Forex-novosti i prognoze od 04-08-2022

• WTI crude oil holds lower ground near six-month bottom after declining for the last four days.
• Fears of economic slowdown, central bank aggression outweigh geopolitical woes linked to China, Russia.
• US jobs report for July, developments surrounding China will be important for fresh impulse.

WTI crude oil prices remain depressed at the lowest levels in six months as fears of economic slowdown supersede geopolitical crisis. That said, the black gold seesaws around $87.20-30, after refreshing the multi-day low with the $87.18 mark, as traders await the US employment data on Friday.

The energy benchmark dropped during the last four consecutive days to print the six-month bottom the previous day as mixed statistics from the major economies join aggressive monetary policy actions to highlight the recession fears.

It’s worth noting that the Bank of England’s (BOE) open acceptance of the economic slowdown in late 2022 amplified the fears. On the same line was Cleveland Fed President Loretta Mester who said that recession risks have increased in the US.

It’s worth noting that the US Treasury yields continued to portray the risk of recession as the difference between the 10-year and 2-year bond coupons remain the widest since 2000. That said, the US 10-year Treasury yields closed near 2.069% while the 2-year counterpart dropped to 3.049% at the latest.

Alternatively, a smaller output increase by the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, should have helped the oil buyers but did not. The reason could be linked to the weekly stockpile data from the US Energy Information Administration (EIA) marked a notable increase in inventories. “Crude inventories rose by 4.5 million barrels in the week to July 29 to 426.6 million barrels, the EIA said, compared with analysts' expectations in a Reuters poll for a 600,000-barrel drop,” stated the news.

Also likely to have challenged the oil prices are headlines surrounding China and Russia. Recently, the dragon nation’s heavy military drills near the Taiwan border gained major attention and challenges the global trade channel, which in turn should mark further strain on the supply chain and might create an imbalance in the oil supply-demand matrix. However, the same could also escalate the recession fears and may not be that effective. On the other hand, Russia’s sustained invasion of Ukraine has been old news and hence gained little attention from the markets.

Amid these plays, the oil bears keep reins ahead of the key US employment data for July that will be crucial for determining near-term market moves.

Also read: Nonfarm Payrolls Preview: High expectations set deal the dollar a blow, create buying opportunity

Technical analysis

A daily close below July’s low of $88.34 directs bears towards October 2021 peak near $85.00.

• AUD/NZD has shifted into a consolidation mode ahead of the RBA’s monetary policy statement.
• The RBA raised its OCR by 50 bps consecutively for the third time to 1.85%.
• A downbeat NZ employment data released this week may keep the kiwi bulls on the tenterhooks.

The AUD/NZD pair is witnessing topsy-turvy moves in a range of 1.1043-1.1075 from Thursday. The market participants are likely to remain on the sidelines as investors are awaiting the release of the monetary policy statement (MoPS) by the Reserve Bank of Australia (RBA).

The minutes from the RBA MoPS will provide a detailed view of Tuesday’s interest rate decision. The investing community should be aware of the fact that RBA Governor Philip Lowe announced a rate hike by 50 basis points (bps) and raised the Official Cash Rate (OCR) to 1.85%. This was the third consecutive 50 bps rate hike by the RBA.

In order to combat the soaring price pressures, the RBA needed to tighten its policy extremely and squeeze liquidity from the market. For the second quarter of CY2022, the inflation rate has landed at 6.1%, significantly higher than the prior release of 5.1%.

On the kiwi front, the ineffectiveness of the kiwi economy in generating job opportunities has created immense trouble for the Reserve Bank of New Zealand (RBNZ). Price pressures are soaring in the NZ economy and the RBNZ was expecting decent performance from the labor market to get strengthened for hiking the Official Cash Rate (OCR) unhesitatingly. Now, crippled RBNZ would resort to a less-hawkish stance on the policy rates.

Stats NZ reported that the Unemployment Rate increased to 3.3% from the estimates of 3.1% and the prior release of 3.2% in the second quarter. 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%.

• The GBP/JPY prepares to finish the week with losses of almost 0.50%.
• The cross-currency daily and hourly charts suggest that a mean reversion move towards 162.83 could be on the cards.

The GBP/JPY plummeted on Thursday, failing to crack the 50-day EMA at 164.12, so the pair tumbled towards its daily low at 161.12 before recovering some ground and settling near current exchange rates. As the Asian Pacific session begins, the GBP/JPY is trading at 161.47, registering a minimal losses of 0.06%.

GBP/JPY Price Analysis: Technical outlook

Once the dust settled, after the Bank of England acknowledged that the UK might tap into a recession, the GBP/JPY daily chart shows sellers are in control, tuned in with the Relative Strength Index (RSI), in bearish territory, and below its 7-day RSI’s SMA. Despite some selling pressure lying in the cross, the move’s size suggests a possible mean reversion impulse before extending downwards.

Unless the GBP/JPY decisively breaks below the August 4 low at 161.12, a pullback towards the 100-day EMA at 162.83 is on the cards.

 GBP/JPY Hourly chart

In the near term, the GBP/JPY is neutral-biased but slightly tilted downwards. Failure to conquer 164.00 leaves the pair exposed to selling pressure, so bears could be piling around the confluence of the 200-hour EMA and the 61.8% Fibonacci level, around the 162.84-162.93 area. However, if the cross-currency pair tumbles below 161.00, a re-test of the weekly low at 159.44 is on the cards.

GBP/JPY Key Technical Levels

• USD/CHF is oscillating in an 11-pip range as investors await US NFP data.
• A 200k consensus for the US NFP could drag the asset further.
• The DXY has failed to capitalize on hawkish commentary from the Fed policymaker.

The USD/CHF pair is displaying back and forth moves in a narrow range of 0.9543-0.9554 in the early Tokyo session. The asset has turned lackluster as investors are focusing on the release of the US Nonfarm Payrolls (NFP). On Thursday, the asset witnessed a steep fall after surrendering the crucial support of 0.9600 and printed a low of 0.9543.

Economists at JP Morgan predict the US Nonfarm Payrolls (NFP) to come in weaker at 200K in July’s labor market report. In the month of June, the US economy added 372k jobs in the labor market. Rising interest rates and their multiplier effects have trimmed the job opportunities in the market. Well, the Unemployment Rate is seen unchanged at 3.6%.

The corporate players have inculcated more filters in the selection of investment opportunities due to the unavailability of the cheap dollar. So lower investment planning by the firms is resulting in lower job creation. It is worth noting that various firms in their quarterly earnings commentary have hinted announced that they have halted their recruitment process for the rest of CY2022.

Meanwhile, the US dollar index (DXY) has surrendered the crucial support of 106.00. The asset is hinting at a subdued movement ahead despite the higher targets for interest rates by Federal Reserve (Fed) policymakers. Cleveland Fed President Loretta J. Mester is seeing interest rates above 4% as halting the policy tightening program without finding a slowdown in the inflation rate for months is not feasible.

On the Swiss franc front, the inflation rate has remained in line with the prior release of 3.5%. However, investors were expecting an improvement to 3.5%. Well, this doesn’t trim the odds of a rate hike by the Swiss National Bank (SNB) ahead, but hawkish guidance could get mild.

• AUD/JPY holds lower ground after reversing from weekly top.
• Convergence of 21-DMA, 50-DMA precedes previous support line from early May to restrict immediate upside.
• Bearish MACD signals also favor the decline towards 50% Fibonacci retracement.

AUD/JPY bears keep reins after retaking control from crucial resistances, despite recent dribbling of around 92.60 during Friday’s Asian session.

That said, the cross-currency pair refreshed a one-week high the previous day before reversing from a confluence of the 21-DMA and the 50-DMA, as well as reversing from the resistance-turned-support stretched from May 12.

The pullback moves join bearish MACD signals to keep sellers hopeful.

However, the 50% Fibonacci retracement level of May-June upside, around 92.10, quickly followed by the 92.00 threshold, could challenge the AUD/JPY sellers.

It’s worth noting that July’s bottom near 91.40 and the 61.8% Fibonacci retracement level of 90.95 will precede the latest swing low close to 90.50 to restrict the cross-currency pair’s downside past 92.00.

Alternatively, recovery moves may initially confront the aforementioned DMA convergence of 93.75 before poking the previous support line surrounding 93.85.

Even if the AUD/JPY prices cross the 93.85 hurdle, the bulls need validation from the 94.00 round figure before retaking control.

AUD/JPY: Daily chart

Trend: Further weakness expected

• USD/CAD bears could be on the verge of an attack.
• The bears can eye a break to 1.2780 for the day ahead. 

As per the prior analysis, USD/CAD Price Analysis: Bears lurking and break below 1.2800 eyed, the price was going through a consolidative phase and price discovery. There was little bias to go on although there had been a lower high printed.

The price was holding up in the 1.2830s and a correction to mitigate the price imbalance between spot and 1.2865 was anticipated to result in further supply in order to break down the support of 1.2820. In doing so, this was going to leave the price imbalance between 1.2800 and 1.2780 exposed. 

USD/CAD H1, prior analysis

USD/CAD H1 target reached

As illustrated, the price moved in on the targetted level. However, the bulls came up for air again as follows:

USD/CAD H1 live market

The level proved to be a strong support area from which the price has rallied. However, the bulls have failed to print a higher high so far and should the price respect the trendline resistance, this could be the makings of a breakout to the downside in line with the original bearish scenario and to target a break of 1.2780.

• EUR/JPY oscillates around 136.20 after buyers struggle at 137.00.
• In the near term, the EUR/JPY is range-bound within 136.00-136.80.

The EUR/JPY finished almost flat on Thursday after hitting a daily low at 135.63, followed by a rally towards its weekly high at 136.92. Nevertheless, buyers lost steam and booked profits, while the EUR/JPY dived towards the 136.10 area. At the time of writing, the EUR/JPY is trading at 136.21 up 0.09% as the Asian session begins.

EUR/JPY Price Analysis: Technical outlook

The EUR/JPY daily chart illustrates the formation of a doji, as Thursday’s price action, even though was large, neither buyers/sellers capitalized on each other weaknesses. Therefore, due to the uptrend preceding the chart pattern, the EUR/JPY might dip towards 136.00 due to its neutral-to-downward bias.

EUR/JPY Hourly chart

The EUR/JPY 1-hour chart depicts price action contracting, trapped between the 200 and the 50-hour EMA, meaning that prices could remain sideways or it’s going to break outside the range. On the upside, the EUR/JPY’s first resistance would be the confluence of the  200-hour EMA and the R1 pivot at 136.82. The break above will expose 137.00, followed by July 27 139.34.

On the flip side, the EUR/JPY first support will be the 50-hour EMA at 135.99. Once cleared, the next support would be the confluence of the 100-hour EMA and the S1 pivot at 135.51, followed by the S2 pivot at 135.00.

EUR/JPY Key Technical Levels

• EUR/USD grinds higher amid pre-NFP trading lull, seesaws after the biggest daily jump in a fortnight.
• Treasury yields drown US dollar amid recession risk, mixed data.
• Pre-NFP anxiety, China-linked fears add to the trading filters.

EUR/USD bulls take a breather after the heavy run, grinding higher around 1.0250 during the initial Asian session on Friday. In the doing so, the major currency pair portrays the typical cautious mood ahead of the key US Nonfarm Payrolls (NFP) release. That said, the quote rose the most in 13 days amid broad US dollar weakness and firmer German data on Thursday.

German Factory Orders dropped 0.4% MoM versus -0.8% expected and -0.2% downwardly revised prior. Also adding strength to the Euro were the hopes of economic recovery in the bloc, despite the energy crisis, mainly due to the European Central Bank’s (ECB) bond-buying, per the monthly ECB Economic Bulletin.

In a case of the US, the Initial Jobless Claims rose to 260K for the week ended on July 30 versus 254K prior and 259K expected. Further, the Goods and Services Trade Balance improved to $-79.6B versus $-80.1B market consensus and $-84.9B revised prior. Despite the mixed data, the market players remained hopeful of the Fed’s aggression but that couldn’t lift the US dollar amid fears of recession. On the same line could be an absence of major instances during US House Speaker Nancy Pelosi’s Taiwan visit, despite the verbal war.

The economic slowdown woes gained momentum after the Bank of England (BOE) formally accepted the fears of recession and further hardships while Cleveland Fed President Loretta Mester said that recession risks have increased in the US.

It should be noted that China’s military drills have sparked geopolitical fears as five test missiles landed in Japan’s exclusive economic zones. This adds to the US-China tension over Taiwan and could have challenged the US dollar bears.

Against this backdrop, Wall Street closed mixed but the yields were down for the second consecutive day to 2.69% at the latest, which in turn pressured the US dollar ahead of the key data.

Moving on, the EUR/USD traders should wait for the US Nonfarm Payrolls (NFP) for July, expected 250K versus 372K prior, for clear directions as recession fears jostle with the Fed’s aggression.

Technical analysis

EUR/USD justified Wednesday’s bullish Doji to portray notable run-up. However, failure to cross the two-month-old resistance line on daily closing, at 1.0245 by the press time, seemed to teased the sellers to revisit the 21-DMA support surrounding 1.0165.

• A responsive buying action near the rising channel lower portion indicates the strength of an asset.
• Pound bulls have successfully defended the 200-EMA near 1.2125.
• A golden cross formation by the 50-and 200-EMAs adds to the upside filters.

The GBP/USD pair has turned sideways around 1.2160 in the early Tokyo session after extending recovery above 1.2120 on Thursday. Earlier, the cable displayed a responsive buying action after plummeting below 1.2080 as the Bank of England (BOE) announced an interest rate decision. The BOE elevated the interest rates by 50 basis points (bps) to 1.75%.

On a four-hour scale, the cable found a cushion from the lower portion of the Rising Channel, which is placed from July 14 low at 1.1760. While the upper portion is placed from July 13 high at 1.1968. The availability of decent buying interest around the lower portion of the Rising Channel indicates a fresh bullish impulsive wave ahead.

The pound bulls have confidently defended the 200-period Exponential Moving Average (EMA) at 1.2125, which signals the strength of the asset. Also, a golden cross formation by the 50-and 200-EMAs has infused fresh blood in the cable.

Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range but is likely to fetch momentum if the asset oversteps 60.00 swiftly.

The cable may initiate a fresh bullish impulsive wave if the asset oversteps Thursday at 1.2212. This will drive the asset towards the round-level resistance of 1.2300, followed by a June 27 high at 1.2332.

On the flip side, a decisive slippage below Thursday's low at 1.2065 will drag the asset towards the psychological support at 1.2000.  A downside move from 1.2000 will unleash the greenback bulls and will drag the asset towards July 12 high at 1.1967.

GBP/USD four-hour chart

• AUD/USD bulls take a breather after two-day uptrend, eases of late.
• US dollar dropped despite recession fears, mixed data and geopolitical woes.
• Yields remained pressured for the second consecutive day.
• RBA MPS, US NFP will be important, risk catalysts should also be watched carefully for clear directions.

AUD/USD bulls take a breather after a two-day uptrend, recently easing to 0.6965 as the key NFP Friday begins. The pair’s latest moves could be linked to the cautious sentiment ahead of the key Monetary Policy Statement (MPS) from the Reserve Bank of Australia (RBA), as well as the US employment report for July. However, the buyers remain hopeful over the broad US dollar weakness.

That 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 after the monetary policy decision, which in turn highlights today’s RBA MPS.

On the other hand, the US Initial Jobless Claims rose to 260K for the week ended on July 30 versus 254K prior and 259K expected. Further, job cuts eased and German Factory Orders improved while the US Goods and Services Trade Balance improved to $-79.6B versus $-80.1B market consensus and $-84.9B revised prior. Despite the mixed data, the market players remained hopeful of the Fed’s aggression but that couldn’t lift the US dollar amid fears of recession.

On Thursday, the Bank of England (BOE) formally accepted the fears of recession and further hardships while Cleveland Fed President Lorretta Mester said that recession risks have increased in the US.

Elsewhere, China’s military drills resulted in missiles landing on the Japanese economic zone and escalated geopolitical fears, adding to the US-China tension over Taiwan.

It should be noted that the firmer Aussie trade numbers and an absence of major instances during US House Speaker Nancy Pelosi’s Taiwan visit, despite the verbal war, also appeared to have underpinned the AUD/USD strength the previous day.

Amid these plays, Wall Street closed mixed but the yields were down for the second consecutive day to 2.69% at the latest, which in turn pressured the US dollar ahead of the key data.

Looking forward, the AUD/USD traders should wait for the RBA’s MPS for clear directions amid fears that the hawks are running out of steam. Following that, the US Nonfarm Payrolls (NFP) for July, expected 250K versus 372K prior, will be crucial for AUD/USD traders to watch for clear directions.

Also read: Nonfarm Payrolls Preview: High expectations set deal the dollar a blow, create buying opportunity

Technical analysis

AUD/USD pair’s successful rebound from a four-month-old previous support line, around 0.6875 by the press time, directs the quote towards a downward sloping resistance line from April 20 and 100-day EMA, close to 0.7025 and 0.7040 in that order.

• Silver price is still directionless amid the lack of tier 1 US economic data.
• Sentiment is fragile due to increased concerns of a recession, as the BoE concedes that the UK might tap into one.
• US Initial Jobless Claims could be a prelude to Friday’s NFP, estimated to add 250K jobs.

Silver price climbs for two straight days, registering gains of 0.51%, as US equities finished mixed, while Asian stock futures are fluctuating as recession fears reignited, courtesy of the Bank of England. That said, alongside a soft US dollar, underpinned by falling US Treasury yields, bolstered the white metal on Thursday. At the time of writing, XAGUSD is trading at $20.14.

Silver trades range-bound, waiting for a catalyst

The story of the day is the BoE hiking rates by 50 bps but acknowledged that the UK might tap into a 15-month recession, beginning at the end of the 2022 Q4. Meanwhile, in the US, the 2s-10s yield curve inversion further deepened, sits at -0.357%, and extended to 23 days, while the US 10-year benchmark note rate retraced five bps to 2.694%.

US 2s-10s yield curve inversion

Data-wise, the US calendar featured Initial Jobless Claims for the week ending July 30, which increased by 260K, more than estimated, showing signs that the labor market is easing. At the same time, the US Trade Balance narrowed its deficit from -$80.1 B in May to -$79.6 B in June, propelled by Exports.

In the meantime, the US Dollar Index, a gauge of the buck’s value vs. a basket of peers, tumbled 0.58% at 105.700, accumulating losses from the YTD peak of 3.8%, a tailwind for the dollar-denominated XAGUSD.

Late in the day, Fed speaking, led by Cleveland’s Fed Loretta Mester, reiterated that there’s a path for a soft landing but recognized that recession fears have risen, adding some fuel to the uncertainty confirmed by the UK, recession lingering worldwide.

Shifting to geopolitical jitters, tensions between the US and China persist. In response to US House Speaker Nancy Pelosi’s trip to Taiwan, China fired missiles over Taiwan during military drills, while Japan complained that five of those missiles landed in Japan’s exclusive economic zone. The US National Security spokesman John Kirby said that “China has chosen to overreact,” while adding they’re using the visit to increase military activity around Taiwan.

Those plays, amongst market mood, will keep the silver price fluctuating. Nevertheless, it appears that buyers don’t have the strength to crack the XAGUSD’s 50-day EMA at $20.39.

What to watch

The US economic docket will feature July’s Nonfarm Payrolls estimated at 250K, less than June’s 372K. At the same time, the Unemployment Rate is foreseen to persist unchanged at 3.6%.

Silver (XAGUSD) Key Technical Levels

• Gold price is focused to recapture the psychological resistance of $1,800.00.
• Cleveland Fed President Loretta J. Mester sees interest rates above 4%.
• The downbeat consensus for the US NFP will keep gold bulls solid ahead.

