Market News Report - 28 July 2024
It has been quite a massive turnaround for the yen recently, being the most bullish currency with +2% boosts across each of its major counterparts. The Swiss franc also had a good run, with milder gains for the euro and British pound this past week.
Let's dive deeper into each major market and how they look fundamentally and technically.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
While the Fed is slowly winning the fight against inflation, it has suggested at least one rate cut this year. This may happen at the latest meeting on Wednesday. Still, STIR (short-term interest rate) markets have priced in a 91% chance of a hold.
Short-term interest rate (STIR) markets predict an 8% chance of this happening at the end of this month.
As with the start of any month, traders should also keep an eye on the latest unemployment rate and Non-Farm Payrolls on Friday.
https://www.tradingview.com/x/3ghwUMIL/
The Dixie was pretty mild this past week, trading in a small range. Yet, the chart is still bearish, with the key support at 103.172 and key resistance at 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 indicate a cooling of the US economy. Only geopolitical risks and bond market selling can affect this overall sentiment.
Euro (EUR)
Short-term outlook: 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, markets see a 63% chance of a cut thanks to the ECB's overall dovish tone.
https://www.tradingview.com/x/LxCvcIrF/
While surpassing major resistance, the break could have been more convincing. However, this market is still bullish. So, we should expect a retest at the recent level, with 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 despite short-term interest rate (STIR) markets indicating a 63% chance of a rate cut in September.
Still, the central bank is data-dependent, where any inflation, growth, and wage improvements can lift the euro.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) continues to show dovish tendencies. STIR markets now predict a 51% chance of a BoE rate cut next month.
While the British pound had firmer economic data in recent weeks (e.g., stronger Gross Domestic Product), it failed to rally higher. This is another solid bearish indication.
https://www.tradingview.com/x/6ugINWDR/
The pound has retraced quite a bit after exceeding the recent resistance. Is it slowly aligning with the fundamentals? Let's see.
The major support level is at 1.26156, while the major resistance level remains far ahead at 1.31424.
Long-term outlook: weak bearish.
The interest rate is the chief bearish driver for the pound. So, the British pound is likely to find sellers as expectations for the potential rate cut in August grow.
However, two-way risks remain based on upcoming economic data.
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 69% chance (up from 53%) of a rate hike in the meeting on Wednesday.
Unfortunately, JPY bulls should know that the BoJ does things rather slowly.
https://www.tradingview.com/x/90sY4bER/
USD/JPY has been suddenly and surprisingly bearish in the past few weeks, breaking the major support mentioned in our last report.
The new support marker is now 151.858. Conversely, the key resistance (the yen's all-time high) is at 161.950, which is too rare for the price to test anytime soon.
Long-term outlook: weak bullish
In addition to the expected rate hike, other bullish catalysts for the yen include more lowering in US Treasury yields (one reason for the recent stronger JPY).
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 this coming Tuesday 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/D06j1I4w/
The Aussie has finally broken the major support mentioned in our previous report. This culminates in a dramatic u-turn and aligns with the currency's mild bullishness fundamentally.
The next area of interest for support is 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 result in the past week is another impetus. Furthermore, STIR markets anticipate a 33% chance of a hike.
Conversely, 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.
https://www.tradingview.com/x/0UzgHACA/
Like its closest relative (AUD), the Kiwi has trended down heavily of late. It's now close to the major support at 0.58746. 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 58% (up from 50%) 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 cut rates from 4.75% to 4.50% this past week. 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, which is another bearish catalyst.
https://www.tradingview.com/x/jyMQJsSY/
While breaking two key resistance levels (the most recent being 1.37919), USD/CAD remains in a range mode. The latest resistance at 1.38462 is still an area to watch. On the other hand, the key support is 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. 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: weak bearish.
With a 76% chance of the Swiss National Bank (SNB) cutting the interest rate recently, STIR markets were accurate. They also forecast a cut in September 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.
https://www.tradingview.com/x/TUaUD4NE/
USD/CHF tested the major support area at 0.87296 but didn't have enough to break it confidently. So, there is a chance the market will be near this pathway soon. Meanwhile, the major resistance level is at 0.91582.
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 week, the new interest rate decisions for the yen and US dollar are among the most anticipated economic events. It will be interesting to see whether the former (given the upcoming new rate) can continue to crush other markets.
Nonetheless, the outlooks for each major currency remain consistent from the previous week. So, keep these in mind, but be prepared for surprises as always.
