BluetonaFX - Forex Weekly Recap
Hi Traders!
Forex Weekly Recap for 21–25 August, 2023:
Fundamentals
The Federal Reserve's Harker noted that they probably have done enough on interest rates and can hold steady into the next year. Other key mentions from him were:
The low-income consumer is clearly slowing down.
Consumer credit card delinquencies are starting to tick up.
Student loans won't have a big economic effect, but they will have a psychological effect.
I want to see softening in the labour market, notably in the services sector.
At this point, he sees the Fed holding steady this year while next year is data-driven.
They need to see inflation fall before they are willing to cut rates.
The European Central Bank's (ECB) Centeno called for caution at the next meeting as downside risks to the economy have materialised. Other key mentions from him were:
The transmission of policy is up and running.
The ECB has been data-dependent in its decisions.
Plenty of data is still to come ahead of the September decision.
Downside risks to the economy have materialised.
Federal Reserve Chair Powell delivered his speech at the Jackson Hole Symposium, which for the most part repeated the same as his previous speech in that the Fed is data-dependent and all options are on the table. There’s a particular focus on the labour market, and it looks like the Fed is no longer targeting inflation but the labour market. Other key mentions from him were:
They are prepared to raise rates further if appropriate and will proceed carefully.
The Fed will proceed carefully when deciding whether to hike again or hold steady.
The Fed is attentive to signs that the economy is not cooling as expected.
Economic uncertainty calls for 'agile' monetary policymaking.
Inflation remains too high.
Two months of good data are only the beginning of what they need to see to build confidence in the inflation path.
Policy is restrictive, but the Fed can't be certain what the neutral rate level is.
They will not change their 2% inflation target.
Lowering inflation is also likely to require softer labour markets.
Signs that the job market is not cooling could also warrant more Fed action.
Key Data
New Zealand retail sales came in mixed across the board:
Retail sales Q/Q came in at -1.0% vs. -2.6% expected and -1.4% prior.
Retail sales Y/Y came in worse at -3.5% vs. 3.1% expected and -4.1% prior.
Wednesday was Global PMI Day, where there were a lot of missed expectations, especially on the services side:
Australia's manufacturing PMI came in worse at 49.4 vs. 49.6 expected and 49.6 prior.
Australia Services PMI came in worse at 46.7 vs. 47.9 expected and 47.9 prior.
Japan's manufacturing PMI came in better at 49.7 vs. 49.5 expected and 49.6 prior.
Japan Services PMI came in better at 54.3 vs. 53.9 expected and 53.8 prior.
France's manufacturing PMI came in better at 46.4 vs. 45.0 expected and 45.1 prior.
France Services PMI came in worse at 46.7 vs. 47.5 expected and 47.1 prior.
Germany's manufacturing PMI came in better at 39.1 vs. 38.7 expected and 38.8 prior.
Germany's services PMI came in worse at 47.3 vs. 51.5 expected and 52.3 prior.
The Eurozone Manufacturing PMI came in better at 43.7 vs. 42.6 expected and 42.7 prior.
The Eurozone Services PMI came in worse at 48.3 vs. 50.5 expected and 50.9 prior.
The UK manufacturing PMI came in worse at 42.5 vs. 45.0 expected and 45.3 prior.
UK Services PMI came in worse at 48.7 vs. 51.0 expected and 51.5 prior.
US Manufacturing PMI came in worse at 47.0 vs. 49.3 expected and 49.0 prior.
US Services PMI came in worse at 51.0 vs. 52.3 expected and 52.3 prior.
Canada's retail sales were mixed, with core retail sales coming in worse and retail sales coming in better:
Core Retail Sales M/M came in worse at -0.8% vs. 0.3 expected and -0.3% prior.
Retail sales M/M came in better at 0.1% vs. 0.0% expected and 0.1% prior.
The US jobless claims came in better across the board:
Initial claims came in better at 230K vs. 240K expected and 240K prior (revised from 239K).
Continuing claims came in better at 1702K vs. 1708K expected and 1711K prior (revised from 1716K).
Technicals
It was a mixed week for the US dollar, with some strength and weakness against its major counterparts.
AUDUSD 1W Chart
AUDUSD has rebounded off its new 2023 low at 0.63646 but is still nearing its 2022 low at 0.61702. The symmetrical triangle on the 1W chart was broken to the downside, and if the 2022 low of 0.61702 is also broken, then the long-term target level will be the psychological level of 0.60000.
USDJPY 1W Chart
A strong end to the week for USDJPY as the pair tested the 145.073 resistance level for a second week in a row. A break in this area, and we have a resistance level of 147.572.
EURUSD 1W Chart
EURUSD has reached the bottom support line of the rising wedge. We are looking for swings with less momentum and for them to have lower highs and lower lows to show signs of possible reversal and break the wedge to the downside.
GBPUSD 1W Chart
GBPUSD's potential head and shoulders pattern has formed on the 1W chart; the head and left shoulder have been formed, and the right shoulder has now formed. The market has now broken below the 20 EMA support. The 1.26800 support has not had a close under it for 2 months, so for the potential reversal to occur, there must be a break and close under 1.26800. A close of this week's candle will give us a bearish outlook.
The key focus for the upcoming trading week will be:
Monday: Australian Retail Sales
Tuesday: Japan's Unemployment Rate, US Job Openings
Wednesday: US Non-Farm ADP
Thursday: Japan Retail Sales, Eurozone CPI, Eurozone Unemployment Rate, US Jobless Claims
Friday: US Non-Farm Payroll, US ISM Manufacturing PMI.
We will be back with another Forex Weekly Recap report next week.
Best of luck for the upcoming trading week ahead. Trade safely and responsibly.