Gold price (XAU/USD) has sensed minor selling pressure after hitting a high of $1,794.91. The precious metal is directed to recapture the psychological resistance of $1.800.00 as the US dollar index (DXY) is facing severe heat despite hawkish commentary from Federal Reserve (Fed) policymakers. Also, the lower consensus for the US Nonfarm Payrolls (NFP) is keeping the DXY on the back foot.

Cleveland Fed President Loretta J. Mester cited on Thursday that the policy tightening measures should not be halted by the Fed without recording downward signs in the price pressures for months. The Fed should raise interest rates to above 4% in order to bring inflation back down to the 2% target. Therefore, the interest should see the continuation of elevation this year and for the next half year. Despite, the hawkish commentary, the DXY bulls failed to capitalize on the same.

On the economic data front, the US NFP will remain the show-stopper event for today. As per the market estimates, the US economy has failed to outperform June’s job additions numbers and has added 250k jobs in the labor market in July. Also, the Unemployment Rate is seen flat at 3.6%. The commentary from big US corporate players indicated that the firms have halted their recruitment process for the remaining year, whose consequences will be displayed in the labor market data. This will keep the gold bulls in the driving seat.

Gold technical analysis

On a four-hour scale, the gold price is facing resistance around the upper portion of the Rising Channel formation. The upper portion of the above-mentioned chart pattern is plotted from July 22 high at $1,739.37 while the lower portion is placed from July 21 low at $1,681.87.

The precious metal is confidently established above the 50-and 200-period Exponential Moving Averages (EMAs) at $1,759.62 and $1,765.06 respectively, which adds to the upside filters.

Also, the Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00, which indicates more gains ahead.

Gold four-hour chart

• NZD/USD bears move in within a bullish trend.
• The Us dollar is giving back some ground ahead of NFP.

NZD/USD has started to bleed out although remains 0.45% higher on the day.  The US dollar was lower vs. most major currencies on Thursday, down some 0.5% at the time of writing as per the DXY to 105.81. The positive impact of hawkish Federal Reserve comments faded this week while investors waited for more signs on the data front. Friday's Nonfarm Payrolls and next week's inflation data will be critical. 

''The Kiwi is back above 0.63 this morning, having capitalised on the downward correction of the USD DXY on the back of lower interest rates. What this has meant is that the NZD has held fairly steady on key crosses like NZD/AUD (although for various other reasons, we have seen volatility on some other crosses, as below),'' analysts at ANZ Bank explained.

''There is no local data today, but the US gets monthly jobs data, and that’s the next key risk event (at 12.30am tonight). Markets aren’t expecting a big jobs print, or a change in the unemployment rate, or the monthly pace of wage growth, and in that regard, the hurdle to an upside surprise seems low. The fall in US bond yields does seem out of character with the tone of Fedspeak, but of course markets remain fearful of a US recession, so it’s all a bit mixed.''

Looking ahead, the Nonfarm Payrolls data likely continued to advance firmly in July but at a more moderate pace after four consecutive job gains at just below 400k in March-June, according to analysts at TD Securities. ''High-frequency data, including Homebase, still point to above-trend job creation. We also look for the UE rate to stay at 3.6% for a fifth straight month, and for wage growth to remain steady at 0.3% m/m (4.9% YoY).''

• EUR/GBP rallied more than 100 pips on Thursday after BoE’s dovish hike.
• Longs remain hopeful of cracking 0.8438, the 200-DMA.
• EUR/GBP Price Analysis: in the near term is upward biased; once buyers break resistance at 0.8438, a rally to 0.8500 is in the cards.

The shared currency benefitted from UK’s macroeconomic news, rising almost 100 pips on Thursday after the Bank of England hiked rates but warned that the country might tap into a 15-month recession. Bolstered by the previously mentioned, the EUR/GBP hit a daily high at the confluence of the 20 and 200-day EMAs around 0.8437-41 region. At the time of writing, the EUR/GBP is trading at 0.8426.

EUR/GBP Price Analysis: Technical outlook

The EUR/GBP daily chart depicts that the pair rallied towards the 0.8437-41 area but failed to crack it, meaning that sellers stepped in. As long as EUR/GBP longs keep the spot price above the July 27 high at 0.8426, buyers could remain hopeful of breaching that ceiling level towards the 100-day EMA at 0.8462. Otherwise, the cross would be vulnerable to sellers, which could send the pair towards 0.8400.

EUR/GBP Hourly chart

The EUR/GBP hour chart illustrates that once the pair hit a daily high at 0.8437, they retreated and is consolidating in the 0.8415-37 range. The RSI further confirms the previously mentioned, exiting from overbought conditions but stills in bullish territory, about to cross over the 7-hour RSI’s SMA. Therefore, the EUR/GBP might print a leg-up, but it would need to break above 0.8437.

Once that scenario plays out, the EUR/GBP’s first resistance will be the July 27 high at 0.8491. Break above will expose 0.8500, followed by the July 25 pivot high at 0.8525.

EUR/GBP Key Technical Levels

• EUR/USD has burst to life leaving an inverse H&S on the daily chart.
• The hourly 38.2% Fibonacci, 50% mean reversion and 61.8% ratio could be an area of support in the coming sessions.

As per the prior analysis, EUR/USD Price Analysis: Bulls eye a break of 1.0171 structure, the bulls have taken control and rallied all the way to 1.0253. 

The prior analysis said the bullish correction could eventually result in an upside continuation leaving behind the outcome of an inverted head and shoulders.

EUR/USD daily chart, prior analysis

EUR/USD live market

The price has moved higher as anticipated and there are prospects of a move into the greyed area in the forthcoming days. The bulls will need to overcome the resistance, however between 1.0250 and 1.0300. At this juncture, a pull back on the houly time frame is probable:

The 38.2% Fibonacci, 50% mean reversion and 61.8% ratio could be an area of support in the coming sessions and in the countdown to the Nonfarm Payrolls event to end the week.

What you need to take care of on Friday, August 5:

The dollar fell against most of its major rivals, ending the day near its recent lows, usually a sign of further declines ahead in the near term.

Fears of a global recession returned after the Bank of England announced its latest decision on monetary policy. The central bank hiked rates by 50 bps to 1.75% as expected. But policymakers upwardly revised their inflation forecast while anticipating a recession in the next five quarters. Among other things, Governor Andrew Bailey said that while he understands that raising interest rates will cause financial pain to many, "the alternative is even worse."

Federal Reserve official Loretta Mester stated that recession risks have increased in the US, adding that supply issues are likely to persist for some time. Finally, she said that interest rates should continue to rise at least through this year and the first half of 2023.

The GBP/USD pair plunged to 1.2064 but recovered 100 pips ahead of the daily close. EUR/USD benefited from the broad dollar’s weakness and settled around 1.0250.

AUD/USD advanced and hovers around 0.6970, helped by gold, as the bright metal reached fresh one-month highs in the $1,790 price zone. The USD/CAD pair edged higher and settled at 1.2860, as the CAD was hammered by falling oil prices. The barrel of WTI currently trades at $88.40 a barrel.

Finally, USD/CHF is down to 0.9550, while USD/JPY declined to 132.80.

On Friday, the focus will be on US employment figures. The country will release the Nonfarm Payrolls report, expected to show the country added 250K new jobs in July. The unemployment rate is expected to remain steady at 3.6%.

Ethereum Price Prediction: Too soon to call it quits, too late to walk away

• GBP/USD marches firmly, gaining some 0.17% on Thursday.
• The Bank of England (BoE) raised the Bank Rate to 1.75% in an 8-1 vote.
• Bailey and Co,, acknowledged that the UK would hit a recession, beginning late in 2022.
• US Initial Jobless Claims rose 260K more than expected as the labor market eases.

The British pound recovered some ground vs. the greenback after the Bank of England (BoE) hiked rates 50 bps, the highest increase in 27 years, while it warned that the UK economy would hit a recession during the second half of the year. That said, the GBP/USD seesawed in a volatile session, hitting a daily high at 1.2212 before plunging to 1.2065 daily lows. At the time of writing, the GBP/USD is trading at 1.2165, up by 0.16%.

GBP/USD pares its losses after a BoE’s dovish hike

On Thursday, the BoE raised the Bank Rate to 1.75% in an 8-1 vote, with Sylvana Tenreyro dissenting as she backed a 25 bps. The Bank of England foresees that the UK will tap into a 15-month recession later in the year, projecting GDP to tumble by 1.5% in 2023.

Regarding inflation, the BoE updated its forecast, which increased to 13% in 2022 Q4, more than the 9.4% estimated in June, and acknowledged it will remain elevated through the rest of 2022 and 2023, at the same time consumption further weakens. Additionally, the BoE announced that it would begin reducing its balance sheet by £10 billion a quarter from next month.

Later, after the BoE’s decision, US Initial Jobless Claims for the week ending on July 30 rose by 260K, higher than 259K estimated, a signal that the labor market is easing. Furthermore, the Balance of Trade in the US narrowed the US deficit to -$79.6 B from -$80.1 B estimations, while Exports jumped compared to imports.

All that said, the GBP/USD settled just below the 50-day EMA after a 150 pip volatile session. Although it stays under the daily moving averages (DMA), the Relative Strength Index (RSI) is aiming higher in bullish territory, keeping GBP/USD buyers hopeful of higher prices.

Upwards, the GBP/USD’s next resistance would be 1.2188, the 50-day EMA. On the downside, the first support would be 1.2100.

What to watch

The UK docket will unveil the Halifax House Price Index for July, alongside the BBA Mortgage Rate. On the Us front, the economic calendar will reveal July’s Nonfarm Payrolls figures foreseen at 250K, less than June’s 372K. The Unemployment Rate is expected to persist unchanged at 3.6%.

GBP/USD Key Technical Levels

• Gold bulls have taken charge in the build-up to the NFP showdown.
• Bulls are eyeing a deeper correction towards the golden 61.8% ratio.

The gold price surged on Thursday as the US bond yields fell and the Bank of England warned the United Kingdom's economy could be headed for a recession later this year with inflation rising as high as 13%. XAU/USD has pushed don within its weekly bullish correction to mark a high of $1,794.23. Gold for December delivery was printing above $1,800 per ounce.

Gold has been benefitting from softer US bond yields, bullish for gold since it offers no yield. The US 10-year note was last seen paying 2.699%, down 0.26% on the day. The US dollar was lower vs. most major currencies on Thursday, down some 0.5% at the time of writing as per the DXY to 105.81. The positive impact of hawkish Federal Reserve comments faded this week while investors waited for more signs on the data front. Friday's Nonfarm Payrolls and next week's inflation data will be critical. 

The Fed hiked rates by 75 basis points at its meeting in June and July. For now, the money markets are pricing in a 50 basis point hike at the Fed's September meeting, and a roughly 44% chance of another massive 75 bps increase. Today, Loretta J. Mester, president of the Federal Reserve Bank of Cleveland said on Thursday that the Fed should raise interest rates to above 4% in order to bring inflation back down to target.

"I would pencil in going a bit above four as appropriate," Mester told reporters following an event held at the Economic Club of Pittsburgh, in reference to the central bank's policy rate. "It's not unreasonable I think to maintain that as where we're getting to and then we'll see." 

• ''We will need to raise interest rates and then hold them there for a while.
• Then we'll bring them back down once inflation gets back closer to our 2% goal.''

Analysts at TD Securities explained that ''while Fedspeak has pushed back against the market's dovish interpretation of the FOMC, and yesterday's data surprised to the upside, seeing rates and pricing of the September hike increase, the gold market is thus far trading with a mind of its own.''

''CTA triggers for additional short covering are coming well within reach. Indeed, we estimate prices closing above $1789/oz would catalyze enough of a shift in momentum to see trend followers target a roughly flat net position,'' the analysts added. ''However, with nonfarm payrolls headlining the week tomorrow, our expectations of a stronger-than-anticipated report could quickly put a cap on the prevailing bullishness among gold bugs.''

The monthly US Nonfarm payrolls report will be closely watched on Friday after data early Thursday showed a tick up in jobless claims. 

• Ready for trading the NFP?

''A strong payroll print should help drive a further rebound in the market's pricing in terminal rate pricing. This should pressure front-end rates higher, and continue to flatten the 2s10s curve. We remain short Jan 2023 Fed funds futures to position for Fed rate hikes,'' the analysts at TD Securities said. 

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 61.8% Fibonacci meeting prior structure around $1,800.

Loretta J. Mester, president of the Federal Reserve Bank of Cleveland said on Thursday that the Fed should raise interest rates to above 4% in order to bring inflation back down to target.

"I would pencil in going a bit above four as appropriate," Mester told reporters following an event held at the Economic Club of Pittsburgh, in reference to the central bank's policy rate. "It's not unreasonable I think to maintain that as where we're getting to and then we'll see."

Key quotes

• Business contacts tell me not looking for as many workers as before.
• But these are only nascent signs; labour market still quite strong.
• Fed's framework still stands up with respect to our dual goals.
• But there are lessons to be learned on not having such strict forward guidance again.
• Need to see several months of monthly changes moving down on inflation.
• We will need to raise interest rates and then hold them there for a while.
• Then we'll bring them back down once inflation gets back closer to our 2% goal.
• I would pencil in going a bit above 4% on interest rates.
• That's what I had in my Sep at the last meeting.
• Not unreasonable to think we might have to do a 75 in September; but it could very well be 50 and we'll be guided by the data.
• Interest rates should continue to rise this year and through the first half of next year; then we can maybe pause and start bringing them back down.

US dollar update

Meanwhile, the US dollar was lower vs. most major currencies on Thursday, down some 0.5% at the time of writing as per the DXY to 105.81. The positive impact of hawkish Federal Reserve comments faded this week while investors waited for more signs on the data front. Friday's Nonfarm Payrolls and next week's inflation data will be critical. 

• The USD/CHF tumbling below the 100-day EMA could pave the way for a re-test of 0.9470.
• In the near term, the USD/CHF is neutral downwards, and once it clears 0.9550, it could open the door toward 0.9500.

The USD/CHF retraces under the 100-day EMA and shifts the pair’s bias to neutral-downwards as the exchange rate further separates from the previously mentioned moving average (MA) and closes to the August 3 daily low at 0.9542. At the time of writing, the USD/CHF is trading at 0.9655.

USD/CHF Price Analysis: Technical outlook

From a daily chart perspective, the USD/CHF is neutral-to-downward biased reinforced for several reasons. Firstly, the exchange rate is below the 20, 50, and 100-DMAs. Secondly, the Relative Strength Index (RSI) is in negative territory, made a U-turn, from aiming higher, now is headed downwards, narrowing the distance with its 7-day RSI’s MA. Once the RSI crosses under the latter, it confirms the bearish bias.

Therefore, the USD/HF path of least resistance is downwards. The major’s first support would be 0.9542. Once broken, it will expose the 0.9500, followed by the August 2 low at 0.9470.

USD/CHF Hourly chart

The USD/CHF hourly chart illustrates the pair as neutral-to-downward biased. However, the confluence of the S1 daily pivot and the 100-hour EMA around 0.9550 stopped the downtrend at the time of typing. Nevertheless, USD/CHF traders should notice that the Relative Strength Index (RSI) exited from oversold conditions, with its slope aiming higher, so a correction might be on the cards. Therefore, the USD/CHF might aim toward Fibonacci’s 50% retracement at 0.9588 before cracking 0.9550. Once cleared, the major’s next support will be the August 1 daily low at 0.9470.

USD/CHF Key Technical Levels

Following Bank of England’s 50 basis points rate hike, analysts at Dankse Bank still see the case for the EUR/GBP cross to move higher on the near-term. They target the cross at 0.86 in three months. 

Key Quotes: 

“We change our Bank of England call now expecting another 50bp rate hike in September and another 25bp in November, recognising that the Bank of England is probably not ready to fully stop hiking just yet despite rising recession risks. Further tightening is needed in order to cool extraordinarily high inflation pressure. We expect no rate hikes beyond the November meeting (although another 25bp rate hike in December seems like a close call at this point) and believe markets will start to focus even more on possible rate cuts in 2023 when the UK actually falls into recession.”

“We are slightly more dovish than markets, as the Bank of England has more emphasis on the economic outlook than what markets believe in. We still see a case for EUR/GBP to move slightly higher near-term on relative rates, targeting the cross at 0.86 in 3M. Further out, GBP usually appreciates vs EUR in an environment where USD performs and expect EUR/GBP to move back towards 0.84 in 12M.”
 

The AUD/USD climbs during the North American session off weekly lows around 0.6880s despite investors’ mixed mood due to increasing tensions post-US House Speaker Pelosi’s visit to Taiwan, with China’s military drills deploying missiles and more than 100 planes, as a response to the trip.

The AUD/USD is trading at 0.6972 after dipping to its daily low at 0.6934 early in the Asian Pacific session. Still, as North American traders got to their offices, the Aussie strengthened, and the major hit a daily high at 0.6989 before settling around current exchange rate levels.

AUD/USD ascends, despite positive US data

US equities wobble as sentiment remains fragile. Based on mixed US economic data, AUD/USD dived from daily highs towards 0.6945. Initial Jobless Claims for the week ending on July 30, uptick to 260K, higher than 259K estimated, illustrating that the labor market is loosening. At the same time, the Balance of Trade in the US witnessed a shrinking in the US deficit to -$79.6 B from -$80.1 B estimations, while Exports jumped in comparison with imports.

Even though US data keeps the traders hopeful of missing a recession, the AUD/USD bounced off once analysts digested data, but the major was unable to reach its daily high.

In the meantime, the US Dollar Index, a gauge of the buck’s value vs. a basket of peers, tumbles 0.50%, at 105.867, underpinned by falling US Treasury yields, led by the 10-year benchmark note coupon at 2.674%, down by three basis points.

On the Australian side, the Trade Balance hit a surplus of A$17.7 B in July, from A$12.3 B in June. Australia has benefitted from Iron ore, LNG gas, and coal exports. Nevertheless, its biggest trading partner, namely China, has been trying to limit its reliance on coal imports, and its steel output will weaken late this year.

Analysts at ANZ commented that “Given this and the fact that commodity prices appear to have peaked, we think the trade surplus will soon start to slide.”

What to watch

The Australian docket will feature the Reserve Bank of Australia (RBA) Statement of Monetary Policy alongside the AIG Services Index.

The US economic calendar will feature July’s Nonfarm Payrolls estimated at 250K, less than June’s 372K. The Unemployment Rate is expected to persist unchanged at 3.6%.

AUD/USD Key Technical Levels

The Central Bank of Brazil (BCB) raised its key interest rate by 50 basis points. Analysts at Wells Fargo believe policymakers will opt for a 25 bps rate hike in September and take the Selic rate to 14.00%. They forecast the USD/BRL exchange rate to reach 5.75 by the end of this year, and 5.95 by year-end 2023.

Key Quotes: 

“While we have revised our Selic rate forecast higher, we still believe the outlook for the Brazilian real will be challenging going forward. We share the BCB's concerns of fiscal policy and believe Bolsonaro-led increased social spending will materialize and weigh on the currency ahead of the election. Right now, we would argue Brazil's debt trajectory is still unsustainable. Should Bolsonaro extend spending that is not fiscally prudent or evades the spending cap, market sentiment toward Brazil is likely to turn negative. This is our base case scenario for the Brazilian real, and in the short term, we believe the USD/BRL exchange rate can reach BRL5.75 by the end of 2022 on risks tied to the election.”

“We also believe that increased fiscal spending is likely to become more permanent going forward, regardless of the outcome of the election as both Bolsonaro and Lula have suggested their preference is to eliminate Brazil's fiscal spending cap altogether. We believe this capital flight scenario could pick up momentum over the longer term and the Brazilian real is likely to suffer the consequences.”