As always, be prepared for anything as a trader technically and fundamentally.
Let's dive deeper into each major market and how they look fundamentally and technically.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
While the Fed is slowly winning the fight against inflation, it has suggested at least one rate cut this year. This may happen at the latest meeting on Wednesday. Still, STIR (short-term interest rate) markets have priced in a 91% chance of a hold.
Short-term interest rate (STIR) markets predict an 8% chance of this happening at the end of this month.
As with the start of any month, traders should also keep an eye on the latest unemployment rate and Non-Farm Payrolls on Friday.
https://www.tradingview.com/x/3ghwUMIL/
The Dixie was pretty mild this past week, trading in a small range. Yet, the chart is still bearish, with the key support at 103.172 and key resistance at 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 indicate a cooling of the US economy. Only geopolitical risks and bond market selling can affect this overall sentiment.
Euro (EUR)
Short-term outlook: 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, markets see a 63% chance of a cut thanks to the ECB's overall dovish tone.
https://www.tradingview.com/x/LxCvcIrF/
While surpassing major resistance, the break could have been more convincing. However, this market is still bullish. So, we should expect a retest at the recent level, with 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 despite short-term interest rate (STIR) markets indicating a 63% chance of a rate cut in September.
Still, the central bank is data-dependent, where any inflation, growth, and wage improvements can lift the euro.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) continues to show dovish tendencies. STIR markets now predict a 51% chance of a BoE rate cut next month.
While the British pound had firmer economic data in recent weeks (e.g., stronger Gross Domestic Product), it failed to rally higher. This is another solid bearish indication.
https://www.tradingview.com/x/6ugINWDR/
The pound has retraced quite a bit after exceeding the recent resistance. Is it slowly aligning with the fundamentals? Let's see.
The major support level is at 1.26156, while the major resistance level remains far ahead at 1.31424.
Long-term outlook: weak bearish.
The interest rate is the chief bearish driver for the pound. So, the British pound is likely to find sellers as expectations for the potential rate cut in August grow.
However, two-way risks remain based on upcoming economic data.
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 69% chance (up from 53%) of a rate hike in the meeting on Wednesday.
Unfortunately, JPY bulls should know that the BoJ does things rather slowly.
https://www.tradingview.com/x/90sY4bER/
USD/JPY has been suddenly and surprisingly bearish in the past few weeks, breaking the major support mentioned in our last report.
The new support marker is now 151.858. Conversely, the key resistance (the yen's all-time high) is at 161.950, which is too rare for the price to test anytime soon.
Long-term outlook: weak bullish
In addition to the expected rate hike, other bullish catalysts for the yen include more lowering in US Treasury yields (one reason for the recent stronger JPY).
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 this coming Tuesday 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/D06j1I4w/
The Aussie has finally broken the major support mentioned in our previous report. This culminates in a dramatic u-turn and aligns with the currency's mild bullishness fundamentally.
The next area of interest for support is 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 result in the past week is another impetus. Furthermore, STIR markets anticipate a 33% chance of a hike.
Conversely, 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.
https://www.tradingview.com/x/0UzgHACA/
Like its closest relative (AUD), the Kiwi has trended down heavily of late. It's now close to the major support at 0.58746. 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 58% (up from 50%) 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 cut rates from 4.75% to 4.50% this past week. 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, which is another bearish catalyst.
https://www.tradingview.com/x/jyMQJsSY/
While breaking two key resistance levels (the most recent being 1.37919), USD/CAD remains in a range mode. The latest resistance at 1.38462 is still an area to watch. On the other hand, the key support is 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. 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: weak bearish.
With a 76% chance of the Swiss National Bank (SNB) cutting the interest rate recently, STIR markets were accurate. They also forecast a cut in September 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.
https://www.tradingview.com/x/TUaUD4NE/
USD/CHF tested the major support area at 0.87296 but didn't have enough to break it confidently. So, there is a chance the market will be near this pathway soon. Meanwhile, the major resistance level is at 0.91582.
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 week, the new interest rate decisions for the yen and US dollar are among the most anticipated economic events. It will be interesting to see whether the former (given the upcoming new rate) can continue to crush other markets.
Nonetheless, the outlooks for each major currency remain consistent from the previous week. So, keep these in mind, but be prepared for surprises as always.
As always, be prepared for anything as a trader technically and fundamentally.
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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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