BluetonaFX
Forex Weekly Recap for 21–25 August, 2023:
Fundamentals
The Federal Reserve's Harker noted that they probably have done enough on interest rates and can hold steady into the next year. Other key mentions from him were:
The low-income consumer is clearly slowing down.
Consumer credit card delinquencies are starting to tick up.
Student loans won't have a big economic effect, but they will have a psychological effect.
I want to see softening in the labour market, notably in the services sector.
At this point, he sees the Fed holding steady this year while next year is data-driven.
They need to see inflation fall before they are willing to cut rates.
The European Central Bank's (ECB) Centeno called for caution at the next meeting as downside risks to the economy have materialised. Other key mentions from him were:
The transmission of policy is up and running.
The ECB has been data-dependent in its decisions.
Plenty of data is still to come ahead of the September decision.
Downside risks to the economy have materialised.
Federal Reserve Chair Powell delivered his speech at the Jackson Hole Symposium, which for the most part repeated the same as his previous speech in that the Fed is data-dependent and all options are on the table. There’s a particular focus on the labour market, and it looks like the Fed is no longer targeting inflation but the labour market. Other key mentions from him were:
They are prepared to raise rates further if appropriate and will proceed carefully.
The Fed will proceed carefully when deciding whether to hike again or hold steady.
The Fed is attentive to signs that the economy is not cooling as expected.
Economic uncertainty calls for 'agile' monetary policymaking.
Inflation remains too high.
Two months of good data are only the beginning of what they need to see to build confidence in the inflation path.
Policy is restrictive, but the Fed can't be certain what the neutral rate level is.
They will not change their 2% inflation target.
Lowering inflation is also likely to require softer labour markets.
Signs that the job market is not cooling could also warrant more Fed action.
Key Data
New Zealand retail sales came in mixed across the board:
Retail sales Q/Q came in at -1.0% vs. -2.6% expected and -1.4% prior.
Retail sales Y/Y came in worse at -3.5% vs. 3.1% expected and -4.1% prior.
Wednesday was Global PMI Day, where there were a lot of missed expectations, especially on the services side:
Australia's manufacturing PMI came in worse at 49.4 vs. 49.6 expected and 49.6 prior.
Australia Services PMI came in worse at 46.7 vs. 47.9 expected and 47.9 prior.
Japan's manufacturing PMI came in better at 49.7 vs. 49.5 expected and 49.6 prior.
Japan Services PMI came in better at 54.3 vs. 53.9 expected and 53.8 prior.
France's manufacturing PMI came in better at 46.4 vs. 45.0 expected and 45.1 prior.
France Services PMI came in worse at 46.7 vs. 47.5 expected and 47.1 prior.
Germany's manufacturing PMI came in better at 39.1 vs. 38.7 expected and 38.8 prior.
Germany's services PMI came in worse at 47.3 vs. 51.5 expected and 52.3 prior.
The Eurozone Manufacturing PMI came in better at 43.7 vs. 42.6 expected and 42.7 prior.
The Eurozone Services PMI came in worse at 48.3 vs. 50.5 expected and 50.9 prior.
The UK manufacturing PMI came in worse at 42.5 vs. 45.0 expected and 45.3 prior.
UK Services PMI came in worse at 48.7 vs. 51.0 expected and 51.5 prior.
US Manufacturing PMI came in worse at 47.0 vs. 49.3 expected and 49.0 prior.
US Services PMI came in worse at 51.0 vs. 52.3 expected and 52.3 prior.
Canada's retail sales were mixed, with core retail sales coming in worse and retail sales coming in better:
Core Retail Sales M/M came in worse at -0.8% vs. 0.3 expected and -0.3% prior.
Retail sales M/M came in better at 0.1% vs. 0.0% expected and 0.1% prior.
The US jobless claims came in better across the board:
Initial claims came in better at 230K vs. 240K expected and 240K prior (revised from 239K).
Continuing claims came in better at 1702K vs. 1708K expected and 1711K prior (revised from 1716K).
Technicals
It was a mixed week for the US dollar, with some strength and weakness against its major counterparts.
AUDUSD 1W Chart
AUDUSD has rebounded off its new 2023 low at 0.63646 but is still nearing its 2022 low at 0.61702. The symmetrical triangle on the 1W chart was broken to the downside, and if the 2022 low of 0.61702 is also broken, then the long-term target level will be the psychological level of 0.60000.
USDJPY 1W Chart
A strong end to the week for USDJPY as the pair tested the 145.073 resistance level for a second week in a row. A break in this area, and we have a resistance level of 147.572.
EURUSD 1W Chart
EURUSD has reached the bottom support line of the rising wedge. We are looking for swings with less momentum and for them to have lower highs and lower lows to show signs of possible reversal and break the wedge to the downside.
GBPUSD 1W Chart
GBPUSD's potential head and shoulders pattern has formed on the 1W chart; the head and left shoulder have been formed, and the right shoulder has now formed. The market has now broken below the 20 EMA support. The 1.26800 support has not had a close under it for 2 months, so for the potential reversal to occur, there must be a break and close under 1.26800. A close of this week's candle will give us a bearish outlook.
The key focus for the upcoming trading week will be:
Monday: Australian Retail Sales
Tuesday: Japan's Unemployment Rate, US Job Openings
Wednesday: US Non-Farm ADP
Thursday: Japan Retail Sales, Eurozone CPI, Eurozone Unemployment Rate, US Jobless Claims
Friday: US Non-Farm Payroll, US ISM Manufacturing PMI.
We will be back with another Forex Weekly Recap report next week.
Best of luck for the upcoming trading week ahead. Trade safely and responsibly.
BluetonaFX
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