“With Brazil's economy already likely on the path toward recession by the end of this year, BCB policymakers are likely to be the first major emerging market central bank to unwind interest rate hikes. As fiscal risks persist well into 2023 and the BCB lowers its Selic rate, BRL depreciation is likely to continue. In that context, we believe the USD/BRL exchange rate can reach BRL5.95 by the end of 2023.”

The Bank of England raised its key interest rate by 50 basis points to 1.75%, as expected. According to analysts from Rabobank, considering the next UK PM is likely to be Liz Truss, they expect 100 basis points in rate hikes during 2022. 

Key Quotes: 

“Even though the forecast is based on market curves, which takes into account the high probability of Liz Truss receiving the keys of 10 Downing Street, the central bank currently assumes no changes in fiscal policy. This is not realistic. If she will be elected by the Tory membership –and we think she will– it won’t be long before we will see emergency fiscal action. It remains to be seen whether ‘at least £30 billion’, which amounts to nearly 1.5% of GDP, will be deployed, but we expect a combination of significant tax cuts and energy bill rebates to be put in place this autumn.”

“We now expect 100 bps extra rate increases this year: 50 in September, 25 in November and 25 in December. There is a high risk this tightening will be reversed from 2023 H2 onwards.”

“It remains astonishing to see a central bank stepping up its pace of interest rate hikes while forecasting a long recession with a historically weak recovery and a sharp rise in unemployment. It is hard to avoid the conclusion that it has decided a recession and a much softer labour market is necessary to return inflation back towards 2%, even as most of the inflation overshoot finds its origins in international markets.”
 

The weekly report showed Initial Jobless Claims rose to 260K in the week ended July 30 while Continuing Claims rose to 1.41 million, the highest level since March. The recent trend in jobless continuing claims adds weight to the argument that the US economy is not currently in recession, explained analysts at Wells Fargo. However, they warn that the recent uptick resembles the months that preceded prior recessions, suggesting that the start of a recession may not be far off.

Key Quotes: 

“Initial jobless claims have been trending higher since early April in one of the clearest signs that labor market conditions have begun to deteriorate. While jobless claims have a successful track record foreshadowing recession, we find continuing claims to be a better check on whether the economy is already in one. The recent trend in continuing claims adds weight to the argument that the economy is not currently in recession. That said, the recent uptick bears some resemblance to the months that preceded prior recessions, suggesting that the start of a recession may not be far off.”

“While the potential for payrolls to be revised over the next few months or even year limit the conviction with which we can say whether the U.S. economy is in recession, continuing claims add weight to the argument that the recession clock has not started ticking. That said, continuing claims are starting to drift higher and, with the rise in initial claims, suggest the start of a recession might not be far off either.”

“Whether the U.S. economy may already be in a recession is likely to have minimal bearing on the course of Fed policy in the near term, however. With inflation still raging and FOMC members, including Chair Powell, acknowledging that an “over-tight” labor market is contributing to price pressures, we suspect the Fed will be undeterred by the recent slowing in activity both inside and outside the labor market, and it will push ahead with raising the fed funds rate to around 4% in the coming months.”

Data released on Thursday showed the Canadian trade surplus widened to CAD5.0B in June, in line with market expectations. Analysts at CIBC, explained the trade surplus was in somewhat of a holding pattern during June, but should narrow ahead with oil prices having fallen recently.

Key Quotes: 

“Exports of goods increased by 2.0% on the month, with oil leading the way. The 3.7% increase in that area was a reflection of both higher volumes and prices, although given the decline in global oil prices seen recently the value of exports in this area has likely peaked for now. While energy remained a key driver to overall exports, non-energy exports were also up by a solid 1.4% compared with the prior month.”

“The trade deficit in services widened modestly from $1.1bn in May to $1.3bn in June, with imports rising faster than exports. While trade in travel services continues to improve on both the import and export side, the 5.6% increase in imports during June easily outpaced the 2.1% gain in exports and still has much further to go before reattaining prepandemic levels. The wider services deficit broadly offset the larger goods surplus in terms of the overall trade balance.”

“The Canadian trade surplus was in somewhat of a holding pattern during June, but should narrow ahead with oil prices having fallen recently. The revision to May leaves imports rising at a much stronger pace than exports during the second quarter as a whole. While that implies that net trade will be a fairly big negative for GDP growth in isolation, it could also signal a stronger rebuilding of inventories or growth in consumer spending as an offset.”
 

• US dollar losses momentum amid lower US yields.
• After US Jobless Claims attention turns to Friday’s Non-farm payrolls.
• USD/JPY fails again to break 134.50, and drops sharply.  

The USD/JPY dropped further after the beginning of the American session and printed a fresh daily low at 133.02. A weaker US dollar weighed on the pair.

US data on focus

Economic data released in the US on Thursday showed an increase in Continuing Claims to the highest level since March; while Initial Claims rose to 260K. The trade deficit narrowed to $99.5B in June, the lowest in five months.

On Friday, the US official employment report is due. Market consensus is for an increase in payrolls by 250K. “Data surprises have been strongly correlated with broad USD variation. An above-consensus print should leave a slightly firmer tone but would expect price action to be somewhat contained. EURUSD bias leans lower but should be contained above 1.01. USDJPY faces more topside extension risk on a break of 134.80/00”, explained analysts at TD Securities.

The dollar is falling modestly across the board on Thursday. The US 10-year yield stands at 2.67% and the 30-year at 2.96%. In Wall Street, the Dow Jones is falling by 0.27% and the Nasdaq 0.37%.

The combination of lower US yields and negative risk sentiment is favoring the yen. The Japanese currency is among the top performs. The USD/JPY is near the 133.00 zone a break lower could open the doors to more losses, with the next support at 132.70 followed by 132.20. On the upside, above 134.50 the dollar should strengthen.

Technical levels

• USD/CAD advances during the day face resistance at the 50-day EMA at 1.2857.
• Falling oil prices and sentiment weighed on the Canadian dollar, a tailwind for the USD/CAD.
• USD/CAD Price Analysis: A break above the 50-day EMA might clear the way to 1.3000; otherwise, 1.2800 is eyed.

The USD/CAD climbs and trims some of Wednesday’s losses, as sentiment is mixed after US House Speaker Pelosi’s trip to Taiwan, increasing regional tensions. China’s military drills commenced as expected, with the country firing missiles in its biggest test in two decades.

After hitting a daily low at 1.2820 and rallying towards 1.2876, a daily high, the USD/CAD is trading at 1.2858, up by 0.18%.

USD/CAD rises on sentiment and on CAD weakness

Sentiment is fragile, as abovementioned. EU and US equities fluctuate, while the greenback is soft, trading at 106.200, down 0.30%, underpinned by falling US bond yields. US employment data, namely the Initial Jobless Claims for the week ending on July 30, rose 260K a thousand more than estimated, indicating that the labor market is easing. The trend will likely continue as the Federal Reserve extends its tightening cycle.

At the same time, the  US Balance of Trade deficit narrowed from -$80.1 billion forecasts to -$79.6 billion in June. Exports increased to $260.8 billion, while imports rose to $340.4 billion as expected.

On the Canadian side, the country’s trade surplus widened to C$5.05 billion in June, more than the C$4.8 billion estimated, bolstered by energy products climbing 3.2%, reaching a record high.

In the meantime, falling crude oil prices left the Canadian dollar exposed to further selling pressure as investors sought safety.

What to watch

The Canadian economic docket will update employment conditions in the country, with analysts expecting an increase of 20K jobs added to the economy in July and the Unemployment Rate at 5%. The US economic calendar will feature July’s Nonfarm Payrolls estimated at 250K, less than June’s 372K. The Unemployment Rate is expected to persist unchanged at 3.6%.

USD/CAD Price Analysis: Technical outlook

The USD/CAD has been seesawing with the 50-day EMA in the last three days. Although buyers are in control, per the long-term daily EMAs residing below the spot price, they will face strong resistance at the confluence of the August 3 high and the 20-day EMA at 1.2907, which, if broken, could send the major to test the 1.3000 figure. Otherwise, a fall towards 1.2800 and further, eyeing the 100-day EMA at 1.2779, is in the cards.

• USD/TRY records decent gains just below the 18.00 mark.
• The pair is expected to remain cautious ahead of US NFP.
• The CBRT expects inflation to hit 90% before easing.

The Turkish lira gives away Wednesday’s gains and resumes the downside, lending upside pressure to USD/TRY to the 17.97 level on Thursday.

USD/TRY stays capped by the 18.00 region

USD/TRY extends the consolidative stance in the upper end of the current range just below the 18.00 yardstick on Thursday amidst unclear risk appetite trends and the usual cautiousness among investors in the pre-NFP trade.

In the meantime, the lira remains under scrutiny after inflation figures tracked by the CPI rose to the highest level since September 1998 at nearly 80.0% in July, boosted by high commodity, energy and food prices.

It is worth noting that the Turkish central bank (CBRT) recently revised up its forecast for inflation and now sees consumer prices rising 60.4% by year-end (from 42.8%). Furthermore, the CBRT expects inflation to rise 19.2% by the end of 2023 and 8.8% at some point towards the end of 2024.

The fact that the CPI rose less than expected in July seems to have sparked some optimism in the government after President Erdogan said that consumer prices are expected to slow down to more “appropriate” levels in early 2023, at a time when he stressed that “a price stabilization trend has already started”.

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 and commodity prices - which are 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 (despite rising less than forecast in July), real interest rates remain entrenched in negative figures and the political pressure to keep the CBRT biased towards low interest rates remains 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.

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 0.11% at 17.9360 and faces the immediate target at 17.9694 (2022 high August 4) 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 17.0851 (55-day SMA) and finally 16.0365 (monthly low June 27).

Economist at Commerzbank provide their afterthoughts on the latest Bank of England monetary policy decision, announced earlier this Thursday. The UK central bank announced the sixth rate hike in the current cycle and raised its key interest rate by 50 bps to 1.75%.

Key Quotes:

“The reason for the sharp hike is increasing inflationary pressure. According to the BoE, the labor market remains tight and domestic cost and price pressures are high. The central bank now forecasts inflation to peak at 13% in the fall. Inflation concerns obviously outweighed the economic slowdown – the BoE expects a recession in the UK from the fourth quarter.”

“The BoE would take the necessary decisions to bring inflation back to the 2% target, it said. In doing so, the Committee will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response.”

“In our assessment, the interest rate hikes so far have not been sufficient to get inflation under control. At 1.75%, the bank rate has probably not even reached the "neutral level" at which the economy is neither boosted nor dampened. We therefore continue to expect further interest rate hikes to 2.75% by early 2023. However, following the most recent sharp tightening and against the backdrop of the weaker economy, we believe it is likely that the next meeting in September will see another smaller step of 25 basis points.”

Analysts at TD Securities (TDS) offered a brief preview of the Canadian monthly employment report, due for release on Friday. The data would influence the loonie and provide some meaningful impetus to the USD/CAD pair.

Key Quotes:

“We look for job growth of 38k in July, driven by a partial rebound for trade services and natural resources after their sharp decline in June. Full-time hiring should lead the increase, while stronger labour force participation should keep unemployment stable at 4.9%. We also expect to see wage growth firm to 6.0% y/y in July, although AHE (Average Hourly Earnings) should slow on a m/m basis.”

“The CAD is most correlated with US equities and broad USD variation, neither of which will be affected by this data release. 1.28/29 range should persist and dips in USDCAD are a fade.”

“Overall direction will depend on the Treasury market, but an upside surprise on jobs supports both wider Canada-US spreads and a flatter curve domestically.”

• Gold scales higher through the early North American session and refreshes one-month high.
• Geopolitical tensions, recession fears, softer US bond yields, weaker USD offer some support.
• Signs of stability in the financial markets act as a headwind ahead of the NFP report on Friday.

Gold eased a bit from a fresh one-month high touched during the early North American session and sliped back below the $1,780 level in the last hour. The XAU/USD, however, maintains its positive tone for the second straight day and is trading with gains of nearly 0.70% for the day.

Investors remain worried about a global economic downturn, which along with China's heightened military threats, continue to act as a tailwind for the safe-haven gold. China holds its largest-ever military exercises around Taiwan in retaliation to US House Speaker Nancy Pelosi's visit to the island. In the latest development, China on Thursday said that it conducted “precision missile strikes” in the Taiwan Strait as part of military exercises. The five missiles fired by China landed within Japan's exclusive economic zone and raises tensions in the region.

Apart from this, a modest US dollar weakness turns out to be another factor further underpinning the dollar-denominated gold. Despite more hawkish remarks by several Fed officials this week, investors have been pushing back against the idea of a larger rate hike at the September FOMC meeting. This is evident from a softer tone around the equity markets, which keeps the USD bulls on the defensive and lends some support to the non-yielding yellow metal. That said, signs of stability in the equity markets capped any further for the commodity, at least for the time being.

Investors also seem reluctant to place aggressive bets and prefer to wait for a fresh catalyst from the closely-watched US monthly jobs data. The popularly known NFP is scheduled for release on Friday and will play a key role in influencing the near-term USD price dynamics. Apart from this, geopolitics, along with the broader market risk sentiment, would assist traders to determine the next leg of a directional move for gold.

Technical levels to watch

• Initial Jobless Claims rose by 6,000 in the week ending July 30.
• US Dollar Index continues to fluctuate above 106.00 after the data.

There were 260,000 initial jobless claims in the week ending July 30, the weekly data published by the US Department of Labor (DOL) showed on Thursday. This print followed the previous week's print of 254,000 and came in slightly worse than the market expectation of 259,000.

Further details of the publication revealed that the advance seasonally adjusted insured unemployment rate was 1% and the 4-week moving average was 254,750, an increase of 6,000 from the previous week's revised average.

"The advance number for seasonally adjusted insured unemployment during the week ending July 23 was 1,416,000, an increase of 48,000 from the previous week's revised level," the publication further revealed.

Market reaction

The US Dollar Index showed no immediate reaction to these comments and was last seen posting small daily losses at 106.20.

• EUR/USD regains poise and approaches 1.0200 on Thursday.
• Price action remains stuck with the 1.0100-1.0300 range.

EUR/USD reverses part of the weekly pullback and manages to retest the vicinity of the 1.0200 region on Thursday.

In light of key releases in the US docket on Friday, the pair is expected to keep the current 1.0100-1.0300 range broadly in place for the time being. The loss of the lower bound of the range could see a potential visit to the parity level return to the radar.

In the longer run, the pair’s bearish view is expected to prevail as long as it trades below the 200-day SMA at 1.0934.

EUR/USD daily chart

Bank of England (BoE) Governor Andrew Bailey is delivering his remarks on the policy outlook and responding to questions from the press following the bank's decision to hike the policy rate by 50 basis points to 1.75%.

Key takeaways

"If there are very high wage rises, then we will get persistent inflation."

My concern isn't about any wage increase, but about high wage increases."

"We don't target the exchange rate, we factor in impact of exchange rate on future inflation."

"Larger Fed rate rises reflect different shocks faced by the UK and the US.

About Andrew Bailey (via bankofengland.co.uk)

"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."

• GBP/USD dives to a fresh weekly low after the BoE announced its policy decision.
• Ascending trend-channel breakdown supports prospects for a further downfall.
• Attempted recovery towards the 1.2100 mark could be seen as a selling opportunity.

The GBP/USD pair extends the post-Bank of England downfall and has now retreated around 140 pips from the daily high - levels just above the 1.2200 mark. The pair maintains its heavily offered tone through the early North American session and is currently trading near the weekly low, just above the mid-1.2000s.

The BoE warned that a UK recession will begin in the fourth quarter and last all the way through next year and said that the monetary policy is not on a pre-set path. This suggests that the UK central bank would adopt a more gradual approach to raising interest rates, which, in turn, weighs heavily on the British pound.

The GBP/USD pair loses ground for the third successive day and fails to gain any respite from subdued US dollar price action. This, along with a convincing break below a three-week-old ascending trend-channel support, near the 1.2140 area, and a subsequent fall below the 1.2100 mark supports prospects for additional losses.

The negative outlook is reinforced by the fact that technical indicators on the daily chart have just started drifting into bearish territory. Hence, some follow-through weakness towards testing intermediate support near the 1.2030-1.2025 area, en-route the 1.2000 psychological mark, now looks like a distinct possibility.

The downward trajectory could further get extended towards the 1.1945-1.1940 region before the GBP/USD pair eventually drops to sub-1.1900 levels.

On the flip side, the 1.2100 mark now becomes immediate strong resistance. Any further recovery could be seen as a selling opportunity and is likely to remain capped near the ascending channel support breakpoint, around the 1.2140 region. The latter should now act as a key pivotal point for short-term traders.

GBP/USD 4-hour chart

Key levels to watch

Bank of England (BoE) Governor Andrew Bailey is delivering his remarks on the policy outlook and responding to questions from the press following the bank's decision to hike the policy rate by 50 basis points to 1.75%.

Key takeaways

"We would have had to raise interest rates in double digits last year to fully offset current inflation, causing far deeper recession than now forecast."

"Parts of UK economy are still going forward strongly, including in job market."

"Pass-through of BOE rate rises has been faster to borrowers than to savers so far."

"Important that savers receive the return they should."

About Andrew Bailey (via bankofengland.co.uk)

"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."

• GBP/JPY comes under intense selling pressure after the BoE warns of an economic downturn.
• The BoE now expects that a UK recession will begin in Q4 and last all the way through next year.
• Reviving demand for the safe-haven JPY also contributes to the intraday slide of nearly 250 pips.

The GBP/JPY cross witnesses a dramatic turnaround from the vicinity of the 164.00 mark, or a one-week high touched earlier this Thursday. Spot prices dive to the mid-161.00s. tumbling nearly 250 pips after the Bank of England announced its policy decision.

The British pound weakens across the board after the BoE warned that a UK recession will begin in the fourth quarter and last all the way through next year. Furthermore, the UK central bank said that the monetary policy is not on a pre-set path. This suggests that the BoE is more likely to slow down the pace of its tightening cycle, which, in turn, weighs heavily on sterling and prompts aggressive selling around the GBP/JPY cross.

The intraday selling pressure remains unabated during the post-meeting press conference, where BoE Governor Andrew Bailey noted that the uncertainty surrounding the outlook is exceptionally high. This overshadowed the BoE's historic move to hike benchmark interest rates by 75 bps - the most since 1995 - to 1.75%, or the highest level since late 2008. Meanwhile, reviving demand for the safe-haven Japanese yen exerted additional pressure on the GBP/JPY cross.

The latest leg down suggests that this week's recovery from over a two-month low has run out of steam and supports prospects for a further near-term depreciating move for the GBP/JPY cross. Hence, some follow-through downfall, back towards the 161.00 round-figure mark, now looks like a distinct possibility. Any attempted recovery move could now be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

Technical levels to watch

Bank of England (BoE) Governor Andrew Bailey is delivering his remarks on the policy outlook and responding to questions from the press following the bank's decision to hike the policy rate by 50 basis points to 1.75%.

Key takeaways

"Inflation that is concentrated on essentials hits those on lowest incomes the hardest."

"If we don't bring inflation back to target, things will get worse for those who are least well-off."

"Alternatives to not raising interest rates are even worse, in terms of persistent inflation."

"We see upside risks to inflation over next year, risks are balanced after that."

"Very important that we have moved away from a framework of predictive forward guidance."

"Notwithstanding slowing demand, our agents tell us that businesses feel they can raise prices to meet higher costs."

"I don't think critics have a point when they say BOE is slamming on the brakes at the wrong time."

About Andrew Bailey (via bankofengland.co.uk)

"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."

Five missiles fired by China landed within Japan's exclusive economic one, Kyodo news agency reported on Thursday, citing a Japanese foreign ministry official.

