-DMA, as well as an upward sloping support line from early June, keep the pair buyers hopeful.

That said, a clear daily closing beyond the 6.7850 resistance becomes necessary for the USD/CNH bulls to aim for the yearly high marked in May at around 6.8385.

Following that, the 61.8% Fibonacci Expansion (FE) of the pair’s late March to early June moves, near 6.9200, will be in focus.

It should be noted that January 2020 low near 6.8660 and the 6.9000 round figure could act as buffers during the USD/CNH run-up.

Alternatively, pullback moves could aim for the 21-DMA level surrounding 6.7450 before challenging the short-term support line near 6.7250.

In a case where USD/CNH drops below 6.7250, the odds of witnessing an extended south-run towards June’s low of 6.6168 can’t be ruled out.

Overall, USD/CNH remains on the way to refresh yearly top but the interemediate pullbacks can't be ruled out.

USD/CNH: Daily chart

Trend: Further upside expected

 

01:34
Australia Home Loans registered at -3.3%, below expectations (-3%) in June
01:32
Australia Investment Lending for Homes declined to -6.3% in June from previous 0.9%
01:32
Australia Building Permits (YoY) increased to -17.2% in June from previous -20.9%
01:31
Australia Home Loans came in at -2.6%, above forecasts (-3%) in June
01:30
Australia Building Permits (MoM) above forecasts (-5%) in June: Actual (-0.7%)
01:23
USD/CNY fix: 6.7462 vs. the prior fix of 6.7467

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 6.7462 vs. the prior fix of 6.7467 and the previous close of 6.7675.

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day's closing level and quotations taken from the inter-bank dealer.

01:21
AUD/JPY bears move in ahead of a critical RBA meeting
  • AUD/JPY bears in charge at the start of the week.
  • The markets are getting set for the RBA today. 

AUD/JPY is currently trading at 91.72 and down on the day by some 0.76% falling from a high of 92.59 to a low of 91.69. However, the Aussie has been broadly higher at the start of the week while the USD drifted lower overnight amid more weak US data and as investors weighed the likelihood that the Federal Reserve will not raise interest rates as aggressively as some had expected.

US manufacturing activity slowed less than expected in July. The manufacturing ISM fell to 52.8 (exp: 52.0, prev: 53.0) reflecting a sharp drop from the low 60s seen at the end of 202. The headline index is at a two-year low. However, the key report for investors this week will be the Nonfarm Payrolls report on Friday after the Federal raised the benchmark overnight interest rate by three-quarters of a percentage point. last week. The move came on top of a 75 basis points hike last month and smaller moves in May and March, in an effort by the US central bank to cool inflation. Nevertheless, US yields have fallen which is supporting the yen which was at its strongest vs. the greenback since mid-June. 

Domestically, the Reserve Bank of Australia Board is expected to signal it will “take further steps”:'' If the RBA delivers the expected 50bp rate hike, attention will swing to whether there are any substantive changes in the statement,'' analysts at ANZ Bank said.

''In particular, does it: still, describe the increase as a “further step in the withdrawal of the extraordinary monetary support” and repeat the Board’s expectation that it will “take further steps in the process of normalising monetary conditions”? The reference to extraordinary monetary support could be amended given that the cash rate is now well above its pre-pandemic level, while we expect the RBA to signal further hikes to come. The market will also be looking for any details about the RBA’s forecast update to be published on Friday.''

AUD/JPY daily chart

The price has left behind an M-formation following the bearish impulse that has run into an area of prior support. Should the bulls move in then a correction will be on the cards that could potentially mitigate the price imbalances along the bearish run on the way to 93.70s in a 50% mean reversion.

On the hourly chart, the 92.50s will first need to be clear:

01:17
GBP/USD struggles to cheer DXY weakness around 1.2250 on downbeat options market signals GBPUSD

GBP/USD retreats from intraday high as buyers struggle to extend a five-day uptrend around a five-week top marked the previous day. That said, the Cable pair eases to 1.2260 by the press time.

In doing so, the quote fails to cheer the US Dollar weakness amid downbeat signals from the options market.

The US Dollar Index (DXY) drops to the fresh low in a month as bears approach the 105.00 mark at the latest.

On the other hand, one-month risk reversal (RR) of the GBP/USD prices, a spread between the call options and put options, dropped for the third consecutive day to -0.030 at the latest by the end of Monday’s North American session, per Reuters data.

