Market News Report - 11 August 2024
The yen took the backseat as the dominant forex market. Instead, currencies like the Canadian and the 'two siblings' (the Aussie and New Zealand) reigned supreme.
This week, let’s see how these and other markets may perform 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.
The latest Fed meeting confirmed what STIR (short-term interest rate) markets already knew: a rate cut is on the table next month. The latest unemployment hike (from 4.1% to 4.3%) indicates a cooling economy and further encouragement to decrease the interest rate.
This week, pay attention to several US-linked economic releases (like the core inflation rate) that may redeem or add to the dollar's bearish pressure.
https://www.tradingview.com/x/88NZMC0l/
The DXY chart aligns perfectly with the fundamentals, having just broken a recent key support. However, the break wasn’t strong enough, so 102.358 is still an area of interest for major support. Meanwhile, the key resistance is far away at 107.348 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. The Council also indicated that rates should be 'sufficiently restrictively for as long as possible.
Thanks to this mostly dovish tone, markets see an 87% chance of a cut (up from 78% last week).
https://www.tradingview.com/x/fJO13wSX/
Interestingly, the chart tells a different story. As mentioned in our last report, the euro eventually tested the recent major resistance at 1.09813 (but not enough to break it). So, the odds are decent that this market will try again.
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.
Still, the central bank is data-dependent, and any inflation, growth, and wage improvement can lift the euro.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) cut the interest rate by 25 basis points at the start of this month. However, they remain data-dependent and have no set future path. STIR markets are currently pricing in an additional two cuts for the remainder of 2024.
Pay close attention to a few noteworthy GBP-related news events this week, starting Monday with the unemployment rate and year-on-year inflation rate on Wednesday.
https://www.tradingview.com/x/CggBxjCD/
While the pound is down on the charts, it retraced noticeably last week. Still, the key support remains at 1.26156, while the key resistance is far away at 1.31424.
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 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/jTR5fUFH/
For the first time since the start of last month, USD/JPY cooled down from its massive decline. Still, it did break the recent support area. So, the next point of interest lies at 140.252.
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 further retracement is imminent.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The Reserve Bank of Australia (RBA) unsurprisingly kept the interest rate unchanged on Tuesday to keep the fight against persistent inflation rate. Based on their language, a hike isn't out of the question this year.
Like many currencies, the Aussie remains data-sensitive, whether we look at economic growth, labour or inflation going forward. The recent rise in China's share prices, which correlates with the Aussie, has been positive for the currency. Still, there is doubt over the longevity of this run.
https://www.tradingview.com/x/s2f5ASS8/
The Aussie rose noticeably in the past week despite breaching the recent major support area. The new level to watch for now is 0.63484, while the major resistance is far ahead at 0.67986.
Long-term outlook: weak bullish.
The RBA remains hawkish as per last week's meeting, focusing on core inflation. Overall, it's crucial to be data-dependent with the Aussie. Furthermore, keep in mind that the Australian dollar is exposed to slow economic growth in other countries, being a pro-cyclical currency.
New Zealand dollar (NZD)
Short-term outlook: neutral.
In a meeting by the Reserve Bank of New Zealand (RBNZ), “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.
The RBNZ will meet again on Tuesday to determine the new interest rate, where it is anticipated to indicate further cuts. They are also expected to reduce GDP (Gross Domestic Product) forecasts, as well as CPI projections.
https://www.tradingview.com/x/vmlO3j4z/
Like its closest relative (AUD), the Kiwi has retraced upwards after just scraping the recent support area at 0.58524. This still remains the focal point, while the major resistance is at 0.62220, an area which it is 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.
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.
The ongoing mortgage stress in Canada has forced the Bank of Canada (BoC) to be dovish, the first major bearish catalyst. With a rate cut last month, STIR markets have raised the probability to 88% (from 82% a week ago) of the same next month.
The latest CPI print recently dropped while the latest labour data was mixed.
https://www.tradingview.com/x/YbDSOTLY/
While it looked to continue trending higher, USD/CAD saw a notable decline. This has left the new resistance area to be 1.39468, while the support target is far below at 1.35896.
Long-term outlook: weak bearish.
Expectations of a rate cut remain the focal point, with the BoC governor 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 GDP.
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.
https://www.tradingview.com/x/7Fq4u2C8/
After being one of the biggest losers last week, USD/CHF retraced higher (in line with the fundamental outlook).
The new key support area to consider is 0.84323. 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
This week's hottest economic events include the interest rate decision for the New Zealand dollar, followed by a few other high-impact releases for the dollar and British pound.