"Japan lodged a stern protest against China," the official added and noted that this is the first time Chinese ballistic missiles have landed within Japan's exclusive economic zone.

Meanwhile, Taiwan urged China to be rational and restrain itself. "China's heightened military threats have unilaterally damaged the status quo and stability of the Indo-Pacific region," the island's presidential office said in a post on its official Facebook account.

Market reaction

US stock index futures showed no immediate reaction to this report and were last seen posting small daily gains.

Bank of England (BoE) Governor Andrew Bailey is delivering his remarks on the policy outlook and responding to questions from the press following the bank's decision to hike the policy rate by 50 basis points to 1.75%.

Key takeaways

"BOE will not comment on Conservative leadership candidates' plans."

"BOE has a very clear mandate of price stability."

"Consequences of Russia's actions in Ukraine have a serious economic impact."

"Political pressures have been very well managed since BOE independence."

"I have not abandoned the narrow path analogy for UK policy outlook."

"A number of central banks have a similar narrow path to tread."

About Andrew Bailey (via bankofengland.co.uk)

"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."

• DXY trades without a clear direction around 106.40.
• Occasional bullish attempts target the weekly high near 107.40.

DXY attempts a consolidative move in the 106.50 region on Thursday amidst a cautious tone prior to the release of July’s Nonfarm Payrolls on Friday.

In the meantime, occasional gains in the index should meet the initial resistance at the post-FOMC top at 107.42 (July 27), which is deemed as the last defense for an assault of the 2022 high at 109.29 (July 14).

Further near-term upside remains on the cards while above the 6-month support line, today at 104.15.

Furthermore, the broader bullish view in the dollar remains in place while above the 200-day SMA at 99.68.

DXY daily chart

Bank of England (BoE) Governor Andrew Bailey is delivering his remarks on the policy outlook and responding to questions from the press following the bank's decision to hike the policy rate by 50 basis points to 1.75%.

Key takeaways

"Faster policy tightening now reduces the risk of a more extended and costly tightening cycle later."

"50 bp rate rise today does not mean we are now moving to a pre-determined path of raising rates by 50 bp per meeting."

"All options are on the table for the September meeting and beyond."

About Andrew Bailey (via bankofengland.co.uk)

"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."

Bank of England (BoE) Governor Andrew Bailey is delivering his remarks on the policy outlook and responding to questions from the press following the bank's decision to hike the policy rate by 50 basis points to 1.75%.

Key takeaways

"Economic cost of war in Ukraine will not deflect BOE from setting rates to hit 2% target."

"Underlying nominal wage growth is expected to pick up further."

"Labour market may only loosen slowly in response to falling demand."

"Mix of high near-term inflation and weak activity is a challenging backdrop for monetary policy."

"No ifs or buts in our commitment to 2% inflation target."

"More forceful action was justified in August because there are some indications price pressure becoming more persistent and broader."

About Andrew Bailey (via bankofengland.co.uk)

"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."

Bank of England (BoE) Governor Andrew Bailey is delivering his remarks on the policy outlook and responding to questions from the press following the bank's decision to hike the policy rate by 50 basis points to 1.75%.

Key takeaways

"Risks around MPC forecasts are exceptionally large."

"Near-term inflationary pressures have intensified significantly."

"Rise in energy prices has exacerbated fall in real incomes, led to another big deterioration in outlook."

"UK is forecast to enter recession later this year."

About Andrew Bailey (via bankofengland.co.uk)

"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."

• EUR/GBP spikes to a fresh weekly high in reaction to the post-BoE selling around sterling.
• The BoE hikes interest rates by 50 bps and indicates that policy is not on a pre-set path.
• Investors now look forward to BoE Governor Bailey’s comments for a fresh impetus.

The EUR/GBP cross catches aggressive bids near the 0.8340 region and rallies to a fresh weekly high after the Bank of England announced its policy decision. The cross is currently trading just above the 0.8400 mark as the focus now shifts to the post-meeting press conference.

As was widely expected, the BoE's Monetary Policy Committee (MPC) voted unanimously to raise the benchmark rate by 50 bps - the most since 1995 - to 1.75%, or the highest level since late 2008. The British pound, however, witnesses a typical 'buy the rumour sell the fact' kind of trade as the jumbo rate hike was already priced in the markets.

Furthermore, the UK central bank - in the accompanying policy statement - said that the monetary policy is not on a pre-set path. This was accompanied by a warning that a UK recession will begin in the fourth quarter and last all the way through next year, suggesting that the BoE could adopt a more gradual approach to raising interest rates.

The aforementioned factors undermine sterling and remain supportive of the EUR/GBP pair’s strong intraday move up. Market participants now look forward to BoE Governor Andrew Bailey's comments for fresh clues about further rate hikes. This, in turn, would play a key role in influencing the EUR/GBP cross and help traders to grab short-term trading opportunities.

Technical levels to watch

Below are the Bank of England's updated economic forecasts:

• Inflation in one year's time at 9.53% (May forecast: 6.65%).
• Inflation in two years' time at 2.00% (May forecast: 2.14%).
• Inflation in three years' time at 0.76% (May forecast: 1.30%).
• Market rates imply more BOE tightening than May, show bank rate at 2.4% in Q4 2022, 2.9% in Q4 2023, 2.4% in Q4 2024 (May: 1.9% in Q4 2022, 2.6% in Q4 2023, 2.2% in Q4 2024)."
• GDP fell 0.2% (QQ) in Q2 2022 (June forecast: -0.3% QQ), sees +0.4% QQ in Q3 2022."
• GDP in 2022 +3.5% (May forecast: +3.75%), 2023 -1.5% (May: -0.25%), 2024 -0.25% (May: +0.25%).
• Unemployment rate 3.67 in Q4 2022 (May forecast: 3.61%); Q4 2023 4.68% (May: 4.26%); Q4 2024 5.68% (May: 5.05%).
• Real post-tax household disposable income in 2022 -1.5% YY (May: -1.75%), 2023 -2.25% (May: +1%), 2024 +0.75% (May: +2.5%)."
• Wage growth +5.25% YY in Q4 2022 (May forecast: +5.75%), Q4 2023 +5.25% (May: +4.75%), Q4 2024 +2.75% (May: +2.75%)

• GBP/USD turns lower for the third straight day in reaction to a dovish BoE policy decision.
• The BoE raises interest rates by 50 bps and indicates that policy is not on a pre-set path.
• Investors now look forward to the post-meeting press conference for a fresh impetus.

The GBP/USD pair struggles to find acceptance above the 1.2200 mark for the second straight day on Thursday and witnessed aggressive selling after the Bank of England announced its policy decision. The pair turns lower for the third straight day and momentarily slips below the 1.2100 round figure, hitting a fresh weekly low in the last hour.

As was widely expected, the BoE's Monetary Policy Committee (MPC) voted unanimously to raise the benchmark rate by 50 bps - the most since 1995 - to 1.75%, or the highest level since late 2008. The jumbo rate hike, however, was fully priced in the markets and thus, prompted a typical 'buy the rumour sell the fact' kind of trade around the British pound.

In the accompanying monetary policy statement, the UK central bank indicated that monetary policy is not on a pre-set path. This, in turn, suggests that the BoE is more likely to slowdown the pace of its tightening cycle amid growing recession fears. This is reaffirmed by the fact that the BoE now estimates the GDP to fall by 0.2% during the second quarter.

The BoE further adds that risks surrounding projections are exceptionally large at present. The immediate reaction, meanwhile, suggests a dovish market assessment and supports prospects for a further depreciating move for the GBP/USD pair. That said, traders are likely to wait for the post-meeting press conference before placing fresh directional bets.

Technical levels to watch

• EUR/JPY extends the weekly recovery to the vicinity of 137.00.
• The next up barrier lines up at the 100-day SMA near 137.80.

EUR/JPY advances for the third consecutive session and flirts with the 137.00 zone on Thursday.

Considering the ongoing price action, further upside in the cross appears likely for the time being, with the interim hurdles at the 100- and 55-day SMAs at 137.84 and 139.49, respectively.

While above the 200-day SMA at 133.73, the outlook for the cross is expected to remain constructive.

EUR/JPY daily chart

Following its August policy meeting, the Bank of England announced that it raised the policy rate by 50 basis points to 1.75% as expected.

The policy statement revealed that Monetary Policy Committee (MPC) member Silvana Tenreyro voted to hike the rate by 0.25 basis points.

Follow our live coverage of the BoE policy announcements and the market reaction.

Market reaction

With the initial market reaction, the GBP/USD pair edged lower and was last seen trading unchanged on the day at 1.2145.

Key takeaways from policy statement as summarized by Reuters

"Mpc is provisionally minded to start gilt sales shortly after September MPC meeting, subject to economic and market conditions and a confirmatory vote."

"UK projected to enter recession in Q4 2022, recession to last 5 quarters, GDP to fall 2.1%."

"Inflation to peak at 13.3% in October 2022 (June forecast: "Slightly above 11%" in October 2022)."

"MPC will be particularly alert to indications of more persistent price pressures, will if necessary act forcefully."

"Risk that long period of externally generated inflation will lead to more enduring domestic price and wage pressures."

"Real household post-tax income to fall sharply in 2022 and 2023, largest 2-year fall since records began in 1964, consumption to fall."

"Labour market remains tight, domestic cost and price pressures elevated."

"Risks around forecasts are exceptionally large, MPC placing less weight on any single set of assumptions."

Bank of England (BoE) Governor Andrew Bailey will deliver his remarks on the monetary policy decisions at a press conference at 1130 GMT on Thursday, August 4.

Follow our live coverage of the BoE policy announcements and the market reaction.

About Andrew Bailey (via bankofengland.co.uk)

"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."

Analysts at TD Securities (TDS) offered a brief preview of the Reserve Bank of Indian (RBI) monetary policy decision, scheduled to be announced on Friday. The central bank is widely expected to announce the third consecutive increase in interest rate, through markets seem divided over the size of the hike.

Key Quotes:

“We look for the RBI to hike its repo rate by 35bp to 5.25% (cons. 5.40%), shifting to a more measured pace of hikes at its August 5 meeting after hiking by a total of 90bp in May and June and introducing a standing deposit facility to withdraw surplus liquidity in April. Risks are skewed towards a bigger move, but we think the RBI will want to moderate the pace of tightening going forward as inflation has likely peaked.”

“CPI inflation has fallen from its April high of 7.8% but remains well above the RBI's 2-6% target range. Food and energy have been prime drivers of CPI as in most countries but there was a little softening in those components last month and we expect this to continue in the months ahead.“

“The RBI highlighted in its July 2022 Bulletin that the drop in inflation is happening more quickly than anticipated while trying to ensure a soft landing for the economy, suggesting less urgency for aggressive hikes. We anticipate further hikes, with a terminal rate of 6.0% expected in Q1 2023.”

BoE Monetary Policy Decision – Overview

The Bank of England (BoE) is scheduled to announce its monetary policy decision this Thursday at 11:00 GMT and looks poised to hike rates for the sixth time since December to rein in soaring inflation. In fact, the headline UK CPI surged to a 40-year high and the BoE had said in June that it would act forcefully if inflation pressures became more persistent. Hence, the broader consensus is that the UK central bank would raise benchmark interest rates by 50 bps - the most since 1995 - to 1.75%, or the level since late 2008.

Apart from this, the central bank's inflation and growth forecasts will gather market attention. According to Dhwani Mehta, Senior Analyst at FXStreet: “The BOE’s 11% peak inflation forecast made in May will likely be revised upwards at the August meeting. The economic uncertainty, courtesy of the European gas crisis and China’s covid lockdowns, could lead the central bank to downgrade its growth forecasts.”

Investors would then shift the focus to the post-meeting press conference, where comments by BoE Governor Andrew Baily would be scrutinized for clues about future rate hikes amid growing recession fears. This, in turn, should infuse a fresh bout of volatility around the British pound and provide some meaningful impetus to the GBP crosses.

How could it affect GBP/USD?

Ahead of the key central bank event risk, jumbo BoE rate hike expectations assisted the GBP/USD pair to regain positive traction on Thursday amid modest USD weakness. The move, however, is fully priced in the markets, which might have already set the stage for some disappointment. Furthermore, the central bank could strike a dovish tone and acknowledge an economic downturn. This would be enough to weigh heavily on sterling.

As Eren Sengezer, European Session Lead Analyst at FXStreet. explains: “A 50 bps rate hike by itself could trigger a 'buy the rumour sell the fact' reaction and cause the British pound to weaken against its rivals. In that case, investors will pay close attention to the vote split. If the policy statement reveals that some policymakers wanted to raise the rate by 75 bps, this could be seen as GBP-positive development. On the other hand, the sterling could face additional selling pressure in case markets see that some policymakers preferred a 25 bps hike.”

Eren also outlines important technical levels to trade the GBP/USD pair: “1.2160 (Fibonacci 23.6% retracement of the latest uptrend) aligns as a key level for the pair. In case this level stays intact as resistance, additional losses toward 1.2100 (psychological level, Fibonacci 38.2% retracement) and 1.2075 (200-period SMA) could be witnessed.”

“On the upside, stiff resistance seems to have formed at 1.2200 (psychological level, 20-period SMA) ahead of 1.2275 (the end-point of the uptrend) and 1.2300 (psychological level),” Eren adds further.

Key Notes

  •  BOE Rate Decision Preview: Bailey to follow Powell’s footsteps with a dovish hike

  •  Bank of England Preview: Bailey to deal blow to pound with dovish hike, what to watch for

  •  GBP/USD Forecast: Pound could weaken in case BOE forecasts recession

About the BoE interest rate decision

The BoE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the GBP. Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.

Economist at UOB Group Lee Sue Ann comments on the recently released labour market figures in New Zealand.

Key Takeaways

“New Zealand’s jobless rate rose a tad to 3.3% in 2Q22 from a record-low of 3.2% in 1Q22, and higher than expectations of 3.1%. Employment growth also stalled, with the number of jobs unchanged for the quarter.”

“Meanwhile, wages came in stronger than expected, with private-sector wages rising 1.3% from the prior quarter. From a year earlier, wages climbed 3.4%, the most since 2008. Notably, private sector wage growth has now almost caught up to CPI inflation.”

“The continued surge in wage inflation will remain a major concern, and that should keep the RBNZ on track to hike the OCR to 4.00% by the end of this year, as per our forecasts. Thereafter, we see the RBNZ on hold.”

• Silver adds to the overnight modest uptick and edges higher for the second straight day.
• The technical set-up favour bulls and supports prospects for a further appreciating move.
• A convincing break below the $19.20 area would shift the bias in favour of bearish traders.

Silver gains some positive traction for the second successive day on Thursday and moves further away from a multi-day low, around the $19.75 region touched the previous day. The intraday uptick picks up pace during the first half of the European session and lifts the white metal to a fresh daily high, around the $20.20 region.

From a technical perspective, any subsequent move up is likely to confront stiff resistance near the $20.30-$20.40 confluence. The said barrier comprises the 50% Fibonacci retracement level of the $22.52-$18.15 downfall and the 50-day SMA. This should now act as a key pivotal point and help determine the near-term trajectory for the XAG/USD.

Oscillators on the daily chart, meanwhile, are holding comfortably in the positive territory and have been gaining traction on hourly charts. The technical setup supports prospects for an eventual breakout through the aforementioned confluence resistance. The XAG/USD might then climb to the 61.8% Fibo. level, around the $20.85 area, en route to the $21.00 mark.

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 round-figure mark. The latter coincides with the 100-day SMA, which if cleared decisively would be seen as a fresh trigger for bullish traders and pave the way for a further near-term appreciating move.

On the flip side, the $19.80-$19.75 region, or the 38.2% Fibo. level now seems to act as immediate support. Any subsequent decline is more likely to stall near the 23.6% Fibo. level, around the $19.20 region. Some follow-through selling would suggest that the recovery from the YTD low has run out of steam and shift the bias in favour of bearish traders.

The XAG/USD would then turn vulnerable to weakening further below the $19.00 mark and test the $18.50 intermediate support. Spot prices could eventually drop towards challenging the YTD low, around the $18.15 region touched on July 14.

Silver daily chart

Key levels to watch

Senior Economist at UOB Group Alvin Liew reviews the latest PMI results in Singapore.

Key Takeaways

“Singapore’s manufacturing Purchasing Managers’ Index (PMI) edged slightly lower by 0.2 point to 50.1 in Jul, the 25th straight month where PMI stayed above the 50.0 mark, indicating an overall expansion in activity. The electronics sector PMI also followed suit, with a 0.3-point decline to post a slower rate of expansion at 50.5 in Jul.”

“Both the headline and electronics PMI recorded slower expansion rates for new orders, new exports, factory output and imports index. It was also noted that their respective input prices index remained elevated but eased slightly from Jun while their employment index continued to expand but at a slower pace.”

“Manufacturing Outlook – The latest PMI number was in line with the weaker manufacturing PMI prints seen across North Asian economies. In contrast however, the PMI numbers from other ASEAN economies were more resilient and saw higher prints in Jul, likely benefiting from improving domestic demand as their economies re-open. The easing of input prices may indicate improvement in supply chain issues but the lower readings for new orders, exports orders, imports and inventory, raised concerns about demand (in particular, for electronics), especially when overlaid with the weaker global growth outlook. In addition, we are mindful of the external risks due to the on-going Russia Ukraine conflict, COVID-19 related supply chain disruptions and a broadly slower global growth outlook. The latest PMI outcome does not change our growth forecast for Singapore’s manufacturing, but we note the simmering downside risks. For now, we maintain our manufacturing growth forecast at 4.5% in 2022 (from 13.2% in 2021) while our full year 2022 GDP growth forecast is also unchanged at 3.5%.”

• GBP/USD gains some positive traction on Thursday amid modest USD weakness.
• The upside remains limited as traders seem reluctant ahead of the BoE decision.
• Hawkish Fed expectations act as a tailwind for the USD and contribute to cap gains.

The GBP/USD pair edges higher on Thursday and moves further away from the weekly low, around the 1.2100 round-figure mark touched the previous day. Spot prices, however, retreat a few pips from the daily high and seem to stabilize around mid-1.2100s during the early part of the European session.

A softer tone surrounding the US Treasury bond yields exerts some downward pressure on the US dollar, which, in turn, is offering support to the GBP/USD pair. Apart from this, expectations that the Bank of England would raise interest rates by 50 bps - the most since 1995 - lend additional support to the British pound. The uptick, however, lacked bullish conviction as investors prefer to wait on the sidelines ahead of the key central bank event risk.

The UK central bank is scheduled to announce its policy decision later this Thursday and lift the benchmark to 1.75%, or the highest level since late 2008. Market participants, however, remain divided over future interest rate hikes amid growing worries about a global economic downturn. Hence, the focus would be on the post-meeting press conference, where comments by the BoE Governor Andrew Bailey could trigger a fresh bout of volatility around the GBP crosses.

In the meantime, more hawkish comments by several Federal Reserve officials this week, hinting that more interest rates are coming in the near term, should act as a tailwind for the USD. This might further contribute to keeping a lid on any meaningful upside for the GBP/USD pair, warranting some caution for bullish traders. Hence, it would be prudent to wait for a sustained strength beyond the 1.2200 mark before positioning for any meaningful appreciating move.

Technical levels to watch

• AUD/USD scales higher for the second straight day amid the emergence of some selling.
• Retreating US bond yields, along with a positive risk tone, weigh on the safe-haven buck.
• Recession fears, hawkish Fed expectations should limit the USD losses and cap the major.

The AUD/USD pair builds on the previous day's bounce from a one-and-half-week low and gains traction for the second straight day on Thursday. The steady intraday ascent prolongs through the early European session and lifts spot prices to a fresh daily high, around the 0.6975 region.