In doing so, the options market gauge snapped a four-week uptrend ahead of the key Bank of England (BOE) monetary policy meeting.

Also read: GBP/USD Price Analysis: Bulls eye a break of key daily structure

01:08
S&P 500 Futures drop, US 10-year Treasury yields renew four-month low amid recession, China concerns
  • Market sentiment roils as economic slowdown fears join risk-negative headlines surrounding China.
  • Mixed US data, recently hawkish Fedspeak also spoil the mood.
  • S&P 500 Futures extend pullback from two-month high, US 10-year Treasury yields print five-day downtrend to refresh multi-day low.

The risk profile deteriorates during Tuesday’s Asian session, extending the previously sour sentiment, as recession woes join headlines surrounding China.

While portraying the mood, the S&P 500 Futures stretch the previous day’s pullback from the highest levels since early June while the US 10-year Treasury yields drop to the lowest levels in four months. That said, the US equity futures gauge drops 0.30% intraday to 4,107 at the latest whereas the benchmark US bond coupon declines 6.4 basis points (bps) to 2.54% by the press time.

It’s worth noting, however, that the US Dollar Index (DXY) fails to cheer the risk-aversion wave as it drops to the fresh low in a month as bears approach 105.00 mark at the latest.

That said, the recently disappointing US PMIs joined the last week’s US Gross Domestic Product (GDP) to portray economic fears for the US. On Monday, the US ISM Manufacturing PMI dropped to the lowest since 2020 in July as the activity gauge dropped to 52.8 versus 53.0 prior. However, the actual figures were better than the 52.0 market forecast. Also, final readings of the US S&P Manufacturing PMI eased below 52.3 initial estimates to 52.2, compared to 52.7 prior.

Also weighing on the mood could be Fed Chair Jerome Powell’s indirect signals that the hawks are running out of steam.

Elsewhere, Reuters quotes three sources familiar with the matter to mention that US House of Representatives Speaker Nancy Pelosi was set to visit Taiwan on Tuesday as the United States said it wouldn't be intimidated by Chinese threats to never "sit idly by" if she made the trip to the self-ruled island claimed by Beijing. Furthermore, the news suggests that the US is considering limiting shipments of American chipmaking equipment to memory chip makers in China. Additionally, a Chinese media report suggesting the dragon nation’s readiness for a military drill in Bohai, South China Sea, also raises alarms of the fresh Sino-American tussles over the diplomatic issue.

Looking forward, headlines surrounding China and the recession will be important for the market sentiment ahead of Wednesday’s US ISM Services PMI for July and Friday’s US jobs report. That said, speeches from Chicago Fed President Charles L. Evans and President of the Federal Reserve Bank of St. Louis James Bullard will be important for intraday directions.

01:07
USD/CAD Price Analysis: Loonie bulls defend 200-EMA USDCAD
  • A double top formation around 1.2860 advocates a sheer downside reversal.
  • Descending 200-EMA has acted as a major hurdle for the greenback bulls.
  • A range shift by the RSI (14) in a 40.00-60.00 territory will weaken the greenback further.

The USD/CAD pair has witnessed a steep fall after attempting to break Monday’s high at around 1.2860 in the Asian session. The asset has sensed significant barricades around Monday’s high and has formed a ‘Double Top’ chart pattern that indicates a sheer bearish reversal ahead. On a broader note, the major is declining for the past two weeks amid broader weakness in the US dollar index (DXY).

A Rising Channel formation on an hourly scale is indicating a prolonged downside trend in the asset. The upper portion of the above-mentioned chart pattern is placed from an average price of July 18 at 1.2990 while the lower portion is plotted from July 22 low at 1.2822.

The 200-period Exponential Moving Average (EMA) at 1.2856 has acted as a major barricade for the counter.

However, the Relative Strength Index (RSI) (14) is oscillating in a 60.00-80.00 range but is likely to shift into a 40.00-60.00 territory as the asset has failed to overstep Monday’s high.

A decisive drop below Tuesday’s low at 1.2837 will drag the asset towards the round-level support at 1.2800, followed by the six-week low at 1.2768.

On the flip side, the greenback bulls could defy the odds and may display gains if the asset oversteps Monday’s high at around 1.2860 confidently. An occurrence of the same will send the major towards July 26 high at 1.2901 and later on to near July 25 high at 1.2947.

