Market News Report - 07 July 2024
The US dollar fell significantly this past week, a stark contrast to the one prior. As is often the case at the start of any month, the NFP (Non-Farm Payrolls) was a chief talking point, which unfortunately went against the greenback. Meanwhile, the Japanese yen continues its losing streak despite favourable fundamentals.
In our latest report, let's cover these pairs and the rest of the FX market.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
Our short-term outlook has changed from 'weak bearish' to a confident 'bearish.' As mentioned in last week's overview, news concerning NFP and the ISM (Institute for Supply Management) index resulted negatively.
Furthermore, the latest month-on-month CPI (Consumer Price Index) came in lower than expected. The Federal Reserve's hawkish tone remains another bearish driver.
The key news to diarise concerning USD is the new inflation rate on Friday.
https://www.tradingview.com/x/XnYNCcIF/
The chart goes along with the above sentiment, with the 'Dixie' breaking multiple minor support levels this past week. Still, the major support level is 103.993, while the major resistance is 106.490.
Long-term outlook: bearish.
With markets anticipating at least two rate cuts by the Fed for the remainder of the year, the bearish bias is justified. The latest CPI and NFP data also add fuel to this fire. Only geopolitical risks and bond market selling can affect this overall sentiment.
Euro (EUR)
Short-term outlook: weak bearish.
STIR (short-term interest rate markets) have priced in a hawkish move in the European Central Bank's (ECB) interest rate decision next week. Finally, the ECB's President, Christine Lagarde, hinted at a 'strong likelihood' of 'dialling back.'
As stated in our last report, the French elections can also affect the euro.
https://www.tradingview.com/x/3ss0sk2d/
After nearing major support at 1.06494 for a few weeks, the euro is now firmly on its way to test the opposite major resistance at 1.09160. This was mainly caused by USD weakness. Based on this recent price action, the market is more likely to move in the north instead of the south direction.
Long-term outlook: weak bearish.
The interest rate is the primary bearish driver for the euro. Yet, any improvement in fundamentals like wage data can lift the euro over time.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) continues to show dovish tendencies, with STIR (short-term interest rate) markets envisioning a 43% chance of a BoE rate cut next month. Furthermore, a negative result is forecasted for the upcoming GDP data on Thursday.
https://www.tradingview.com/x/562UDPNE/
Surprisingly, the GBP/USD chart sings a different tune thanks to USD bearishness. The price is close to testing the key resistance at 1.28606 while unlikely to reach the key support far below at 1.24457 anytime soon.
Long-term outlook: bearish.
The interest rate is the chief bearish driver for the pound amid an unfavorable economic outlook. So, GBP is likely to find sellers as expectations for the potential rate cut in August grow.
Japanese yen (JPY)
Short-term outlook: weak bullish.
The Bank of Japan’s (BoJ) recent decision to keep the interest rate unchanged is mildly bullish for the yen.
Governor Ueda also stated, "depending on economic, price, and financial data and information available at the time, there is a chance we could raise interest rates at the July meeting." Moreover, STIR markets see a 60% chance of a rate hike in the meeting at the end of July.
Unfortunately, JPY bulls should know that the BoJ does things rather slowly, partly explaining why the yen chart goes against the fundamental outlook.
https://www.tradingview.com/x/fTHbwCUA/
USD/JPY made another all-time high in the past week. While the new resistance (of 161.950) is not a major level, it's one to watch out for going forward. Ultimately, this market is very bullish, and it would take many months to reach the key support area at 154.546.
Long-term outlook: weak bullish
Aside from the expected rate hike, other bullish catalysts for the yen include a potential lowering in US Treasury yields.
Given the yen's continued beating on the charts, expect Japan's Ministry of Finance to intervene in the near future to save the currency.
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 next month.
The CPI print at the end of July is another consideration, with expectations of a positive outcome.
Finally, the Australian dollar shares an interesting correlation with China. Data indicating growth in this region (e.g., stimulus, new infrastructure projects, solid economic data) should lift the Aussie.
https://www.tradingview.com/x/BR0OqOFc/
After some sideways movements since May, the Aussie finally broke the major resistance mentioned last week (0.67141). The next target (last reached at the end of last year) lies ahead at 0.68711. Meanwhile, the major support remains far below at 0.65761.
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. Furthermore, STIR markets anticipate a 33% chance of a hike.
On the other hand, 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: weak bullish.