The emergence of some US dollar selling turns out to be a key factor lending support to the AUD/USD pair. In fact, the USD, so far, has been struggling to capitalize on this week's goodish recovery from its lowest level since July 5 amid the ongoing decline in the US Treasury bond yields. Apart from this, the recent recovery in the equity markets is further undermining the safe-haven buck and offering additional support to the risk-sensitive aussie.

The USD downtick, however, is likely to remain limited in the wake of more hawkish remarks by several Fed officials this week, hinting that more interest rates are coming in the near term. Furthermore, growing recession fears, along with heightened US-China tensions caused by US House Speaker Nancy Pelosi's Taiwan trip, might keep a lid on the optimistic move in the markets. The said factors should act as a tailwind for the USD and cap gains for the AUD/USD pair.

Investors might also be reluctant to place aggressive bets and prefer to move on the sidelines ahead of the US monthly jobs data, due for release on Friday. The popularly known NFP report might influence Fed rate hike expectations and play a key role in influencing the USD price dynamics, which, in turn, would determine the next leg of a directional move for the AUD/USD pair.

In the meantime, traders on Thursday would take cues from the release of the usual Weekly Initial Jobless Claims data from the US. This, along with the US bond yields and Fedspeak, would drive the USD demand and provide some impetus to the AUD/USD pair. Apart from this, the broader market risk sentiment would also be looked upon for short-term trading opportunities.

Technical levels to watch

• EUR/USD reverses the recent weakness and targets 1.0200.
• German 10y Bund yields add to the ongoing recovery.
• Germany Construction PMI eased to 43.7 in July.

The single currency so far manages to regain some upside traction and pushes EUR/USD back to the 1.0180 region on Thursday.

EUR/USD stronger on USD-selling

The now soft stance surrounding the greenback allows the current rebound in the risk complex and prompts EUR/USD to attempt another move to the key barrier in the 1.0200 region.

The dollar, in the meantime, appears on the back foot despite higher yields and the recent hawkish rhetoric from several Fed speakers, who in general reinforced the ongoing tightening process and advocated for further rate hikes in the next months, always amidst the current context persistent elevated inflation.

The bounce in the pair so far comes pari passu with another improvement in the German 10y Bund yields, this time flirting with the 0.90% area.

In Germany, the Construction PMI worsened to 43.7 in July and Factory Orders contracted at a monthly 0.4% in June.

Data across the pond will include Initial Claims and the Balance of Trade.

What to look for around EUR

EUR/USD looks to regain composure and initially targets the 1.0200 zone ahead of recent tops near 1.0300, always on the back of the renewed selling pressure hitting the dollar.

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 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 advancing 0.17% at 1.0180 and a breakout of 1.0293 (monthly high August 2) would target 1.0409 (55-day SMA) en route to 1.0615 (weekly high June 27). Next on the downside comes the next support at 1.0096 (weekly low July 26) seconded by 1.0000 (psychological level) and finally 0.9952 (2022 low July 14).

Here is what you need to know on Thursday, August 4:

With FOMC policymakers pushing back against the market view of the Fed possibly starting to lower policy rate in the second half of the day, the dollar preserved its strength against its rivals on Wednesday. Market action remains relatively subdued in the early European morning as investors wait for the Bank of England (BOE) to announce its policy decisions. Later in the day, the US economic docket will feature the weekly Initial Jobless Claims and June Goods Trade Balance data. Meanwhile, US stock index futures trade flat on the day, pointing to a cautious mood.

BOE Rate Decision Preview: Bailey to follow Powell’s footsteps with a dovish hike.

Richmond Fed President Tomas Barking said on Wednesday that recession fears were slightly inconsistent with monthly jobs growth of nearly 400,000 and an unemployment rate of 3.6%. St. Louis Fed President James Bullard reiterated that he would want the policy rate to move up to the 3.75-4% rate this year. Finally, San Francisco Fed President May Daly argued that markets are getting ahead of themselves by expecting rate cuts next year.

The BOE is expected to hike its policy rate by 50 basis points to 1.75% following its policy meeting. Previewing the BOE event, "the BOE is set to raise rates by 50 bps on Super Thursday, but also likely to paint a gloomy picture that would lower expectations for the path of further hikes," said FXStreet analyst Yohay Elam. "This complex event has several twists and turns, but more likely than not to result in sterling suffering."

Bank of England Preview: Bailey to deal blow to pound with dovish hike, what to watch for.

In the meantime, the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, have agreed to raise the oil output by 100,000 barres per day in September.

EUR/USD pair posts modest daily gains on Thursday but continues to trade below 1.0200. Earlier in the day, the data from Germany showed that Factory Orders declined by 0.4% on a monthly basis in June and were down 9% annually.

GBP/USD stages a modest recovery and trades above 1.2150 after having closed the previous two days in negative territory.

USD/JPY preserves its bullish momentum early Thursday and trades above 134.00. “Investors should start preparing for a return to normal Japanese bond trading as the central bank will one day step back from its debt purchases,” Japan's Ministry of Finance, Michio Sato, said earlier in the day but these comments failed to help the JPY find demand.

Following Tuesday's sharp decline, gold managed to regain its traction and registered modest gains on Wednesday. XAU/USD continues to push higher and was last seen trading in positive territory above $1,770.

Bitcoin continued to edge lower for the sixth straight day on Wednesday and seems to have steadied around $23,000 early Wednesday. Ethereum continues to fluctuate in a relatively tight channel near $1,600.

• Gold gains traction for the second successive day on Thursday amid modest USD weakness.
• Retreating US bond yields seem to weigh on the USD and lend support to the commodity.
• The prospects for a further policy tightening by the Fed could cap ahead of the NFP on Friday.

Gold builds on the previous day's modest move up and gains some follow-through traction for the second successive day on Thursday. The steady intraday ascent extends through the early European session and lifts the XAU/USD to a fresh daily high, around the $1,774-$1,775 region.

Growing worries about a global economic slowdown, along with heightened US-China tensions caused by US House Speaker Nancy Pelosi's Taiwan trip, continue to act as a tailwind for gold. Apart from this, the emergence of some selling around the US dollar offers additional support to the dollar-denominated commodity. Despite more hawkish comments by FOMC members, the USD has been struggling to capitalize on this week's goodish bounce from its lowest level since July 5 amid retreating US Treasury bond yields.

That said, the prospects for a further policy tightening by the Fed could hold back bulls from placing aggressive bets around the non-yielding gold. In fact, several Federal Reserve officials hinted this week more interest rates are coming in the near term. This, along with the recent recovery in the global equity markets, could further contribute to capping gains for the safe-haven XAU/USD. Investors might also prefer to move on the sidelines ahead of the release of closely-watched US monthly employment details.

The popularly known NFP report is scheduled for release on Friday and will play an important role in influencing the USD price dynamics. This, in turn, would act as a fresh catalyst, which should allow traders to determine the near-term trajectory for gold. In the meantime, traders on Thursday would take cues from the Bank of England monetary policy decision. Later during the early North American session, the usual US Weekly Jobless Claims data could produce some trading opportunities around the XAU/USD.

Technical levels to watch

In the opinion of FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, USD/CNH should remain within the 6.7350-6.7700 range in the near term.

Key Quotes

24-hour view: “Yesterday, we expected USD to ‘trade in a choppy manner between 6.7500 and 6.7910’. USD subsequently traded sideways within a narrower range than expected (6.7537/6.7803). Further sideway-trading would not be surprising, likely within a range of 6.7470/6.7700.”

Next 1-3 weeks: “We continue to hold the same view as yesterday (03 Aug, spot at 6.7750) where is USD is likely to trade between 6.7350 and 6.8000 for now.”

• The index loses the grip and drops to 106.30.
• US yields resume the upside amidst alternating risk trends.
• Initial Claims, Balance of Trade next of note in the NA docket.

The greenback, in terms of the US Dollar Index (DXY), keeps trading within a cautious stance around 106.30 against the backdrop of improving US yields and alternating risk appetite trends.

US Dollar Index looks to data, risk trends

The index trades with gains for the third session in a row amidst the generalized cautious tone among market participants, all against the backdrop of escalating tensions between US and China and recent hawkish messages from Fed speakers ahead of the key Nonfarm Payrolls due on Friday.

The deceleration of the rebound in the dollar also comes in line with the bounce in US yields across the curve, particularly in the short end and in response to recent hawkish comments from FOMC’s Daly, Bullard and Mester, who defended further tightening in the next months.

Back to the US docket, usual weekly Claims are due next along with trade balance figures.

What to look for around USD

Despite the risk aversion ebbed somewhat in past hours, the dollar remains bid vs. the risk complex and keeps the index underpinned in the mid-106.00s for the time being.

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: 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 retreating 0.07% at 106.29 and faces the next support at 105.04 (monthly low August 2) seconded by 104.91 (55-day SMA) and finally 103.67 (weekly low June 27). On the upside, 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).

• USD/CAD gains some positive traction on Thursday, though lacks bullish conviction.
• Weaker crude oil prices seem to undermine the loonie and offer support to the pair.
• Sliding US bond yields keep the USD bulls on the defensive and act as a headwind.

The USD/CAD pair attracts some buying near the 1.2835-1.2830 region on Thursday and reverses a part of the previous day's retracement slide from a one-week high. The pair holds on to its modest gains through the early European session and is currently trading near the mid-1.2800s, up only 0.10% for the day.

Weaker crude oil prices continue to undermine the commodity-linked loonie, which, in turn, offers some support to the USD/CAD pair. Investors remain concerned that a slowdown in global growth will hit fuel demand. Adding to this, indications that the current tight supply is abating, along with the overnight data showing an unexpected surge in US crude and gasoline stockpiles, weighed on the commodity.

Despite the supporting factor, the USD/CAD pair seem to lack bullish conviction amid subdued US dollar price action. A weaker tone around the US Treasury bond yields turns out to be a key factor keeping the USD bulls on the defensive. That said, hawkish remarks by several Fed officials this week, hinting that more interest rates are coming in the near term, should help limit any meaningful USD downfall.

The fundamental backdrop favours bullish traders and supports prospects for some near-term appreciating move for the USD/CAD pair. Investors, however, seem reluctant and prefer to wait on the sidelines ahead of this week's important macro data. The monthly jobs report from the US and Canada are scheduled for release on Friday, which should provide a fresh directional impetus to the USD/CAD pair.

In the meantime, traders on Thursday might take cues from the release of the Weekly Initial Jobless Claims, due later during the early North American session. This, along with the US bond yields and Fedspeak, might influence the USD demand. Apart from this, oil price dynamics should allow traders to grab short-term opportunities around the USD/CAD pair.

Technical levels to watch

• EUR/GBP extends the previous day’s corrective pullback ahead of BOE.
• Bearish MACD signals, failure to cross support-turned-resistance keep sellers hopeful.
• Previous support line from March, 61.8% Fibonacci retracement guards immediate recovery ahead of 200-DMA.
• Late March swing low could lure the bears below 0.8340.

EUR/GBP picks up bids to 0.8310 as buyers mark another attempt to cross the previous support line from March during early Thursday morning in Europe. That said, the cross-currency pair dropped to the lowest levels since April 22 on Tuesday before bouncing off 0.8340.

The pair’s latest recovery, however, takes clues from the nearly oversold RSI conditions. Even so, the quote remains below the support-turned-resistance line surrounding 0.8380. Also challenging the short-term EUR/GBP buyers is the weekly resistance line, near 0.8385.

Even if the pair rises past 0.8385, the 61.8% Fibonacci retracement of the March-June upside and the 200-DMA level, respectively near 0.8400 and 0.8440, could challenge the EUR/GBP bulls.

Following that, the ball lands in the buyer’s court and the prices could rise towards late July’s swing high close to 0.8585.

On the flip side, the latest bottom near 0.8340 restricts the immediate downside of the EUR/GBP prices during the fresh pullback. Following that, a south-run towards the March 23 low of 0.8295 appears logical.

In a case where EUR/GBP remains bearish past 0.8295, the odds of witnessing a further south-run towards the yearly low marked in March, near 0.8200, can’t be ruled out.

EUR/GBP: Daily chart

Trend: Further weakness expected

USD/JPY still forecast to trade within the 131.30-135.60 range in the next weeks, noted FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “We expected USD to ‘advance further’ yesterday but we were of the view that ‘overbought conditions suggests the resistance at 134.60 is unlikely to come under threat’. Our view turned out to be correct as USD rose to 134.54 before pulling back quickly. Upward momentum has slowed and USD is unlikely to advance further. For today, USD is more likely to trade between 133.10 and 134.50.”

Next 1-3 weeks: “There is no change in our view from yesterday (03 Aug, spot at 133.50). As highlighted, the recent USD weakness has ended. The current price actions are likely the early stages of a broad consolidation phase and USD is expected to trade between 131.30 and 135.60 for now.”

Andrew Hanlan, Senior Economist, Westpac offers his first impression of the Australian Trade Balance data released earlier in the Asian session this Thursday.

Key quotes

“The surplus climbed to $17.7bn in June led by an export surge.”

“The June outcome exceeded expectations, Westpac $14.6bn and market median $14.0bn.”

“Note that the May figures was revised lower, to $15.0bn from $16.0bn, - still a new record high ahead of the June result.”

“Export earnings surged during the June quarter, reflecting a combination of higher prices and a welcome lift in volumes, off a relatively subdued base.”

“Exports grew by 5.4% in April, then rose 8.9% in May, followed by a 5.1% lift in June. We had anticipated that exports would consolidate in June.

“On the import side, the gain of 0.7% fell short of our expectations, a forecast 3.2%.” 

“Weakness was centred on a pull-back in civil aircraft, as well as softness in car imports which continue to be disrupted by supply chain issues.” 

• USD/CHF picks up bids to print three-day uptrend after bouncing off short-term key support.
• Convergence of 21-DMA, 50-DMA appears a tough nut to crack for bulls.
• RSI, MACD hints at further recovery moves, 100-DMA guards immediate upside.

USD/CHF bulls attack the 100-DMA hurdle while picking up bids to 0.9620 during early Thursday morning in Europe. In doing so, the Swiss currency (CHF) pair rises for the third consecutive day after Tuesday’s rebound from the lowest levels since late April.

The recovery moves also took place from a 10-week-old downward sloping trend line. That said, the recently firmer RSI and an impending bull cross on the MACD also keep USD/CHF buyers hopeful.

However, a daily closing beyond the 100-DMA level surrounding 0.9625 becomes necessary for the pair to convince buyers.

Even so, a confluence of the 21-DMA and 50-DMA, around 0.9680, will be a crucial resistance for the USD/CHF bulls to cross before taking control.

Alternatively, the pair’s pullback moves may aim for the 0.9600 and the 0.9500 thresholds before revisiting the downward sloping support line from late May, around 0.9490 by the press time.

Also acting as a downside filter is a horizontal area comprising the latest swing low and March’s peak, around 0.9460-70.

Should the USD/CHF prices drop below 0.9460 support, the odds of witnessing the 0.9400 level back on the chart can’t be ruled out.

USD/CHF: Daily chart

Trend: Further upside expected

FX option expiries for August 4 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0100 935m
• 1.0150 1.6b
• 1.0200 1.1b
• 1.0230 1.3b
• 1.0300 1.3b

- GBP/USD: GBP amounts        

• 1.1920 251m
• 1.2400 267m

- USD/JPY: USD amounts                     

• 130.85 757m
• 131.40 570m
• 132.00 633m
• 132.50 436m
• 133.00 1.4b
• 134.31 400m
• 134.80 1b
• 135.00 1.5b

- USD/CHF: USD amounts        

• 0.9780 500m

- AUD/USD: AUD amounts  

• 0.6975 354m
• 0.7000 584m

- USD/CAD: USD amounts       

• 1.2750 745m
• 1.2900 540m

- EUR/GBP: EUR amounts

• 0.8560 350m

• USD/JPY attracts some dip-buying on Thursday and turns positive for the third straight day.
• The Fed-BoJ policy divergence continues to weigh on the JPY and offers support to the pair.
• Sliding US bond yields keep the USD bulls on the defensive and might cap any further gains.

The USD/JPY pair reverses an intraday dip to the 133.40 area and turns positive for the third straight day on Thursday. Spot prices climb back above the 134.00 mark during the early European session, with bulls now eyeing a move towards the weekly high touched the previous day.

A big divergence in the monetary policy stance adopted by the Federal Reserve and the Bank of Japan continues to weigh on the Japanese yen, which, in turn, acts as a tailwind for the USD/JPY pair. It is worth recalling that several Fed officials hinted this week that more interest rates are coming in the near term. In contrast, the BoJ has repeatedly called to stick to its ultra-easy policy settings and its commitment to keep the 10-year Japanese government bond yield around 0%.

The USD/JPY pair uptick, however, seems limited amid the ongoing decline in the US Treasury bond yields, which keeps the US dollar bulls on the defensive. Apart from this, the cautious mood around the equity markets could lend some support to the safe-haven JPY and further contribute to capping any meaningful upside for the USD/JPY pair, at least for the time being. This makes it prudent to wait for strong follow-through buying before positioning for any further appreciating move.

Thursday's key focus would remain on the Bank of England monetary policy decision, which could infuse some volatility in the markets and provide some impetus to the USD/JPY pair. Traders will further take cues from the release of the usual Weekly Initial Jobless Claims data from the US, due later during the early North American session. This, along with the US bond yields and Fedspeak, might influence the USD price dynamics and allow traders to grab short-term opportunities.

Technical levels to watch

Considering advanced prints from CME Group for natural gas futures markets, open interest resumed the uptrend and went up by around 5.2K contracts on Wednesday. In the same line, volume rose for the third session in a row, this time by around 47.4K contracts.

Natural Gas:  Ready for a test of $9.75?

Prices of natural gas rose sharply and briefly tested the $8.50 mark, just to close a tad lower, on Wednesday. The strong advance was on the back of rising open interest and volume and leaves the door open to the continuation of the uptrend with the immediate target at the 2022 peak at $9.75 per MMBtu (July 26).

• Copper drops for the fourth consecutive day after rising to one-month high.
• US-China tension over Taiwan, fears of economic slowdown due to the central bank’s aggression weigh on prices.
• Resumption of multiple manufacturing facilities in China appears to propel supply.
• China’s State Grid’s planned investment, recently softer US dollar limit downside move.

Copper prices remain pressured for the fourth consecutive day heading into Thursday’s European session. The metal’s latest weakness could be linked to the sluggish sentiment in the market, as well as fears of lesser demand for industrial metal going forward.

That said, prices of a three-month copper contract on the London Metal Exchange (LME) stay on the back foot below $7,700 while the most-traded September copper contract on the Shanghai Futures Exchange (SFE) fell 1.2% to 59,310 yuan ($8,781.20) a tonne by the press time.

It’s worth noting that the quote rose to the highest in one month on Monday before reversing from $3.5957, per the most active COMEX Copper contract. The pullback in prices could be linked to the market’s risk aversion wave amid the US-China tussles over US House Speaker Nancy Pelosi’s Taiwan visit, as well as the fears of an economic slowdown given the most central banks’ rush for higher rates.

It should be noted that the fears of more supplies due to major copper producing facilities’ restart in China and Chile also weigh on the prices. On the contrary, Reuters hinted at higher copper demand from China as it said, “In China, the State Grid plans to invest more than 150 billion yuan ($22 billion) in the second half of 2022 in ultra-high voltage power transmission lines, expected to drive demand for raw materials including aluminum.”

Elsewhere, China’s actions in the Taiwan Strait appear to weigh on the market sentiment and weigh copper prices. Recently, Taiwan’s Foreign Ministry crossed wires, via Reuters, while saying that China is attempting to alter the status quo in the Taiwan Strait. However, Bloomberg’s news suggests the US Democratic Party members’ dissent to the US-Taiwan ties appears to tame the fears of the Sino-Americans due to US House Speaker Pelosi’s Taiwan visit.