The fundamental outlooks of each currency have remained unchanged from the previous weeks. However, as you would expect, be prepared for technical shifts.
This week, let’s see how these and other markets may perform 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.
The latest Fed meeting confirmed what STIR (short-term interest rate) markets already knew: a rate cut is on the table next month. The latest unemployment hike (from 4.1% to 4.3%) indicates a cooling economy and further encouragement to decrease the interest rate.
This week, pay attention to several US-linked economic releases (like the core inflation rate) that may redeem or add to the dollar's bearish pressure.
https://www.tradingview.com/x/88NZMC0l/
The DXY chart aligns perfectly with the fundamentals, having just broken a recent key support. However, the break wasn’t strong enough, so 102.358 is still an area of interest for major support. Meanwhile, the key resistance is far away at 107.348 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. The Council also indicated that rates should be 'sufficiently restrictively for as long as possible.
Thanks to this mostly dovish tone, markets see an 87% chance of a cut (up from 78% last week).
https://www.tradingview.com/x/fJO13wSX/
Interestingly, the chart tells a different story. As mentioned in our last report, the euro eventually tested the recent major resistance at 1.09813 (but not enough to break it). So, the odds are decent that this market will try again.
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.
Still, the central bank is data-dependent, and any inflation, growth, and wage improvement can lift the euro.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) cut the interest rate by 25 basis points at the start of this month. However, they remain data-dependent and have no set future path. STIR markets are currently pricing in an additional two cuts for the remainder of 2024.
Pay close attention to a few noteworthy GBP-related news events this week, starting Monday with the unemployment rate and year-on-year inflation rate on Wednesday.
https://www.tradingview.com/x/CggBxjCD/
While the pound is down on the charts, it retraced noticeably last week. Still, the key support remains at 1.26156, while the key resistance is far away at 1.31424.
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 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/jTR5fUFH/
For the first time since the start of last month, USD/JPY cooled down from its massive decline. Still, it did break the recent support area. So, the next point of interest lies at 140.252.
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 further retracement is imminent.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The Reserve Bank of Australia (RBA) unsurprisingly kept the interest rate unchanged on Tuesday to keep the fight against persistent inflation rate. Based on their language, a hike isn't out of the question this year.
Like many currencies, the Aussie remains data-sensitive, whether we look at economic growth, labour or inflation going forward. The recent rise in China's share prices, which correlates with the Aussie, has been positive for the currency. Still, there is doubt over the longevity of this run.
https://www.tradingview.com/x/s2f5ASS8/
The Aussie rose noticeably in the past week despite breaching the recent major support area. The new level to watch for now is 0.63484, while the major resistance is far ahead at 0.67986.
Long-term outlook: weak bullish.
The RBA remains hawkish as per last week's meeting, focusing on core inflation. Overall, it's crucial to be data-dependent with the Aussie. Furthermore, keep in mind that the Australian dollar is exposed to slow economic growth in other countries, being a pro-cyclical currency.
New Zealand dollar (NZD)
Short-term outlook: neutral.
In a meeting by the Reserve Bank of New Zealand (RBNZ), “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.
The RBNZ will meet again on Tuesday to determine the new interest rate, where it is anticipated to indicate further cuts. They are also expected to reduce GDP (Gross Domestic Product) forecasts, as well as CPI projections.
https://www.tradingview.com/x/vmlO3j4z/
Like its closest relative (AUD), the Kiwi has retraced upwards after just scraping the recent support area at 0.58524. This still remains the focal point, while the major resistance is at 0.62220, an area which it is 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.
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.
The ongoing mortgage stress in Canada has forced the Bank of Canada (BoC) to be dovish, the first major bearish catalyst. With a rate cut last month, STIR markets have raised the probability to 88% (from 82% a week ago) of the same next month.
The latest CPI print recently dropped while the latest labour data was mixed.
https://www.tradingview.com/x/YbDSOTLY/
While it looked to continue trending higher, USD/CAD saw a notable decline. This has left the new resistance area to be 1.39468, while the support target is far below at 1.35896.
Long-term outlook: weak bearish.
Expectations of a rate cut remain the focal point, with the BoC governor 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 GDP.
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.
https://www.tradingview.com/x/7Fq4u2C8/
After being one of the biggest losers last week, USD/CHF retraced higher (in line with the fundamental outlook).
The new key support area to consider is 0.84323. 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
This week's hottest economic events include the interest rate decision for the New Zealand dollar, followed by a few other high-impact releases for the dollar and British pound.
The fundamental outlooks of each currency have remained unchanged from the previous weeks. However, as you would expect, be prepared for technical shifts.
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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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