Market News Report - 04 August 2024
USD/JPY continues its long-overdue downward spiral as it has done in the past week. Speaking of USD, the greenback suffered across the board (somewhat predicted in our last report) due to an unchanging interest rate and poor employment figures.
Other notable gainers in the past week include the Swiss franc and euro.
Let’s see how these and other markets may perform fundamentally and technically this week.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
The Fed's latest meeting (where they kept the interest rate unchanged) gave away a few dovish clues. Most notable is the potential for a rate cut next month, with STIR (short-term interest rate) markets predicting a 68% chance of this happening.
A slight rise in the unemployment rate in the past week further adds to the bearish bias.
https://www.tradingview.com/x/uhbeR90b/
The DXY chart aligns perfectly with the fundamentals, having just broken a recent key support. However, the break wasn’t strong enough, so 103.172 is still an area of interest for major support. Meanwhile, the key resistance is far away at 106.490 and will likely remain untouched for some time.
Long-term outlook: bearish.
Markets anticipate at least two rate cuts before the year ends. The latest Consumer Price Index (CPI) and jobs data indicate a cooling of the US economy, another bearish sign.
Only geopolitical risks and bond market selling can affect this overall sentiment. So, we cannot rule out a bullish fight for the dollar, but it is unlikely to happen, at least quickly.
Euro (EUR)
Short-term outlook: weak bearish.
The European Central Bank (ECB) has recently kept its interest rate unchanged. Christine Lagarde, the ECB President, also suggested slow economic growth in the Eurozone, with inflation expected to fluctuate around current levels. Furthermore, the President stated that September's interest rate meeting is 'wide open.'
However, thanks to the ECB's overall dovish tone, markets see a 78% chance (up from 63% last week) of a cut.
https://www.tradingview.com/x/ewOwYcsp/
After falling slightly, the euro is looking to test the new major resistance, now at 1.09813 (not far from the former mark).
Meanwhile, the key support area lies far below at 1.06494.
Long-term outlook: weak bearish.
The recent unchanged interest rate is the primary bearish driver. However, the ECB hasn't committed to a specific future path in this regard.
Still, the central bank is data-dependent, and any improvement in inflation, growth, and wages can lift the euro.
British pound (GBP)
Short-term outlook: bearish.
The folks at the Bank of England (BoE) cut the interest rate by 25 basis points at the 01 August 2024 meeting. However, they remain data-dependent and have no set future path. Still, STIR markets are currently pricing an additional two cuts for the remainder of 2024.
https://www.tradingview.com/x/5HHj8Puj/
Meanwhile, the pound is down on the charts, which shouldn’t be surprising given the fundamentals.
The key support, at 1.26156, is not too distant. On the other hand, the key resistance is so far away (at 1.31424) that you have to zoom out your charts. In simple terms, we are bearish here.
Long-term outlook: weak bearish.
The interest rate is the chief bearish driver for the pound. However, STIR markets predict a rate hold next month. Furthermore, two-way risks remain based on upcoming economic data (e.g., inflation, labour, economic growth).
Japanese yen (JPY)
Short-term outlook: weak bullish.
The Bank of Japan’s (BoJ) recent decision to hike the interest rate is bullish for the yen. However, STIR markets
STIR markets expect a hold (95% probability) at the next meeting (but one hike before the year ends).
Declining US Treasury yields and the heightened political tension in the Middle East have accelerated the recent huge down move in USD/JPY.
https://www.tradingview.com/x/ut2OEBxS/
Unsurprisingly, USD/JPY has confidently broken another major support. Interestingly, the new marker is now 146.482, a level which has been reached. However, this week should determine if the market stalls around this area or breaks it.
Meanwhile, the major resistance (at 161.950) is too far for traders to worry about.
Long-term outlook: weak bullish
In addition to the recent rate hike, other bullish catalysts for the yen include lower US Treasury yields.
The Bank of Japan is actively intervening in the forex markets, contributing to the JPY's upside. However, having moved quite a distance, a retracement is imminent.
Australian dollar (AUD)
Short-term outlook: weak bullish.
Due to persisting inflation highlighted by the Reserve Bank of Australia (RBA), the central bank has enough reasons to keep or hike the interest rate on Tuesday.