USD/CAD hourly chart

 

00:46
Gold Price Forecast: XAU/USD bulls attack $1,780 hurdle, Fedspeak, US NFP in focus
  • Gold price grinds higher of late, refreshes monthly top during the five-day uptrend.
  • Softer US dollar, fears of recession favor buyers ahead of key data/events.
  • Likely escalating US-China tussles also underpin XAU/USD upside.

Gold price (XAU/USD) picks up bids to renew a one-month high near $1,778 during Tuesday’s Asian session. In doing so, the yellow metal rises for the fifth consecutive day amid broad US dollar weakness and the market’s rush towards risk safety amid the fears concerning economic slowdown.

US Dollar Index (DXY) refreshed its monthly low on Monday, down 0.13% intraday near 105.24 at the latest, as fears of “technical recession” in the US escalated amid downbeat data. US ISM Manufacturing PMI dropped to the lowest since 2020 in July as the activity gauge dropped to 52.8 versus 53.0 prior. However, the actual figures were better than the 52.0 market forecast. Also, final readings of the US S&P Manufacturing PMI eased below 52.3 initial estimates to 52.2, compared to 52.7 prior.

It should be noted, however, that the disappointing statistics from Eurozone and the risk-negative catalysts surrounding China appeared to have probed the US dollar bears, which in turn have stopped XAU/USD bulls, during late Monday.

That said, Germany’s Retail Sales dropped 8.8% YoY in June versus -8.0% market consensus and -3.6% prior. On the other hand, Reuters quotes three sources familiar with the matter to mention that US House of Representatives Speaker Nancy Pelosi was set to visit Taiwan on Tuesday as the United States said it wouldn't be intimidated by Chinese threats to never "sit idly by" if she made the trip to the self-ruled island claimed by Beijing. Furthermore, the news suggests that the US is considering limiting shipments of American chipmaking equipment to memory chip makers in China.

Against this backdrop, Wall Street closed with mild losses while the US 10-year Treasury yields refreshed a four-month low of around 2.58%. Also, the S&P 500 Futures drops 0.25% on a day to 4,110 by the press time.

To sum up, the softer US dollar and the market’s rush towards risk-safety could favor gold buyers. However, speeches from Chicago Fed President Charles L. Evans and President of the Federal Reserve Bank of St. Louis James Bullard will be important for directions ahead of Friday’s US Nonfarm Payrolls (NFP).

Technical analysis

Gold price picks up bids inside an eight-day-old bullish channel, recently nearing the resistance line, amid overbought RSI (14). That said, a convergence of the stated channel’s upper line and the 50% Fibonacci retracement (Fibo.) of June-July downside, near $1,780, appears a tough nut to crack for the XAU/USD bulls considering the RSI conditions.

Even if the yellow metal manages to cross the $1,780 hurdle the 61.8% Fibonacci retracement level and July’s peak, respectively near $1,804 and $1,815, could challenge the gold buyers.

Meanwhile, pullback moves could retest the 200-SMA level surrounding $1,767 before declining towards the one-month-old horizontal support line near $1,753-52.

Also acting as strong support is the convergence of the 50-SMA and lower line of the aforementioned bullish channel, near $1,736.

Gold: Four-hour chart

Trend: Pullback expected

 

00:37
EUR/GBP tests the upside break of consolidation around 0.8370, BOE policy in focus
  • EUR/GBP has given an upside break of the consolidation formed in a 0.8364-0.8374 range.
  • The BOE is likely to sound less hawkish on subdued economic indicators.
  • A preliminary estimate for the Eurozone Retail Sales is -1.7% vs. 0.2% in the prior release.

The EUR/GBP pair is testing the upside break of the consolidation formed in a range of 0.8364-0.8374 in early Tokyo. On a broader note, the shared currency bulls have defended a reclaim of a three-month low of around 0.8350. The pre-anxiety period ahead of the interest rate decision by the Bank of England (BOE) will result in wild swings in the counter.

An interest rate policy by the BOE on Thursday is likely to conclude with an outcome of an interest rate hike by 25 basis points (bps). A quarter-to-a-percent rate hike decision by BOE Governor Andrew Bailey will lift the interest rates to 1.5%.

It is worth noting the price pressures are highest in the pound area and the BOE has turned slow in announcing interest rate hikes. Also, the BOE is the first central bank that increased its rates for the first time after the pandemic.