Moving on, the US Good and Services Trade Balance for June, expected $-80.1B versus $-85.5B prior, as well as the weekly Initial Jobless Claims, expected 259K versus 256K prior, will decorate the calendar. Also important to watch will be the Sino-American tension over Taiwan for clear directions ahead of Friday’s US NFP.

While further downside is likely in the next weeks, NZD/USD is expected to meet strong contention in the 0.6150 region, note FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “We highlighted yesterday that ‘the deeply oversold decline in NZD has scope to extend but a break of 0.6175 is unlikely’. NZD subsequently dipped to 0.6214 before rebounding strongly. Downward pressure has eased and NZD is unlikely to weaken further. For today, NZD is more likely to trade sideways within a range of 0.6240/0.6290.”

Next 1-3 weeks: “We continue to hold the same view as yesterday (03 Aug, spot at 0.6230). As highlighted, NZD is likely to trade with a downward bias even though any weakness is expected to encounter solid support at 0.6150. Overall, only a break of 0.6315 (no change in ‘strong resistance’ level from yesterday) would indicate that the current downward pressure has eased.”

• NZD/USD has printed an intraday high at 0.6300 as DXY has turned sideways ahead of US NFP.
• Investors have ignored the weak NZ labor market data.
• Escalating US-China tensions could impact the antipodean significantly.

The NZD/USD pair is advancing sharply higher as investors have shrugged-off vulnerable employment data. The asset is likely to display a ‘Double Distribution’ trading session as a decent rally has been witnessed after an upside break of morning inventory distribution and further distribution is highly expected. The major has climbed to the round-level resistance of 0.6300.

On Wednesday, Stats NZ reported that the Unemployment Rate increased to 3.3% from the estimates of 3.1% and the prior release of 3.2% in the second quarter. 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%.

The ineffectiveness of the kiwi economy in generating job opportunities has created immense trouble for the Reserve Bank of New Zealand (RBNZ). Price pressures are soaring in the NZ economy and the RBNZ was expecting decent performance from the labor market to get strengthened for hiking the Official Cash Rate (OCR) unhesitatingly. Now, crippled RBNZ would resort to a less-hawkish stance on the policy rates.

Soaring US-China tensions could fetch the risk-off impulse as death threats to US House Speaker Nancy Pelosi is not a weak concern. This may bring sanctions to China by the US and a slowdown in China could also impact the antipodean, being a trading partner to China.

Meanwhile, the US dollar index (DXY) is auctioning in a restricted territory as investors are awaiting the release of the US Nonfarm Payrolls (NFP). A preliminary estimate for the employment generation is 250k, lower than the prior release of 372k. Also, the jobless rate is expected to remain unchanged at 3.6%.

• German Factory Orders fell 0.4% MoM in June vs. -0.8% expected.
• German Factory output arrived at -9.0% YoY in June vs. -6.0% expected.
• EUR/USD keeps its range below 1.0200 on the mixed German data.

The German Factory Orders dropped in June, suggesting that the manufacturing sector activity in Europe’s economic powerhouse is dwindling.

Contracts for goods ‘Made in Germany’ fell by 0.4% on the month vs. -0.8% expected and -0.2% last, the latest data published by the Federal Statistics Office showed on Thursday.

On an annualized basis, Germany’s Industrial Orders arrived at -9.0% in the reported month vs. -6.0% expected and -3.2% previous.

FX implications

The shared currency remains unfazed by the mixed German factory data.  At the time of writing, EUR/USD is almost unchanged on the day, trading at 1.0165.

CME Group’s flash data for crude oil futures markets noted open interest rose by around 5.5K contracts on Wednesday, resuming the uptrend following Tuesday’s drop. In the same line, volume offset the previous pullback and went up by around 147.6K contracts.

WTI could accelerate losses below $90.00

Prices of the WTI intensified the leg lower on Wednesday and remained poised to challenge the $90.00 mark sooner rather than later. This view is underpinned by the backdrop of rising open interest and volume and exposes further losses in the very near term.

GBP/USD is predicted to maintain the 1.2040-1.2255 range in the next few weeks, suggested FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “We highlighted yesterday that ‘downward momentum is building and GBP could weaken to 1.2100’. GBP dropped briefly to 1.2100 during NY session before rebounding. While downward momentum has not improved by much, there is room for GBP to edge lower to 1.2085. For today, the major support at 1.2040 is not expected to come into the picture. On the upside, a break of 1.2200 (minor resistance is at 1.2170) would indicate that the current downward pressure has eased.”

Next 1-3 weeks: “There is no change in our view from yesterday (03 Aug, spot at 1.2160). As highlighted, the recent GBP strength has ended. GBP has appears to have moved into a consolidation phase and is likely to trade within a range of 1.2040/1.2255 for now.”

• EUR/USD remains sidelined after posting the bullish Doji candlestick the previous day.
• 21-DMA, bullish MACD signals favor recovery moves targeting 1.0200 resistance confluence.
• Two-month-old descending trend line appears tough nut to crack for bulls.

EUR/USD treads water as markets turn cautious ahead of the key data/events. Among them, Thursday’s European Central Bank’s (ECB) monthly economic bulletin and Friday’s US Nonfarm Payrolls (NFP) are the key events. That said, the Major currency pair seesaws around 1.0180 heading into Thursday‘s European session.

Also read: EUR/USD: Wednesday’s Doji, ECB Economic Bulletin teases buyers below 1.0200

It should be noted that the quote’s latest rebound takes clues from the bullish MACD signals and Wednesday Doji candlestick. Also supporting the EUR/USD rebound is the 21-DMA.

However, a convergence of the 10-DMA and previous support line from July 14, around 1.0200, Will be an important resistance for the EUR/USD buyers to retake control.

Even so, a downward sloping resistance line from early June, at 1.0250 by the press time, could challenge the pairs’ further advances.

Alternatively, the 21-DMA support level of 1.0157 restricts immediate support ahead of the 1.0100 mark, a break of which could quickly redirect the EUR/USD bears towards the yearly low near 0.9950.

It’s worth noting that the parity level near 1.0000 will act as an intermediate halt during the pair’s downside past 1.0100.

EUR/USD: Daily chart

Trend: Further recovery expected

Open interest in gold futures markets dropped by just 91 contracts on Wednesday, extending the downtrend for the fourth consecutive session according to preliminary readings from CME Group. Volume followed suit and shrank by around 20.7K contracts, partially trimming the previous build.

Gold appears capped by $1,800

Gold prices edged higher on Wednesday, although the move was against the backdrop of shrinking open interest and volume, leaving at the same time the upside somewhat limited near the key $1,800 mark per ounce troy for the time being.

• GBP/JPY has turned sideways as investors are awaiting the interest rate decision by the BOE.
• To combat the price rise, a rate hike of 50 bps by the BOE looks likely.
• Lower earnings and higher consumption payouts have hurt the sentiment of UK households.

The GBP/JPY pair is displaying back and forth moves in a 162.47-162.66 range as investors have shifted to the sidelines ahead of the monetary policy by the Bank of England (BOE). The asset is likely to extend its two-day winning streak if the cross oversteps Wednesday’s high at 163.06.

Considering the market expectations, the BOE will announce a rate hike by 50 basis points (bps). Featuring a rate hike by half of a percent by BOE Governor Andrew Bailey will push the interest rates to 1.75%. It is worth noting that price pressures in the UK area have climbed to 9.4%. Also, the inflation rate has not shown any sign of exhaustion yet, which indicates that the new normal 50 bps rate hike is not sufficient to offset the accelerating inflationary pressures.

The households in the UK area are facing the headwinds of soaring price rise rates. There is no denying the fact that the inflation rate is sky-rocketing, which is hurting the paychecks of the households. Apart from that, the employees are witnessing a drop in Labor Cost Index. A simultaneous drop in earnings along with the lower-valued paychecks has trimmed their confidence in the UK economy.

On the Tokyo front, investors are worried over the fact that the rate hike by the BOE will escalate the BOE-Bank of Japan (BOJ) policy divergence. This could drag the yen bull further. The continuation of ultra-loose monetary policy by BOJ Governor Haruhiko Kuroda to keep growth rates stronger is bringing more export business to the table.

FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang expect EUR/USD to remain side-lined for the time being, likely between 1.0100 and 1.0260.

Key Quotes

24-hour view: “Yesterday, we expected the decline in EUR to extend but we were of the view that ‘the major support at 1.0100 is unlikely to come under threat’. We indicated, ‘there is another support at 1.0130’. During NY session, EUR dropped briefly to 1.0121 before rebounding to end the day unchanged at 1.0164. Downward pressure has eased and EUR is unlikely to weaken further. For today, EUR is more likely to trade sideways between 1.0130 and 1.0210.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (03 Aug, spot at 1.0165). As highlighted, EUR is still in a consolidation phase and it is likely to trade between 1.0100 and 1.0260. Looking ahead, EUR has to break the major support at 1.0100 before a sustained decline is likely.”

• GBP/USD remains mostly steady inside a three-week-old bullish channel formation.
• BOE is expected to announce a 50-bps rate hike amid concerns surrounding economic slowdown and rampant inflation.
• Rate Statement, Governor Bailey’s speech will be more important amid hopes of conveying recession fears.
• Mixed US data, Fedspeak also contributes to the market’s inactions ahead of BOE, NFP.

GBP/USD portrays the cautious mood ahead of the Bank of England’s (BOE) monetary policy announcement during the early European morning on “Super Thursday”. In addition to the pre-BOE anxiety, a lack of market activity ahead of Friday’s US Nonfarm Payrolls (NFP), as well as mixed catalysts from the US, also restrict the Cable pair’s latest moves.

“The Bank of England is expected to raise interest rates by the most since 1995 on Thursday, even as the risks of a recession mount, in an attempt to stop a surge in inflation from becoming embedded in Britain's economy,” said Reuters ahead of the BOE announcements. It’s worth noting that the economic conditions in the UK are fragile and the political jitters, as well as the Brexit woes, add pressure on the “Old Lady”, as the British central bank is known.

Late on Thursday, UK PM hopeful Liz Truss mentioned that it would look to change the Bank of England’s mandate to ensure it controlled inflation, per the Financial Times (FT). Given Truss’ leading status in the UK PM race, the BOE may act aggressively this time. However, the central bank’s future moves and economic forecasts will be more important to watch for clear directions.

Also read: BOE Rate Decision Preview: Bailey to follow Powell’s footsteps with a dovish hike

On the other hand, China’s actions in the Taiwan Strait appear to weigh on the market sentiment and tame the GBP/USD prices. Recently, Taiwan’s Foreign Ministry crossed wires, via Reuters, saying that China is attempting to alter the status quo in the Taiwan Strait. However, Bloomberg’s news suggests the US Democratic Party members’ dissent to the US-Taiwan ties appears to tame the fears of the US-China tussles due to US House Speaker Nancy Pelosi’s Taiwan visit.

Elsewhere, St. Louis Federal Reserve Bank President James Bullard, a top hawk, was joined by Fed Minneapolis President Neel Kashkari and Richmond Fed President Thomas Barkin to exert downside pressure on the GBP/USD pair the previous day. However, San Francisco Fed President Mary Daly appeared to have flashed mixed signals and tamed the DXY bulls afterward. The policymaker said, "Markets are ahead of themselves in expecting rate cuts next year."

Amid these plays, the S&P 500 Futures clings to mild losses at around 4,150 and the US 10-year Treasury yields remain pressured at around 2.71%, down three basis points (bps) by the press time.

Given the risk-off and the pre-BOE anxiety, GBP/USD could remain sidelined. That said, the US Good and Services Trade Balance for June, expected $-80.1B versus $-85.5B prior, as well as the weekly Initial Jobless Claims, expected 259K versus 256K prior, will also decorate the calendar and are important to watch too.

Technical analysis

GBP/USD pair’s rebound from the three-week-old channel’s support line joins firmer RSI (14) and the bullish MACD signals to keep buyers hopeful. With this, the recovery moves can aim for the multiple highs marked during late June, around 1.2330 ahead of challenging the aforementioned channel’s resistance line, at 1.2345 by the press time.

Meanwhile, pullback moves need validation from the channel’s support line, at 1.2120 by the press time, a break of which could direct the quote towards the previous resistance line from February, near 1.2100. Also acting as short-term key support is the convergence of the 21-DMA and the resistance-turned-support line from June 16, close to 1.2030-25.

• Oil prices have given a downside break of the symmetrical triangle that indicates a volatility expansion ahead.
• A decisive downside break of $90.00 will unleash the bears’ potential.
• The RSI (14) has shifted into the bearish range of 20.00-40.00.

West Texas Intermediate (WTI), futures on NYMEX, is oscillating in a narrow range of $89.00-91.03 in the Asian session. The black gold has remained vulnerable after surrendering the critical support of 91.60 on Wednesday. The oil prices are sneaking around the psychological support of $90.00 and may deliver a sheer downside move if violate the same unhesitatingly.

On the daily scale, the oil prices have given a downside break of the symmetrical triangle chart pattern. The upward sloping trendline of the above-mentioned chart pattern is placed from July 14 low at $88.34 while the downward-sloping trendline is plotted from July 8 high at $102.77.

The black gold has faced selling pressure while attempting to cross the 20-period Exponential Moving Average (EMA) at $96.35. Also, the 50-EMA at $101.04 is trading higher, which signals that the short-term trend is bearish.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which adds to the downside filters. The momentum oscillator is not displaying any sign of divergence and oversold situation.

A downside break of Wednesday’s low at $89.88 will drag the oil prices towards the 10 October 2021 high at $85.00, followed by January 7 high at $79.97.

Alternatively, bulls could defend the escalating downside odds and may drive the black gold towards April 21 high at $105.24 and June 2 low at $109.96 after surpassing Friday’s high at $100.95 confidently.

WTI daily chart

• Gold price cheers renewed USD selling on weaker Treasury yields and upbeat mood.
• Hawkish Fedspeak and strong US data jack up a 75 bps Sept Fed rate hike bets.   
• Path of least resistance appears up for XAU/USD, with eyes on BOE, US jobs.

Gold price is trading on the front foot, awaiting a sustained move towards the $1,790-$1,792 supply zone. Strong US corporate earnings and economic data combined with the Chinese tech gains have lifted the overall market mood, despite ongoing China’s military threats against Taiwan. The greenback takes a back seat alongside the Treasury yields amid the market optimism, underpinning the USD-priced yellow metal. The further upside in XAU/USD hinges on the Fed rate hike expectations, with the chance for a 75 bps lift-off in September having increased to 42% after the recent hawkish comments from the Fed policymakers. Next of relevance for gold traders remain the US employment data, which could hint at a probable recession. The BOE monetary policy decision will be also closely followed for fresh trading direction in the non-interest-bearing bullion.

Also read: Gold Price Forecast: XAU/USD looks north towards 1,790, focus on BOE, yields

Gold Price: Key levels to watch

The Technical Confluence Detector shows that the gold price is heading into the pivot point one-day R1 resistance at $1,773, where the previous day’s high meets.

The next upside barrier is aligned at the Bollinger Band four-hour Upper at $1,780, above which the pivot point one-day R2 at $1,783 will be tested.

Bulls will then aim to take out $1,786, the pivot point one-week R1, on its way to $1,792. At that level, the SMA50 one-day and pivot point one-day R3 coincide.

On the downside, strong support is seen at the confluence of the previous week’s high and Fibonacci 23.6% one-day at $1,768.

Sellers are likely to challenge a dense cluster of support levels around $1,764, which is the intersection of the SMA5 one-day, Fibonacci 61.8% one-month and the previous low four-hour.

The next relevant support awaits at the Fibonacci 61.8% one-day at $1,761. The line in the sand for XAU bulls is $1,755, the convergence of the previous day’s low, Fibonacci 23.6% one-week and pivot point one-day S1.

Here is how it looks on the tool

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.

• USD/INR remains on the front foot as buyers aim for the 21-DMA hurdle amid broad US dollar weakness.
• RSI weakness, hawkish hopes from the RBI challenge buyers.
• Second-tier US data, risk catalysts are important for fresh impulse.

USD/INR remains on the front foot around 79.40 heading into Thursday’s European session. In doing so, the Indian rupee (INR) pair prepares for Friday’s monetary policy decision from the Reserve Bank of India (RBI), as well as the US Nonfarm Payrolls (NFP) amid the US dollar pullback.

The US Dollar Index (DXY) remains indecisive around 106.35 after refreshing the weekly top with 106.82 earlier on Wednesday. That said, mixed US data and Fedspeak also appeared to have weighed on the US dollar of late. Also challenging the greenback could be the market’s cautious optimism that China could overcome the economic difficulties, especially after witnessing the previous day’s Caixin Services PMI for the dragon nation.

On the other hand, hawkish hopes from the RBI also favor the USD/INR bulls. Ahead of the RBI verdict, a Reuters poll of foreign exchange strategists mentioned, “India's rupee will trade near its historic low in the coming three months, despite a recent recovery, based on a widening trade deficit and global flows into safe-haven US dollars.”

It should be noted, however, that the latest headlines suggesting China’s actions in the Taiwan Strait appear to weigh on the market sentiment and challenge the USD/INR bulls. That said, Taiwan’s Foreign Ministry recently crossed wires, via Reuters, while saying that China is attempting to alter the status quo in the Taiwan Strait. However, Bloomberg’s news suggests the US Democratic Party members’ dissent to the US-Taiwan ties appears to tame the fears of the US-China tussles due to US House Speaker Nancy Pelosi’s Taiwan visit.

Looking forward, USD/INR may grind higher while keeping eyes on the second-tier US data for intermediate directions. Among them, the US Good and Services Trade Balance for June, expected $-80.1B versus $-85.5B prior, as well as the weekly Initial Jobless Claims, expected 259K versus 256K prior, will decorate the calendar.

Technical analysis

USD/INR bulls approach the 21-DMA hurdle surrounding 79.55, backed by the recent improvement in the RSI.

However, the RSI divergence showed via a three-week-old descending trend line on the oscillator window, appeared to challenge the bulls.

On the same line are the multiple hurdles surrounding the 80.00 threshold and the recent peak near 80.20 mark.

Meanwhile, pullback moves may initially aim for the latest trough surrounding 78.40 ahead of challenging an upward sloping support line from early April, near 78.23 at the latest. Also acting as the downside filter is the 100-DMA level close to 77.66.

USD/INR: Daily chart

Trend: Further upside expected

• Steel prices are having a nightmare as foreign investments in China will trim on Sino-US tensions.
• The prolonged property crisis in China is forcing steel mill owners to go bankrupt.
• Goldman Sachs has trimmed the demand for steel by 5% for the CY2022.

Steel prices have shifted into a bearish trajectory as downside risks have escalated after the market participants trimmed the demand forecasts for steel going forward. Analyst at Goldman Sachs has cut the steel demand by 5% for CY2022.

A steep cut in steel demand is backed by escalating China’s real estate crisis. Real estate has been vulnerable in China from the past year led by a shift in spending pattern in the household after the Covid-19 pandemic. Apart from that, infrastructure spending has been slowed down sharply in China. It is worth noting that the property sector addresses one-third of steel demand in China.

The occurrence of the property crisis has forced steel mills owners to ditch the production as higher stockpiles due to vulnerable demand is forcing them bankruptcy. Going forward, the demand for steel likely to remain muted on escalating Sino-US tensions over Taiwan.

Death threats to US House Speaker Nancy Pelosi on her personal visit to Taiwan may result in sanctions on China by the US administration. Adding to that, foreign investment in China could trim significantly and property crisis could extend to a great extent.