On the flip side, markets suggest at least one rate cut in 2024 (initially set for 2025). However, the recent rise in China's share prices, which correlates with the Aussie, has been positive for the currency.
https://www.tradingview.com/x/zm5RbWMW/
While trading mildly in the past week, the Aussie is nearly testing the major support at 0.64653.
Meanwhile, the major resistance is far ahead at 0.67986.
Long-term outlook: weak bullish.
The hot CPI for Q1 and April has pressured the RBA to increase rates, which they recognised in their meeting last month. Also, the slightly higher unemployment rate from the past few weeks is another impetus. While STIR markets anticipate a 33% chance of a hike, this has been priced out.
Also, keep in mind that the Australian dollar is exposed to slow economic growth in other countries because it is a pro-cyclical currency.
New Zealand dollar (NZD)
Short-term outlook: neutral.
As predicted by STIR markets, the Reserve Bank of New Zealand (RBNZ) recently maintained the interest rate at 5.5%.
In their latest meeting, “The Committee agreed that monetary policy will need to remain restrictive. The extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures”.
In simple terms, the central bank is winning against inflation and is, thus, unlikely to raise rates.
NZD traders should diarise New Zealand's upcoming unemployment rate on Wednesday.
https://www.tradingview.com/x/Ihp2Ja1w/
Unlike its closest relative (AUD), the Kiwi has retraced upwards. However, it’s still within a largely bearish move.
The primary support lies at 0.58524. Meanwhile, the major resistance is at 0.62220, an area which it’s unlikely to test soon.
Long-term outlook: neutral.
The central bank's recent dovish tilt amid improving inflation puts the Kiwi in a neutral bracket. Furthermore, STIR markets anticipate a 65% (up from 58%) chance of a rate cut next month.
On the flip side, as a risk-sensitive currency like the Aussie, any growth data in China could trigger bullishness for NZD.
Canadian dollar (CAD)
Short-term outlook: bearish.
Firstly, the Bank of Canada (BoC) cut rates from 4.75% to 4.50% not so long ago. The Governor of the Bank of Canada (BoC), Macklem, had already suggested this would happen if inflation became stickier. Realistically, the BoC will drop rates slowly now or aggressively later.
It's also worth noting that the mortgage stress in Canada has forced the BoC to be dovish, another bearish catalyst.
Watch for the new unemployment figure for CAD on Friday.
https://www.tradingview.com/x/DkqI9nVB/
After a long while in range mode, USD/CAD is inclined more bullishly. It only just broke the recent major resistance (at 1.38463). The next target, which is quite nearby, is at 1.38991.
On the other hand, the key support lies far down at 1.35896.
Long-term outlook: weak bearish.
Expectations of a rate cut remain the focal point, with Macklem himself saying it's reasonable to expect more cuts in the future. Moreover, STIR markets see two rate cuts for the BoC this year.
The mortgage stress remains a major factor in this interest rate policy, and the BoC will have to cut rates to alleviate it.
However, encouraging oil prices may redeem the Canadian dollar as a risk-sensitive currency, along with improvements in jobs, inflation, and Gross Domestic Product.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets forecast a rate cut in September (a 92% chance) and December this year.
Secondly, SNB expects a moderate improvement in inflation, GDP (Gross Domestic Product), and unemployment to rise slightly in the near term.
However, the Swiss franc can strengthen during geopolitical tensions like the Middle East crisis.
Watch for the new unemployment figure for CHF on Tuesday.
https://www.tradingview.com/x/CVbBqXPH/
USD/CHF was among the biggest losers (dropping 1.71%), confidently breaking the last major support. We mentioned the likelihood of this happening.
The new key support area to consider is now 0.85510. Meanwhile, the major resistance level is far higher at 0.92244.
Long-term outlook: weak bearish.
The expected rate cut in the next SNB meetings for 2024 is the main bearish driver. However, the SNB's chairperson, Thomas Jordan, expressed that "appreciation of the Swiss Franc has an impact on monetary policy." This means that potential intervention by the central bank can go either way.
Conclusion
The most anticipated economic events this week include the unemployment for NZD, CAD, and CHF, along with the RBA's interest decision.
Nonetheless, the fundamental outlooks for each major currency remain consistent from the previous week. However, see if these match the technical side and leave room for surprises.