The inflation rate in the sterling zone has climbed to 9.4% and further acceleration to a two-digit figure is imminent as price pressures have not displayed any signs of exhaustion yet.

On the eurozone front, the Retail Sales data is in focus. A preliminary estimate for the Eurozone Retail Sales is -1.7%, extremely lower than the prior release of 0.2%. Investors must be aware of the fact that households in Europe are facing the headwinds of higher price pressures, which are forcing them to higher payouts despite a minor change in quantity purchased. Therefore, the Retail Sales data should be higher. And, a lower estimate for the economic demand indicates a serious fall in the retail demand.

 

 

 

00:30
Stocks. Daily history for Monday, August 1, 2022
Index Change, points Closed Change, %
NIKKEI 225 191.71 27993.35 0.69
Hang Seng 9.33 20165.84 0.05
KOSPI 0.75 2452.25 0.03
ASX 200 47.8 6993 0.69
FTSE 100 -9.98 7413.42 -0.13
DAX -4.42 13479.63 -0.03
CAC 40 -11.64 6436.86 -0.18
Dow Jones -46.73 32798.4 -0.14
S&P 500 -11.66 4118.63 -0.28
NASDAQ Composite -21.71 12368.98 -0.18
00:21
AUD/USD Price Analysis: Further upside hinges on 0.7045-50 resistance break, RBA AUDUSD
  • AUD/USD remains sidelined after refreshing six-week high, mildly bid of late.
  • A convergence of 100-day EMA, descending trend line from late April restricts immediate upside.
  • Four-month-old previous resistance line could lure bears during pullback.
  • MACD, RSI conditions favor buyers but it all depends upon the RBA.

AUD/USD takes rounds to 0.7025-30 during the mid-Asian session on Tuesday. In doing so, the Aussie pair flirts with the key hurdle to the north as traders await the Reserve Bank of Australia’s (RBA) Interest Rate Decision.

In addition to a joint of the 100-day EMA and the downward sloping trend line from April 20, fears that the RBA might refrain from too hawkish commentary due to the broad recession fears also challenge the AUD/USD bulls.

Also read: AUD/USD bulls take a breather below 0.7050 ahead of RBA Interest Rate Decision

It’s worth noting, however, that the first MACD signals and the RSI (14), not overbought, keep AUD/USD buyers hopeful. On the same line is the Aussie pair’s sustained trading beyond the downward sloping resistance line from April, now support around 0.6910.

Should the pullback moves drag the quote below 0.6910, the lows marked during mid-June and May, respectively around 0.6850 and 0.6830, will challenge the pair’s further downside before redirecting bears towards the yearly low of 0.6680.

On the contrary, a successful run-up beyond the 0.7050 hurdle needs validation from June 16 swing high near 0.7070 before fueling the AUD/USD prices towards 50% and 61.8% Fibonacci retracement levels of the April-July downtrend, close to 0.7175 and 0.7300 in that order.

AUD/USD: Daily chart

Trend: Further Upside expected

 

00:15
Currencies. Daily history for Monday, August 1, 2022
Pare Closed Change, %
AUDUSD 0.70266 0.62
EURJPY 135.051 -0.83
EURUSD 1.02582 0.36
GBPJPY 161.267 -0.57
GBPUSD 1.22508 0.63
NZDUSD 0.6328 0.71
USDCAD 1.28392 0.26
USDCHF 0.9495 -0.21
USDJPY 131.65 -1.19
00:03
EUR/USD Price Analysis: Bears lurking at critical daily resistance EURUSD
  • EUR/USD sears are lurking at critical resistance. 
  • Hourly market structure is located at 1.0225 on the downside. 

EUR/USD remains in familiar ranges, bounded by resistance and support on the daily chart, currently testing the upper boundary of the range. The following illustrates the market structure on the daily and hourly charts. 

EUR/USD daily chart

EUR/USD has been in the hands of the bears for a number of days and has reached the prior highs which might be expected to act as resistance, potentially leading to a sell-off. On the other hand, there is a large area of imbalance of price between the resistance and 1.0416 for which would be mitigated in due course. 

EUR/USD H1 chart

The hourly chart's trendline support could be broken at this juncture should the bulls capitulate at resistance in the forthcoming sessions. The market structure, in such a scenario, will need to be broken at 1.0225.

00:02
Ireland Purchasing Manager Index Manufacturing declined to 51.8 in July from previous 53.1

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