Meanwhile, rising interest rates by the Western central banks will keep hurting the demand for steel. Price pressures have increased significantly and in order to contain the same, the central banks have resorted to policy tightening measures. This will force the corporate players to spend the costly money wisely on the investment projects and construction activities.

• AUD/USD buyers keep reins around intraday high, up for the second consecutive day.
• RSI, MACD favor the bounce off previous resistance line from April.
• Convergence of 100-day EMA, 15-week-old descending trend line appears a tough nut to crack for the bulls.

AUD/USD grinds higher around the intraday top near 0.6965 as bulls keep control during early Thursday morning in Europe. In doing so, the Aussie pair extends the previous day’s rebound from the four-month-long resistance-turned-support line.

Given the firmer RSI and bullish MACD signals backing the latest rebound, the AUD/USD prices are likely to remain firmer.

However, the 100-day EMA and downward sloping resistance line from April 20 will challenge the buyers around 0.7040. It’s worth mentioning that the 0.7000 can act as an immediate hurdle.

Should the pair manage to provide a daily closing beyond 0.7040, a run-up towards June’s peak of 0.7283 can’t be ruled out.

Meanwhile, pullback remains elusive beyond the previous resistance line near 6880.

Following that, the lows marked during June and May, respectively around 0.6850 and 0.6830, will challenge the bears.

If the AUD/USD prices remain weak past 0.6830, the odds of witnessing a fresh yearly low, currently around 0.6680, appears too high.

AUD/USD: Daily chart

Trend: Further upside expected

Jeffrey Gundlach, Wall Street's bond king and Founder and Chief Executive Officer of DoubleLine Capital, in his latest tweet, warned of an incoming recession, as the US yield-curve inversion deepens.

He tweeted out, “The 2-year 10-year yield curve inversion is gaining steam. At 36 basis points right now. Rough road ahead.”

After the Fed raised the rates by 75 bps last week, Gundlach said the Fed is no longer behind the curve and that Chair Jerome Powell has restored his credibility.

Related reads

• US NFP: Job growth to soften to 200K in Friday’s report – JP Morgan
• Is the US really in a recession?

• USD/JPY treads water after bouncing off two-month low during the last two days.
• Massive option expiries, strong support at 133.42 challenge momentum traders.
• Mixed data, indecisive Fedspeak also limit market moves amid a light calendar.
• Second-tier US data could entertain traders but risk catalyst are more important.

USD/JPY remains indecisive around 133.80 yen traders search for fresh clues during early Thursday morning in Europe. In doing so, the yen pair portrays the market’s cautious mood ahead of the key US Nonfarm Payrolls (NFP) while justifying the options market characteristics.

Market sentiment remains sluggish after portraying the optimism the previous day. While signaling the mood, the S&P 500 Futures clings to mild losses at around 4,150 and the US 10-year Treasury yields remain pressured at around 2.71%, down three basis points (bps) by the press time.

Latest headlines suggesting China’s actions in the Taiwan Strait appear to weigh on the market sentiment. That said, Taiwan’s Foreign Ministry recently crossed wires, via Reuters, while saying that China is attempting to alter the status quo in the Taiwan Strait. However, Bloomberg’s news suggests the US Democratic Party members’ dissent to the US-Taiwan ties appears to tame the fears of the US-China tussles due to US House Speaker Nancy Pelosi’s Taiwan visit.

Elsewhere, the US ISM Services PMI for July rose to 56.7 from 55.3 prior and the market expectation of 53.5 whereas the final reading of the US S&P Global Services PMI for July dropped to 47.3, marking the first contraction in two years, from 52.7 in June and the flash estimate of 47. Elsewhere, China’s Caixin Services PMI for July also surprised markets with upbeat data.

Talking about the Federal Reserve speakers, other than St. Louis Federal Reserve Bank President James Bullard, who is a top hawk, Fed Minneapolis President Neel Kashkari and Richmond Fed President Thomas Barkin also joined the league of the Fed hawks to exert downside pressure on the market sentiment. However, San Francisco Fed President Mary Daly appeared to have flashed mixed signals and tamed the DXY bulls afterward. The policymaker said, "Markets are ahead of themselves in expecting rate cuts next year."

It should be noted that Reuters quotes the heavy USD/JPY option expiries around 134.25 to suggest an upside cap for the yen pair. The news also mentioned, “Total $960 million in expiries between 134.25-45, $1.1 billion 134.80-85, more above.” On the contrary, “133.00 sees $1.4 billion in expiries today, also 134.00-05 total $481 million,” stated Reuters.

Considering the indecision of traders and options market behavior, the USD/JPY prices are likely to remain lackluster below 134.00. However, the US Good and Services Trade Balance for June, expected $-80.1B versus $-85.5B prior, as well as the weekly Initial Jobless Claims, expected 259K versus 256K prior, will decorate the calendar. Also important to watch will be the Sino-American tension over Taiwan for clear directions ahead of Friday’s US NFP.

Technical analysis

Although the 100-DMA level of 130.55 appears a tough nut to crack for the USD/JPY bears, recovery remains elusive unless the quote rises past the late July swing high near 137.50.

• Asian equities are performing broadly well after following the footprints of Wall Street.
• An upbeat US ISM Services data has strengthened the risk-on market mood.
• Oil prices are declining led by the cumulative impact of various supply catalysts.

Markets in the Asian domain are broadly positive, following the footprints of bullish Wall Street after the release of the US ISM Services PMI data. The economic data landed at 56.7, higher than the estimates of 53.5 and the prior release of 55.3. Also, the US ISM Services New Orders Index was released at 59.9, lower than the consensus of 60.5 but remained solid than the former release of 55.6.

The upbeat US ISM Services economic data indicated that the demand is resilient and sent the tech stocks on fire. This tech-savvy index NASDAQ rose 2.59% and improved the risk appetite of investors swiftly.

At the press time, Japan’s Nikkei225 and China A50 added 0.50%, Hang Seng jumped 1.70%, and Nifty50 gained 0.80%.

Indian indices are likely to remain on tenterhooks as the Reserve Bank of India (RBI) will announce the interest rate decision. RBI Governor Shaktikanta Das is expected to hike the repo rate by 50 basis points (bps). A rate hike of 50 bps will push the repo rate to its pre-pandemic levels at 5.40%, which was earlier recorded in August 2019.

Meanwhile, the US dollar index (DXY) is finding a cushion around 106.40. The DXY is likely to remain on the sidelines ahead of the jobs data. Economists at JP Morgan predict the US Nonfarm Payrolls (NFP) to come in weaker at 200K in July’s labor market report.

On the oil front, higher oil stockpiles buildup reported by the Energy Information Administration, a promise of pumping more oil by the OPEC+, and a soaring demand crisis have sent the oil prices into a bearish trajectory. The oil prices have fallen to near the psychological support of $90.00.

Taiwan's ruling party, the Democratic Progressive Party (DPP), condemned Chinese military drills, saying that they have triggered regional tensions and are illegitimate.

“China is conducting drills on busiest international waterways, aviation routes and that is an irresponsible unilateral behavior,” the ruling party said.

Meanwhile, Taiwan’s Foreign Ministry thanked G7 countries for supporting peace and stability in the Into-Pacific region.

Additional quotes

The country’s Cabinet Spokesman was also reported, as expressing the most serious condemnation over Chinese drills around Taiwan.

“Continuous cyber-attacks on gov units have not caused damage so far,” he added.

Market reaction

The risk-on tone seems to have cooled down a bit in Thursday’s Asian trading, with the S&P 500 futures back in the red.

AUD/USD is off the highs, trading around 0.6950, still up 0.14% on the day as of writing.

• USD/CAD struggles to defend bounce off 100-HMA, four-day-old support line.
• Sluggish MACD, steady RSI joins lower-high to keep sellers hopeful.
• Descending trend line from July 26 challenge buyers.

USD/CAD remains lackluster at around 1.2850, struggling to extend the previous day’s pullback from the weekly top, during Thursday’s Asian session.

That said, recent lower highs and steady RSI (14) line joins sluggish MACD signals, mostly bearish, appear to keep sellers hopeful.

However, a clear downside break of the 100-HMA and an upward sloping trend line from Monday, respectively around 1.2835 and 1.2830, restricts immediate USD/CAD downside moves.

Following that, the 1.2800 threshold and the double-bottom marked on July 29, near 1.2790, could challenge the pair’s downside before directing it to the two-month low flashed on Monday, at 1.2767.

Meanwhile, recovery moves need validation from the 50% and 61.8% Fibonacci retracement level of July 25 to August 01 moves, near 1.2860 and 1.2880 in that order.

Even so, a downward sloping trend line from July 26, close to 1.2890, quickly followed by the 1.2900 round figure, will challenge the Loonie pair buyers.

Overall, USD/CAD remains sidelined as buyers retreat ahead of the key US/Canada jobs report for July, up for publishing on Friday.

USD/CAD: Hourly chart

Trend: Further weakness expected

• EUR/USD is displaying back and forth moves around 1.0170 as investors await US jobs data.
• The US NFP is likely to land at 250k vs. 372k reported earlier.
• Vulnerable Eurozone Retail Sales data has been ignored by market participants.

The EUR/USD pair is auctioning in a minute range of 1.0155-1.0176 as investors are shifting their focus to the US Nonfarm payrolls (NFP), which will release on Friday. Also, the US dollar index (DXY) is behaving like a nightmare for short-term investors due to its nasty moves.

Pre-anxiety of the US NFP will keep the market participants on the tenterhooks. As per the market forecasts, the US NFP data will display a vulnerable performance. Investors are seeing 250k additional jobs created by the US economy in July, much lower than June’s print of 372k.

Thanks to the policy tightening measures by the Federal Reserve (Fed), which have forced the corporate players to inculcate more filters on investment selection and its consequences have forced them to halt their recruitment process for this year.

Meanwhile, the US dollar index (DXY) has turned topsy-turvy as Fed policymakers have trimmed the odds of policy tightening in CY2023. Fed President Neel Kashkari highlighted the fact that the Fed was too slow to hike interest rates in 2021. Also, added that Fed is laser-focused on bringing inflation down, therefore it will exploit its all weapons to control inflation. Therefore, a rate hike scenario in CY2023 is unlikely.

On the eurozone front, investors have ignored the vulnerable Retail Sales data. The economic data landed at -3.7%, lower than the expectations of -1.7% and the prior release of 0.4%. Price pressures are sky-rocketing, therefore the economic data should have an uptick. However, a slump in the same indicates that the overall demand is extremely poor.

• GBP/USD is expected to extend gains above 1.2170 as BOE rate hike will trim Fed-BOE policy divergence.
• BOE Andrew Bailey may announce a rate hike by 50 bps.
• The DXY has turned volatile on escalating Sino-US tensions.

The GBP/USD pair has displayed a minor pullback after failing to recapture the 1.2170 hurdle. However, the upside remains favored as the US dollar index (DXY) is likely to extend losses below 106.30. Broadly, the asset has resumed its upside move after a healthy correction to the round-level support of 1.2100.

The cable could display some volatile moves ahead as investors are eyeing the monetary policy announcement by the Bank of England (BOE). Taking into account the market expectations, BOE Governor Andrew Bailey will elevate the interest rates to 1.75% as a consecutive 50 basis points (bps) rate hike is expected.

No one could deny the fact that households in the UK are facing severe heat of soaring price pressures. The inflation rate has climbed to 9.4% and no signs of a peak have been observed yet. The ongoing momentum in the price rise could lift the inflation rate to a two-digit figure and the consequences will be borne by households by higher payouts for similar quantities purchased.

Well, a rate hike by 50 bps to combat the inflation monster is not sufficient. But poor growth forecasts and a lower Labor Cost Index are not supporting the BOE to sound extremely hawkish.

On the dollar front, the US dollar index (DXY) is witnessing uncertain moves as US House Speaker Nancy Pelosi's visit to Taiwan has strengthened prolonged Sino-US tensions. The mighty US is holding the global leadership for a longer period and China is eagerly looking to get the batch. Therefore, the support of the US to Taiwan, a country with immense potential of technological advancement has escalated US-China tensions.

Economists at JP Morgan predict the US Nonfarm Payrolls to come in weaker at 200K in July’s labor market report, due to be published at 1230 GMT on Friday.

Key quotes

The labor market “appears to be softening on the margin."

“We expect US job growth to soften to 200K in Friday’s report and maintain our marker that a sustained rise in initial claims to 275K or higher would signal a US recession is underway.”

• Gold price remains firmer for the second consecutive day.
• Mixed sentiment, softer US dollar underpin the XAU/USD rebound ahead of the key US NFP.
• Headlines surrounding Taiwan, recession may join Fedspeak to entertain traders.
• Second-tier US data, ECB Economic Bulletin will also be important to watch for clear directions.

Gold price (XAU/USD) prints mild gains around $1,767, despite the latest retreat from the intraday high during Thursday’s Asian session. In doing so, the yellow metal keeps the previous day’s rebound from the weekly low amid a softer US dollar and the market’s indecision ahead of all-important US Nonfarm Payrolls (NFP), up for publishing on Friday.

The US Dollar Index (DXY) remains indecisive around 106.35 after refreshing the weekly top with 106.82 earlier on Wednesday. That said, mixed US data and Fedspeak also appeared to have weighed on the US dollar of late. Also challenging the greenback could be the market’s cautious optimism that China could overcome the economic difficulties, especially after witnessing the previous day’s Caixin Services PMI for the dragon nation.

On Wednesday, the US ISM Services PMI for July rose to 56.7 from 55.3 prior and the market expectation of 53.5 whereas the final reading of the US S&P Global Services PMI for July dropped to 47.3, marking the first contraction in two years, from 52.7 in June and the flash estimate of 47. Elsewhere, China’s Caixin Services PMI for July also surprised markets with upbeat data.

St. Louis Federal Reserve Bank President James Bullard said, “(There is) still some ways to go to get to a restrictive monetary policy." The policymaker adds that he still wants to get to 3.75 to 4% this year while showing a preference for the type of frontloading.

Other than Fed’s Bullard, Fed Minneapolis President Neel Kashkari and Richmond Fed President Thomas Barkin also joined the league of the Fed hawks to exert downside pressure. However, San Francisco Fed President Mary Daly appeared to have flashed mixed signals and tamed the DXY bulls afterward. The policymaker said, "Markets are ahead of themselves in expecting rate cuts next year."

On a different page, Bloomberg’s news suggesting a lack of support for the US-Taiwan ties also seems to help the gold buyers. The reason could be linked to the Democratic Party members’ ability to stop the US policymakers from mingling more with Taiwan which China doesn’t like, the same could help the market sentiment and the XAU/USD. “The Biden administration is lobbying Democratic senators to put the brakes on a bill that would alter US policy toward Taiwan, including by designating it as a major non-NATO ally, according to people familiar with the matter,” stated the news.

With this, market sentiment remains sluggish after portraying the optimism the previous day. While signaling the mood, the S&P 500 Futures remain directionless near 4,150 and the US 10-year Treasury yields remain pressured at around 2.71%, down three basis points (bps) by the press time.

Moving on, the US Good and Services Trade Balance for June, expected $-80.1B versus $-85.5B prior, as well as the weekly Initial Jobless Claims, expected 259K versus 256K prior, will decorate the calendar. However, major attention will be given to the comments from the ECB and the Fed policymakers, as well as the Sino-American tension over Taiwan for clear directions ahead of Friday’s US NFP.

Given the sluggish sentiment and the US dollar’s weakness, the XAU/USD buyers can stay hopeful.

Technical analysis

Gold price extends the previous day’s rebound from the 38.2% Fibonacci retracement of June-July downturn, around $1,755, amid firmer RSI line.

The recovery moves, however, needs validation from the $1,785-87 monthly horizontal resistance area. That said, the 50% Fibonacci retracement (Fibo.) level near $1,780 can act as an immediate resistance.

In a case where the quote rises past $1,787, the odds of witnessing a run-up towards July 04 swing high near $1,814 can’t be ruled out.

Alternatively, a downside break of the 38.2% Fibo level near $1,755 becomes necessary to recall the XAU/USD bears.

Following that, a convergence of the 50-SMA and a two-week-old ascending trend line, close to $1,750-48, will be crucial to watch for the gold bears.

Gold: Four-hour chart

Trend: Further recovery expected

• AUD/JPY renews intraday high as bulls approach one-week-old resistance line.
• Australia’s trade numbers for June signals firmer surprise contrasting the softer Import, Export data.
• Sluggish MACD tests upside momentum but sustained break of 100-HMA favors bulls.
• 200-HMA acts as the additional resistance before highlighting June’s top.

AUD/JPY justifies firmer Aussie trade numbers while picking up bids to refresh the daily top near 93.10 during Thursday’s Asian session. In doing so, the cross-currency pair approaches a weekly resistance line while keeping the successful break of the 100-HMA.

Given the sluggish MACD signals, the AUD/JPY prices are likely to remain sidelined.

That said, Australia’s Trade Balance rose to 17,670M in June, well beyond the 14,000M forecast and 15,965M prior. However, Imports and Exports both eased to 0.7% and 5.1% during the stated month versus respective priors of 5.8% and 9.5%.

It should be noted that the quote’s upside break of the 93.25 trend line hurdle will need validation from the 200-HMA resistance of 93.65 to recall the AUD/JPY bulls.

On the contrary, a convergence of the 100-HMA and 38.2% Fibonacci retracement of July 27 to August 02 downside, near 92.50, appears a tough nut to crack for the AUD/JPY bears.

Following that, the 23.6% Fibonacci retracement level near 91.70 could probe the downside momentum ahead of the weekly low near 90.50.

AUD/JPY: Hourly chart

Trend: Further upside expected

Citing the head of the department that oversees debt issuance at Japan's Ministry of Finance, Michio Sato, aka Mr. JGB’, Bloomberg reports, “investors should start preparing for a return to normal Japanese bond trading as the central bank will one day step back from its debt purchases.”

“Ministry of Finance has already started looking into a comprehensive review to ensure there’s sufficient depth and liquidity in the market,” Sato added.

Market reaction

USD/JPY remains unfazed by the above comments, trading at 133.80, down 0.04% on the day, at the press time.

• AUD/USD picks up bids to refresh intraday high, extend the previous day’s bounce off weekly top.
• Australia’s Trade Balance improved in June even as Exports, Imports eased.
• Mixed sentiment, softer US dollar add strength to the recovery moves.
• Second-tier US data, risk catalysts will be important for fresh impulse.

AUD/USD remains on the front foot for the second consecutive day, refreshing intraday high near 0.6965. In doing so, the Aussie pair justifies firmer Trade Balance data from the Australian Bureau of Statistics while cheering a softer US dollar amid a sluggish Asian session on Thursday.

That said, Australia’s Trade Balance rose to 17,670M in June, well beyond the 14,000M forecast and 15,965M prior. However, Imports and Exports both eased to 0.7% and 5.1% during the stated month versus respective priors of 5.8% and 9.5%.

It should be noted that Bloomberg’s news suggesting a lack of support for the US-Taiwan ties also seems to help the AUD/USD prices. The reason could be linked to the Democratic Party members’ ability to stop the US policymakers from mingling more with Taiwan which China doesn’t like, the same could help the market sentiment and the Aussie pair. “The Biden administration is lobbying Democratic senators to put the brakes on a bill that would alter US policy toward Taiwan, including by designating it as a major non-NATO ally, according to people familiar with the matter,” stated the news.

Elsewhere, mixed US data and Fedspeak also appeared to have weighed on the US dollar. That said, the US Dollar Index (DXY) remains indecisive around 106.35 after refreshing the weekly top with 106.82 earlier on Wednesday.

On Wednesday, the US ISM Services PMI for July rose to 56.7 from 55.3 prior and the market expectation of 53.5 whereas the final reading of the US S&P Global Services PMI for July dropped to 47.3, marking the first contraction in two years, from 52.7 in June and the flash estimate of 47. Elsewhere, China’s Caixin Services PMI for July also surprised markets with upbeat data.