Other notable gainers in the past week include the Swiss franc and euro.
Let’s see how these and other markets may perform fundamentally and technically this week.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
The Fed's latest meeting (where they kept the interest rate unchanged) gave away a few dovish clues. Most notable is the potential for a rate cut next month, with STIR (short-term interest rate) markets predicting a 68% chance of this happening.
A slight rise in the unemployment rate in the past week further adds to the bearish bias.
https://www.tradingview.com/x/uhbeR90b/
The DXY chart aligns perfectly with the fundamentals, having just broken a recent key support. However, the break wasn’t strong enough, so 103.172 is still an area of interest for major support. Meanwhile, the key resistance is far away at 106.490 and will likely remain untouched for some time.
Long-term outlook: bearish.
Markets anticipate at least two rate cuts before the year ends. The latest Consumer Price Index (CPI) and jobs data indicate a cooling of the US economy, another bearish sign.
Only geopolitical risks and bond market selling can affect this overall sentiment. So, we cannot rule out a bullish fight for the dollar, but it is unlikely to happen, at least quickly.
Euro (EUR)
Short-term outlook: weak bearish.
The European Central Bank (ECB) has recently kept its interest rate unchanged. Christine Lagarde, the ECB President, also suggested slow economic growth in the Eurozone, with inflation expected to fluctuate around current levels. Furthermore, the President stated that September's interest rate meeting is 'wide open.'
However, thanks to the ECB's overall dovish tone, markets see a 78% chance (up from 63% last week) of a cut.
https://www.tradingview.com/x/ewOwYcsp/
After falling slightly, the euro is looking to test the new major resistance, now at 1.09813 (not far from the former mark).
Meanwhile, the key support area lies far below at 1.06494.
Long-term outlook: weak bearish.
The recent unchanged interest rate is the primary bearish driver. However, the ECB hasn't committed to a specific future path in this regard.
Still, the central bank is data-dependent, and any improvement in inflation, growth, and wages can lift the euro.
British pound (GBP)
Short-term outlook: bearish.
The folks at the Bank of England (BoE) cut the interest rate by 25 basis points at the 01 August 2024 meeting. However, they remain data-dependent and have no set future path. Still, STIR markets are currently pricing an additional two cuts for the remainder of 2024.
https://www.tradingview.com/x/5HHj8Puj/
Meanwhile, the pound is down on the charts, which shouldn’t be surprising given the fundamentals.
The key support, at 1.26156, is not too distant. On the other hand, the key resistance is so far away (at 1.31424) that you have to zoom out your charts. In simple terms, we are bearish here.
Long-term outlook: weak bearish.
The interest rate is the chief bearish driver for the pound. However, STIR markets predict a rate hold next month. Furthermore, two-way risks remain based on upcoming economic data (e.g., inflation, labour, economic growth).
Japanese yen (JPY)
Short-term outlook: weak bullish.
The Bank of Japan’s (BoJ) recent decision to hike the interest rate is bullish for the yen. However, STIR markets
STIR markets expect a hold (95% probability) at the next meeting (but one hike before the year ends).
Declining US Treasury yields and the heightened political tension in the Middle East have accelerated the recent huge down move in USD/JPY.
https://www.tradingview.com/x/ut2OEBxS/
Unsurprisingly, USD/JPY has confidently broken another major support. Interestingly, the new marker is now 146.482, a level which has been reached. However, this week should determine if the market stalls around this area or breaks it.
Meanwhile, the major resistance (at 161.950) is too far for traders to worry about.
Long-term outlook: weak bullish
In addition to the recent rate hike, other bullish catalysts for the yen include lower US Treasury yields.
The Bank of Japan is actively intervening in the forex markets, contributing to the JPY's upside. However, having moved quite a distance, a retracement is imminent.
Australian dollar (AUD)
Short-term outlook: weak bullish.
Due to persisting inflation highlighted by the Reserve Bank of Australia (RBA), the central bank has enough reasons to keep or hike the interest rate on Tuesday.
On the flip side, markets suggest at least one rate cut in 2024 (initially set for 2025). However, the recent rise in China's share prices, which correlates with the Aussie, has been positive for the currency.
https://www.tradingview.com/x/zm5RbWMW/
While trading mildly in the past week, the Aussie is nearly testing the major support at 0.64653.