The Reserve Bank of New Zealand (RBNZ) is battling inflation like its neighbouring central bank. So, there is an incentive to be hawkish. However, STIR markets see a 93% chance of a rate hold at the next decision meeting on Tuesday.
https://www.tradingview.com/x/kmtsulVY/
The Kiwi has begun its overdue u-turn on the charts following a mild drop in prior weeks. 0.62220 is the major resistance to closely watch, while the key support remains at a level considerably lower at 0.58746.
Long-term outlook: weak bullish.
The hawkish stance suggested by the RBNZ is the key bullish catalyst. Still, any out-of-consensus CPI prints in the near term and sensitivity to other global economies like China could derail the currency.
Canadian dollar (CAD)
Short-term outlook: bearish.
STIR markets indicate a 50/50 chance for the Bank of Canada to cut rates on 24 July 2024. The Governor of the Bank of Canada (BoC), Macklem, has also suggested this would happen if inflation became stickier. Realistically, the BoC will drop rates slowly now or aggressively later.
However, recent CPI numbers were all positive for the Canadian dollar, hence the 'weak bearish' outlook.
https://www.tradingview.com/x/aRrFl0KR/
CAD remains in full-on range mode, as it has done over the past few weeks. However, the recent price action does bring this market closer to the major support at 1.35896. Of course, there is no telling whether USD/CAD will revert to or near this level.
On the other hand, the key resistance is at 1.37919.
Long-term outlook: weak bearish.
Expectations of a rate cut remain the centre of attention, along with the bearish catalysts associated with CAD as a risk-sensitive currency. However, encouraging oil prices may redeem the Canadian dollar.
Swiss franc (CHF)
Short-term outlook: bearish.
With a 76% chance of the Swiss National Bank (SNB) cutting the interest rate recently, STIR markets were accurate. 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, such as with the Middle East crisis.
https://www.tradingview.com/x/eu5ACPAV/
Following a considerable rise from the key support at 0.88268, USD/CHF has retraced quite a bit. Meanwhile, the key resistance lies at 0.91582. This market can go either way with such a wide gap between the two points. However, it's best to seek other pairs where CHF has a weaker outlook than its quote or base currency.
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
This coming week is another compelling one for high-impact news events. New inflation, GDP, and interest rate figures are set to be announced for the US dollar, British pound, and New Zealand dollar, respectively. So, traders who participate in any of these markets should be mindful.
Always be prepared technically and fundamentally when trading forex - that's the purpose of our weekly reports.
In our latest report, let's cover these pairs and the rest of the FX market.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
Our short-term outlook has changed from 'weak bearish' to a confident 'bearish.' As mentioned in last week's overview, news concerning NFP and the ISM (Institute for Supply Management) index resulted negatively.
Furthermore, the latest month-on-month CPI (Consumer Price Index) came in lower than expected. The Federal Reserve's hawkish tone remains another bearish driver.
The key news to diarise concerning USD is the new inflation rate on Friday.
https://www.tradingview.com/x/XnYNCcIF/
The chart goes along with the above sentiment, with the 'Dixie' breaking multiple minor support levels this past week. Still, the major support level is 103.993, while the major resistance is 106.490.
Long-term outlook: bearish.
With markets anticipating at least two rate cuts by the Fed for the remainder of the year, the bearish bias is justified. The latest CPI and NFP data also add fuel to this fire. Only geopolitical risks and bond market selling can affect this overall sentiment.
Euro (EUR)
Short-term outlook: weak bearish.
STIR (short-term interest rate markets) have priced in a hawkish move in the European Central Bank's (ECB) interest rate decision next week. Finally, the ECB's President, Christine Lagarde, hinted at a 'strong likelihood' of 'dialling back.'
As stated in our last report, the French elections can also affect the euro.
https://www.tradingview.com/x/3ss0sk2d/
After nearing major support at 1.06494 for a few weeks, the euro is now firmly on its way to test the opposite major resistance at 1.09160. This was mainly caused by USD weakness. Based on this recent price action, the market is more likely to move in the north instead of the south direction.
Long-term outlook: weak bearish.
The interest rate is the primary bearish driver for the euro. Yet, any improvement in fundamentals like wage data can lift the euro over time.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) continues to show dovish tendencies, with STIR (short-term interest rate) markets envisioning a 43% chance of a BoE rate cut next month. Furthermore, a negative result is forecasted for the upcoming GDP data on Thursday.
https://www.tradingview.com/x/562UDPNE/
Surprisingly, the GBP/USD chart sings a different tune thanks to USD bearishness. The price is close to testing the key resistance at 1.28606 while unlikely to reach the key support far below at 1.24457 anytime soon.
Long-term outlook: bearish.