Talking about the Fedspeak, St. Louis Federal Reserve Bank President James Bullard said, “(There is) still some ways to go to get to a restrictive monetary policy." The policymaker adds that he still wants to get to 3.75 to 4% this year while showing a preference for the type of frontloading. Other than Fed’s Bullard, Fed Minneapolis President Neel Kashkari and Richmond Fed President Thomas Barkin also joined the league of the Fed hawks to exert downside pressure. However, San Francisco Fed President Mary Daly appeared to have flashed mixed signals and tamed the DXY bulls afterward. The policymaker said, "Markets are ahead of themselves in expecting rate cuts next year."

Against this backdrop, market sentiment remains sluggish after portraying the optimism the previous day. While signaling the mood, the S&P 500 Futures remain directionless near 4,150 and the US 10-year Treasury yields remain pressured at around 2.71%, down three basis points (bps) by the press time.

Looking forward, Germany’s Factory Orders for June will precede the US Good and Services Trade Balance for June, expected $-80.1B versus $-85.5B prior, as well as the weekly Initial Jobless Claims, expected 259K versus 256K prior, to decorate the calendar. However, major attention will be given to the comments from the ECB and the Fed policymakers, as well as the Sino-American tension over Taiwan for clear directions ahead of Friday’s US NFP.

Technical analysis

A clear upside break of the support-turned-resistance line from July 14, around 0.7000 by the press time, becomes necessary for the AUD/USD buyers’ conviction. Failing to get this level can recall sellers targeting the 21-DMA support surrounding 0.6890.

The trade balance released by the Australian Bureau of Statistics has been released as follows:

Australian Trade Balance (AUD) Jun: 17670M (expected 12000M; previous 15965M).

Exports (MoM) Jun: 5% (exp 0%; prev 9%) - Imports (MoM) Jun: 1% (exp 3%; prev 6%).

AUD/USD has popped to fresh session highs of 0.6962 so far. The AUD has been one of the best-performing G10 currencies in recent weeks but suffered a pullback at the start of the week which it is currently correcting. The data is aiding the move in Asian trade today. 

• AUD/USD Price Analysis: Bulls seeking higher grounds into key data events

Prior to the data, it was explained that the price could be headed higher to mitigate a price imbalance on the hourly time frame:

The data has jolted the price higher en route to the area of imbalance with still some way to go, never theless. However, if old highs in the 0.6950s support, then the bulls will stand a good probability of being able to run higher towards 0.7000.

About the Trade Balance

The trade balance released by the Australian Bureau of Statistics is the difference in the value of its imports and exports of Australian goods. Export data can give an important reflection of Australian growth, while imports provide an indication of domestic demand. Trade Balance gives an early indication of the net export performance. If a steady demand in exchange for Australian exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.

• Silver price fades recovery inside one-week-old trading range between $19.80 and $20.50.
• Steady oscillators hint at continuation of the sideways move.
• 100-HMA guards immediate upside ahead of the double top at $20.51.

Silver price (XAG/USD) struggles to keep the rebound from a short-term trading range’s support as traders flirt with the $20.00 threshold during Thursday’s Asian session.

In doing so, the bright metal justifies the steady RSI and sluggish MACD that suggests further grinding of prices inside the $19.80-20.50 trading area.

That said, the 100-HMA level surrounding $20.15 appears to guard the quote’s immediate upside ahead of directing the XAG/USD buyers towards the $20.51 double top.

Should the silver prices cross the $20.51 hurdle, the odds of witnessing a run-up towards challenging the lows marked during June, near $20.65 and $20.90, can’t be ruled out.

In a case where XAG/USD rises past $20.90, the $21.00 may act as a buffer before highlighting June’s peak of $22.51.

Alternatively, pullback remains elusive beyond $19.80.

Even if the quote drops below $19.80, the 200-HMA level near $19.50 could test the silver bears.

It’s worth noting, however, that the XAG/USD weakness below $19.50 could help sellers to aim for a late July swing high near $18.90.

Silver: Hourly chart

Trend: Further recovery expected

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 6.7636 vs. the previous fix of 6.7813 and the prior close of 6.7597.

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.

• USD/CAD is oscillating in a broader range of 1.2832-1.2892 ahead of US/Canada employment data.
• Canada may announce a job addition against lay-off recorded in June.
• EIA oil buildup report, OPEC+ promise for more supply, and ongoing recession fears have dragged oil.

The USD/CAD pair has slipped below the immediate cushion of 1.2850 as the US dollar index (DXY) is displaying a subdued performance after the open. On a broader note, the asset is auctioning in a balanced profile, which is chartered in a 1.2832-1.2892 range. The asset is looking for a potential trigger that will guide the further direction of the asset.

On Friday, the US and China will report their employment data. The Canadian economy is likely to outperform as investors are expecting job additions by 20k this time against the lay-off of 43.2k jobs in June. However, the Unemployment Rate will increase to 5% from the prior release of 4.9%.

On the US job market front, rising interest rates by the Federal Reserve (Fed) and commentaries from giant techs on halting the recruitment process for the remaining year will result in a steep fall in employment opportunities. Therefore, investors have estimated 250k job additions in the labor market in the month of July against June’s print of 372k. 

Meanwhile, oil prices have slipped to near $90.00 on various bearish catalysts. Energy Information Administration (EIA) has reported a buildup in oil stockpiles, and hawkish commentary from Fed policymakers is drawing a rosy picture for the Fed. Apart from that, OPEC+ has promised to pump 100,00 (bpd) of oil in September. The catalysts reflecting an increment in total supply in times when demand forecasts have slashed dramatically have dragged oil prices swiftly.

• EUR/USD remains sidelined after printing bullish Doji near the weekly low.
• Early hints from ECB’s monthly Economic Bulletin have been optimistic.
• US dollar struggles amid mixed data, Fedspeak ahead of NFP.
• German Factory Orders, second-tier US data and Taiwan headlines are also important for fresh impulse.

EUR/USD turns interesting as it picks up bids to 1.0165, justifying Wednesday’s bullish Doji, during Thursday’s mid-Asian session. That said, the pair buyers seek validation from recently softer yields and hopes of optimistic statements from the monthly ECB Economic Bulletin.

That said, the major currency pair refreshed it's weekly low the previous day before bouncing off 1.0122 to match the day’s opening levels and print a bullish Doji candlestick. In doing so, the quote tracked the US dollar moves and mixed concerns surrounding the gas crisis in the bloc, not to forget unimpressive data, ahead of Friday’s all-important US Nonfarm Payrolls (NFP).

The US Dollar Index (DXY) remains indecisive around 106.35 after refreshing the weekly top with 106.82 earlier on Wednesday.

The greenback’s gauge initially cheered the US-China tension over Taiwan, as well as downbeat Eurozone Retail Sales and firmer US PMIs. However, firmer equities and upbeat China PMI seemed to have joined the pre-NFP anxiety to probe the DXY bulls. Also keeping the EUR/USD buyers hopeful is the news shared by Bloomberg. 

In a pre-release of its economic bulletin published on Tuesday, shared by Bloomberg, 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.

Eurozone’s Retail Sales fell by 1.2% MoM in June versus 0.0% expected and 0.4% last while the US ISM Services PMI for July rose to 56.7 from 55.3 prior and the market expectation of 53.5. Furthermore, the final reading of the US S&P Global Services PMI for July dropped to 47.3, marking the first contraction in two years, from 52.7 in June and the flash estimate of 47. Elsewhere, China’s Caixin Services PMI for July also surprised markets with upbeat data.

It’s worth observing that the Fed policymakers have been mostly hawkish of late and challenge the EUR/USD bulls. St. Louis Federal Reserve Bank President James Bullard said, “(There is) still some ways to go to get to a restrictive monetary policy." The policymaker adds that he still wants to get to 3.75 to 4% this year while showing a preference for the type of frontloading. Other than Fed’s Bullard, Fed Minneapolis President Neel Kashkari and Richmond Fed President Thomas Barkin also joined the league of the Fed hawks to exert downside pressure. However, San Francisco Fed President Mary Daly appeared to have flashed mixed signals and tamed the DXY bulls afterward. The policymaker said, "Markets are ahead of themselves in expecting rate cuts next year."

Amid these plays, the Wall Street benchmarks closed with notable gains but the S&P 500 Futures print mild losses at the latest. Further, the US 10-year Treasury yields remain pressured at around 2.71%, down three basis points (bps) by the press time.

Moving on, Germany’s Factory Orders for June will precede the US Good and Services Trade Balance for June, expected $-80.1B versus $-85.5B prior, as well as the weekly Initial Jobless Claims, expected 259K versus 256K prior, to decorate the calendar. However, major attention will be given to the comments from the ECB and the Fed policymakers, as well as the Sino-American tension over Taiwan for clear directions ahead of Friday’s US NFP.

Technical analysis

A convergence of the previous support line from mid-July and the 10-DMA, around 1.0195, precedes the 1.0200 threshold to restrict short-term EUR/USD recovery. Meanwhile, the 21-DMA and Doji’s low, respectively around 1.0155 and 1.0120, could challenge the intraday sellers.

• AUD/USD bulls are moving in with a focus on a break of resistance.
• Bove there, there is risk to 0.7000 in order to mitigate the price imbalance above between 0.6975 and 0.7007.

AUD/USD is climbing ahead of the Trade Balance data today. At 0.6950, the price is tipping into the green at the time of writing having climbed from a low of 0.6935 with eyes on 

The following illustrates the bullish bias from a longer-term perspective and highlights the market structure ahead of the data from an hourly look-in.

AUD/USD weekly chart, prior analysis

As per the prior analysis, AUD/USD Price Analysis: Bulls are trying to pull away with eyes set on the 0.7000s, the W-formation has pulled in the price for a meanwhile correction:

There are still sessions to go until the end of the week, but it so far, the price has retraced to the neckline, so the focus can now be to the upside again. 

AUD/USD H1 chart

The price is trapped between a supporting trendline and horizontal resistance. There is a price imbalance that will be mitigated in due course, potentially as soon as the next hours, but so long as the trendline holds up, the focus is on the upside. A break of resistance opens risk to 0.7000 in order to mitigate the price imbalance above between 0.6975 and 0.7007.

The dollar's strength has yet to peak, according to a majority of currency strategists polled by Reuters who were however divided on when the currency's advance would come to an end.

Key findings

Also read: US Dollar Index oscillates near 106.50 as yields, cautious optimism probe DXY bulls

• EUR/GBP is auctioning in an 8-pip range as the focus is on monetary policy by the BOE.
• The BOE is likely to elevate its interest rates by 50 bps to 1.75%.
• Investors have ignored the downbeat Eurozone Retail Sales data.

The EUR/GBP pair is juggling in a narrow range of 0.8366-0.8374 in the Asian session. The cross is likely to remain on the sidelines as investors are awaiting the announcement of the interest rate policy by the Bank of England (BOE).

As per the market estimates, the BOE will announce a rate hike by 50 basis points (bps). BOE Governor Andrew Bailey will feature a rate hike by half of a percent, which will push the interest rates to 1.75%. It is worth noting that price pressures in the UK area have climbed to 9.4%. Also, the inflation rate has not shown any sign of exhaustion yet, which indicates that the new normal 50 bps rate hike is not sufficient to offset the accelerating inflationary pressures.

The downbeat economic data and political instability after the resignation of UK PM Boris Johnson have weakened the BOE in acting strongly on monetary policy. Lower Average Hourly Earnings are not providing comfort to rising employment generation and henceforth to the BOE as households are facing severe heat. Aggressive interest rate hikes by the BOE could hurt the job addition numbers due to restrictions on investments by corporate players.

Meanwhile, the shared currency bulls have ignored the vulnerable Retail Sales data. The economic data landed at -3.7%, lower than the expectations of -1.7% and the prior release of 0.4%. In times, when price pressures are sky-rocketing, the Retail Sales data should have reported an uptick, however, a slump in the same indicates that the overall demand is extremely poor.

• AUD/NZD bears move in with a focus on the recent lows and eye 1.1050.
• The RBNZ and RBA are in focus with inflation the task at hand. 

At 1.1068, the price is flat on the day but is moving below the US equities hours lows in Tokyo near 1.1075. This is an opening risk for a continuation to the downside for the day ahead. The kiwi is firmer in Asia as takes on the US session highs vs the US dollar near 0.6280, printing a high of 0.6274 so far. 

New Zealand’s second-quarter Unemployment Rate came in a little higher than the markets were expecting, but in the view of analysts at ANZ Bank, it doesn’t matter for the monetary policy outlook.

''Flat employment growth despite still-high demand for labour suggests the economy has run out of labour resource to keep growing, and with wage inflation running higher than anyone was expecting, these data suggest pipeline domestic CPI inflation pressures are far too strong.''

''We think the data fans, rather than fades the case for OCR hikes, and in that regard, the Kiwi may find support from rising short-end rates over coming weeks. But going against that, US interest rates are also rising, and there’s been no let-up in hawkish Fed rhetoric, and for the time being, that is supporting a USD DXY bounce. US jobs data tomorrow night will be crucial; let’s see how that pans out.''

The analysts said that ''the risk of a wage-price spiral clearly isn’t any lower despite the small lift in the unemployment rate. In fact, with average hourly earnings growth at 7% y/y (vs Consumer Price Index inflation at 7.3%), the Reserve Bank of New Zealand should be very worried about high domestic inflation sticking around long after global inflation (ie tradables) has slowed.''

''One of the key takeaways for Australia is that NZ’s success has been underpinned by an incredibly tight labour market. Australia looks similar. While wages are yet to take off here in Australia, the tightness in the labour market raises the risk that we go down the same path as NZ.''

Despite the uncertainties, the Reserve Bank of Australia is unlikely to take any chances with inflation, analysts at Rabobank argued.

''It’s rhetoric is clear insofar as 'Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time'.''

• GBP/USD sellers struggle to keep reins inside a short-term bullish chart formation.
• Channel’s support, previous resistance from February restrict immediate downside.
• Buyers could remain cautious below 1.2667, a 200-pip upside appears smoother.
• Multiple supports, firmer oscillators keep buyers hopeful ahead of the BOE.

GBP/USD probes bears around 1.2145, after a two-day downtrend, as traders await the key Bank of England (BOE) Monetary Policy decisions during the Asian session on “Super Thursday”. In doing so, the Cable pair picks up bids inside a three-week-old ascending trend channel.

Also read: BOE Rate Decision Preview: Bailey to follow Powell’s footsteps with a dovish hike

That said, the quote’s latest rebound from the stated channel’s support line joins firmer RSI (14) and the bullish MACD signals to keep GBP/USD buyers hopeful.

With this, the recovery moves can aim for the multiple highs marked during late June, around 1.2330 ahead of challenging the aforementioned channel’s resistance line, at 1.2345 by the press time.

Should the GBP/USD bulls cross the 1.2345 hurdle, the June 16 top near 1.2405-10 and the 100-DMA level surrounding 1.2490 could challenge the advances before highlighting May’s peak of 1.2666.

Meanwhile, pullback moves need validation from the channel’s support line, at 1.2120 by the press time, a break of which could direct the quote towards the previous resistance line from February, near 1.2100.

Also acting as short-term key support is the convergence of the 21-DMA and the resistance-turned-support line from June 16, close to 1.2030-25.

Furthermore, the GBP/USD pair’s downside past 1.2025 may need back-up from the 1.2000 breakdown to convince bears.

GBP/USD: Daily chart

Trend: Recovery expected

• DXY fades bounce off monthly low as bulls await fresh clues.
• Hawkish Fedspeak, upbeat US data jostle with China numbers, market’s preparations for NFP.
• Firmer equities, fears of recession also seem weighing on the quote.
• US trade numbers, US-China tussles over Taiwan will be important for fresh impulse.

US Dollar Index (DXY) remains depressed around 106.50, after reversing from the weekly top, as traders await clear directions amid Thursday’s sluggish session.

While portraying the mood, the Wall Street benchmarks closed with notable gains but the S&P 500 Futures print mild losses at the latest. Further, the US 10-year Treasury yields remain pressured at around 2.71%, down three basis points (bps) by the press time.

That said, the DXY’s previous strength could be linked to the US-China tussles over Taiwan. However, China’s firmer Caixin Manufacturing PMI weighed on the DXY, by way of improving sentiment and cutting down on the greenback’s haven demand. On the same line could be the firmer prints of equities amid strong earnings.

It’s worth noting that the upbeat prints of US data and hawkish Fedspeak joins recession fears to put a floor under the DXY prices. US ISM Services PMI for July rose to 56.7 from 55.3 prior and the market expectation of 53.5. On the other hand, the Final reading of the US S&P Global Services PMI for July dropped to 47.3, marking the first contraction in two years, from 52.7 in June and the flash estimate of 47.

Elsewhere, St. Louis Federal Reserve Bank President James Bullard said, “(There is) still some ways to go to get to a restrictive monetary policy." The policymaker adds that he still wants to get to 3.75 to 4% this year while showing a preference for the type of frontloading.

Other than Fed’s Bullard, Fed Minneapolis President Neel Kashkari and Richmond Fed President Thomas Barkin also joined the league of the Fed hawks to exert downside pressure. However, San Francisco Fed President Mary Daly appeared to have flashed mixed signals and tamed the DXY bulls afterward. The policymaker said, "Markets are ahead of themselves in expecting rate cuts next year."

Moving on, the US Good and Services Trade Balance for June, expected $-80.1B versus $-85.5B prior, will join the weekly Initial Jobless Claims, expected 259K versus 256K prior, to decorate the calendar. However, major attention will be given to the headlines surrounding the US-China tension over Taiwan, the recession and the Bank of England’s (BOE) ability to tame inflation and defend the growth prospects.

Technical analysis

A successful upside break of the three-week-old falling wedge bullish chart pattern, currently between 106.20 and 104.75, appears necessary to lure DXY bulls. That said, the 50-DMA and lower line of the stated wedge, around 105.20 and 104.75 in that order, could restrict the US Dollar Index downside during the pullback moves.

• USD/JPY has surrendered the cushion of 134.00 firmly and is likely to extend losses ahead.
• Fed policymaker has trimmed the odds of rate hikes in CY2023.
• CIBC has come forward with a target of 132 by year-end for the USD/JPY pair.

The USD/JPY pair has slipped below the critical support of 134.00 swiftly. Earlier, the asset displayed a gradual corrective action after printing a high of 134.55 on Wednesday.

Federal Reserve (Fed) policymakers are back with hawkish commentary on interest rates despite elevating the same to 2.25-2.50% from the ground in the past four monetary policy meetings. Minneapolis Fed President Neel Kashkari highlighted the fact that the Fed was too slow to hike interest rates in 2021. Also, added that Fed is laser-focused on bringing inflation down and a rate hike scenario in CY2023 is unlikely. Therefore, the Fed will exploit its entire weapons this year.

Well, the investing community is always been blaming Fed for displaying a late response to soaring price pressures. Now, the inflation rate is beyond control as the catalyst has not responded well to higher rate hikes by not displaying any exhaustion signals yet.

Going forward, the release of the US Nonfarm Payrolls (NFP) will hog the limelight. As per the market estimates, the US economy has failed to outperform June’s job additions numbers and has added 250k jobs in the labor market in July. Also, the Unemployment Rate is seen flat at 3.6%.

On the Tokyo front, the Bank of Japan (BOJ)’s ultra-loose monetary policy has kept the Japanese yen dependent on other currencies. Analysts at CIBC consider that the decision of the BOJ to continue with its easing policy will keep the yen limited. They forecast the USD/JPY pair at 135 by the end of the third quarter and at 132 by year-end.