Meanwhile, the major resistance is far ahead at 0.67986.
Long-term outlook: weak bullish.
The hot CPI for Q1 and April has pressured the RBA to increase rates, which they recognised in their meeting last month. Also, the slightly higher unemployment rate from the past few weeks is another impetus. While STIR markets anticipate a 33% chance of a hike, this has been priced out.
Also, keep in mind that the Australian dollar is exposed to slow economic growth in other countries because it is a pro-cyclical currency.
New Zealand dollar (NZD)
Short-term outlook: neutral.
As predicted by STIR markets, the Reserve Bank of New Zealand (RBNZ) recently maintained the interest rate at 5.5%.
In their latest meeting, “The Committee agreed that monetary policy will need to remain restrictive. The extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures”.
In simple terms, the central bank is winning against inflation and is, thus, unlikely to raise rates.
NZD traders should diarise New Zealand's upcoming unemployment rate on Wednesday.
https://www.tradingview.com/x/Ihp2Ja1w/
Unlike its closest relative (AUD), the Kiwi has retraced upwards. However, it’s still within a largely bearish move.
The primary support lies at 0.58524. Meanwhile, the major resistance is at 0.62220, an area which it’s unlikely to test soon.
Long-term outlook: neutral.
The central bank's recent dovish tilt amid improving inflation puts the Kiwi in a neutral bracket. Furthermore, STIR markets anticipate a 65% (up from 58%) chance of a rate cut next month.
On the flip side, as a risk-sensitive currency like the Aussie, any growth data in China could trigger bullishness for NZD.
Canadian dollar (CAD)
Short-term outlook: bearish.
Firstly, the Bank of Canada (BoC) cut rates from 4.75% to 4.50% not so long ago. The Governor of the Bank of Canada (BoC), Macklem, had already suggested this would happen if inflation became stickier. Realistically, the BoC will drop rates slowly now or aggressively later.
It's also worth noting that the mortgage stress in Canada has forced the BoC to be dovish, another bearish catalyst.
Watch for the new unemployment figure for CAD on Friday.
https://www.tradingview.com/x/DkqI9nVB/
After a long while in range mode, USD/CAD is inclined more bullishly. It only just broke the recent major resistance (at 1.38463). The next target, which is quite nearby, is at 1.38991.
On the other hand, the key support lies far down at 1.35896.
Long-term outlook: weak bearish.
Expectations of a rate cut remain the focal point, with Macklem himself saying it's reasonable to expect more cuts in the future. Moreover, STIR markets see two rate cuts for the BoC this year.
The mortgage stress remains a major factor in this interest rate policy, and the BoC will have to cut rates to alleviate it.
However, encouraging oil prices may redeem the Canadian dollar as a risk-sensitive currency, along with improvements in jobs, inflation, and Gross Domestic Product.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets forecast a rate cut in September (a 92% chance) and December this year.
Secondly, SNB expects a moderate improvement in inflation, GDP (Gross Domestic Product), and unemployment to rise slightly in the near term.
However, the Swiss franc can strengthen during geopolitical tensions like the Middle East crisis.
Watch for the new unemployment figure for CHF on Tuesday.
https://www.tradingview.com/x/CVbBqXPH/
USD/CHF was among the biggest losers (dropping 1.71%), confidently breaking the last major support. We mentioned the likelihood of this happening.
The new key support area to consider is now 0.85510. Meanwhile, the major resistance level is far higher at 0.92244.
Long-term outlook: weak bearish.
The expected rate cut in the next SNB meetings for 2024 is the main bearish driver. However, the SNB's chairperson, Thomas Jordan, expressed that "appreciation of the Swiss Franc has an impact on monetary policy." This means that potential intervention by the central bank can go either way.
Conclusion
The most anticipated economic events this week include the unemployment for NZD, CAD, and CHF, along with the RBA's interest decision.
Nonetheless, the fundamental outlooks for each major currency remain consistent from the previous week. However, see if these match the technical side and leave room for surprises.
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- Est. Since 2018.
- Up to 100% Profit Share.
- Balance Based Drawdown.
- 1-Step & 2-Step Funded Accounts.
citytradersimperium.com/
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