The interest rate is the chief bearish driver for the pound amid an unfavorable economic outlook. So, GBP is likely to find sellers as expectations for the potential rate cut in August grow.
Japanese yen (JPY)
Short-term outlook: weak bullish.
The Bank of Japan’s (BoJ) recent decision to keep the interest rate unchanged is mildly bullish for the yen.
Governor Ueda also stated, "depending on economic, price, and financial data and information available at the time, there is a chance we could raise interest rates at the July meeting." Moreover, STIR markets see a 60% chance of a rate hike in the meeting at the end of July.
Unfortunately, JPY bulls should know that the BoJ does things rather slowly, partly explaining why the yen chart goes against the fundamental outlook.
https://www.tradingview.com/x/fTHbwCUA/
USD/JPY made another all-time high in the past week. While the new resistance (of 161.950) is not a major level, it's one to watch out for going forward. Ultimately, this market is very bullish, and it would take many months to reach the key support area at 154.546.
Long-term outlook: weak bullish
Aside from the expected rate hike, other bullish catalysts for the yen include a potential lowering in US Treasury yields.
Given the yen's continued beating on the charts, expect Japan's Ministry of Finance to intervene in the near future to save the currency.
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 next month.
The CPI print at the end of July is another consideration, with expectations of a positive outcome.
Finally, the Australian dollar shares an interesting correlation with China. Data indicating growth in this region (e.g., stimulus, new infrastructure projects, solid economic data) should lift the Aussie.
https://www.tradingview.com/x/BR0OqOFc/
After some sideways movements since May, the Aussie finally broke the major resistance mentioned last week (0.67141). The next target (last reached at the end of last year) lies ahead at 0.68711. Meanwhile, the major support remains far below at 0.65761.
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. Furthermore, STIR markets anticipate a 33% chance of a hike.
On the other hand, 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: weak bullish.
The Reserve Bank of New Zealand (RBNZ) is battling inflation like its neighbouring central bank. So, there is an incentive to be hawkish. However, STIR markets see a 93% chance of a rate hold at the next decision meeting on Tuesday.
https://www.tradingview.com/x/kmtsulVY/
The Kiwi has begun its overdue u-turn on the charts following a mild drop in prior weeks. 0.62220 is the major resistance to closely watch, while the key support remains at a level considerably lower at 0.58746.
Long-term outlook: weak bullish.
The hawkish stance suggested by the RBNZ is the key bullish catalyst. Still, any out-of-consensus CPI prints in the near term and sensitivity to other global economies like China could derail the currency.
Canadian dollar (CAD)
Short-term outlook: bearish.
STIR markets indicate a 50/50 chance for the Bank of Canada to cut rates on 24 July 2024. The Governor of the Bank of Canada (BoC), Macklem, has also suggested this would happen if inflation became stickier. Realistically, the BoC will drop rates slowly now or aggressively later.
However, recent CPI numbers were all positive for the Canadian dollar, hence the 'weak bearish' outlook.
https://www.tradingview.com/x/aRrFl0KR/
CAD remains in full-on range mode, as it has done over the past few weeks. However, the recent price action does bring this market closer to the major support at 1.35896. Of course, there is no telling whether USD/CAD will revert to or near this level.
On the other hand, the key resistance is at 1.37919.
Long-term outlook: weak bearish.
Expectations of a rate cut remain the centre of attention, along with the bearish catalysts associated with CAD as a risk-sensitive currency. However, encouraging oil prices may redeem the Canadian dollar.
Swiss franc (CHF)
Short-term outlook: bearish.
With a 76% chance of the Swiss National Bank (SNB) cutting the interest rate recently, STIR markets were accurate. 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, such as with the Middle East crisis.
https://www.tradingview.com/x/eu5ACPAV/
Following a considerable rise from the key support at 0.88268, USD/CHF has retraced quite a bit. Meanwhile, the key resistance lies at 0.91582. This market can go either way with such a wide gap between the two points. However, it's best to seek other pairs where CHF has a weaker outlook than its quote or base currency.
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
This coming week is another compelling one for high-impact news events. New inflation, GDP, and interest rate figures are set to be announced for the US dollar, British pound, and New Zealand dollar, respectively. So, traders who participate in any of these markets should be mindful.
Always be prepared technically and fundamentally when trading forex - that's the purpose of our weekly reports.
City Traders Imperium | Funding For Traders
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citytradersimperium.com/
- Est. Since 2018.
- Up to 100% Profit Share.
- Balance Based Drawdown.
- 1-Step & 2-Step Funded Accounts.
citytradersimperium.com/
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