Market News Report - 17 November 2024The US dollar is showing no let-up as it was, yet again, a bullish force. While there were up-trending currencies like CHF and JPY, USD is definitely stealing the show. But what do the fundamentals say for the greenback and the other currencies? Let's cover them in more detail in our latest market news report.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: weak bearish.
As predicted by STIR (short-term interest rate) markets, the Fed cut the interest rate by 25 basis points/bps from 5.00% to 4.75%. While labour data was down recently, this was mainly due to the impact of US hurricanes and labour disputes with Boeing.
While there is some mildly positive economic data, the bearish bias remains for USD, with STIR pricing indicating one more 25 bps cut in December. However, Powell stated on the 14th of November that the economy isn't giving signals that the Fed must be in a rush to cut rates.
The Dixie continues to head north and is very close to the key resistance at 107.348. Meanwhile, the key support is far away at 100.157, which will remain untouched for some time.
Long-term outlook: weak bearish.
A noteworthy point about the recent Fed meeting is the removal of the line "the committee has gained greater confidence that inflation is moving sustainably towards 2 percent." Finally, Powell also clarified that the US elections won't affect their decisions going forward.
The big takeaway is that the Fed will see how fast/far they should cut rates. Furthermore, any big misses in economic data, such as labour and GDP (Gross Domestic Product), would support the expectation of cuts.
Euro (EUR)
Short-term outlook: bearish.
The short-term interest rate (STIR) markets were predictably accurate as the European Central Bank (ECB) cut the interest rate last month. However, they remain data-dependent on what to do in the future (although they are quite concerned about slow growth).
Short-term interest rate markets have indicated an 84% chance of a rate cut in December. Also, we have seen weaker economic data across various European nations (although the Eurozone Gross Domestic/GDP growth was above expectations).
Another concern is that a protectionist US policy (with Donald Trump winning the election) could impact trade in the Eurozone, suggesting the potential for lower growth due to tariff risks.
The euro has clearly broken the key support we mentioned previously (1.07774) - the next area of interest is 1.04485. Meanwhile, the key resistance remains far higher at 1.12757.
Long-term outlook: bearish.
The latest rate cut and the avoidance of indicating a clear future move for the December meeting are among the key down-trending factors. However, any improvements in economic data (according to the ECB) would be a turnaround.
The threat of a fresh trade tariff with Trump is hugely influential and may cause the euro to be continuously sold off.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) cut the bank rate from 5% to 4.75% as anticipated. The language indicates they need to be restrictive and a "gradual approach" to policy easing. Governor Bailey also highlighted that rates will probably be brought down cautiously.
Despite this, we saw a slight increase in GBP/USD. This may be in line with the BoE's slightly hawkish attitude due to recent inflationary pressures.
Speaking of which, watch out for the new YoY inflation rate for GBP scheduled for Wednesday.
Like other dollar pairs, GBP/USD has looked bearish for some time. The nearest key support is at 1.26156 (which it has just touched), while the resistance target is 1.34343.
Long-term outlook: weak bearish.
The BoE sees inflation (its main concern currently) as being stickier for longer. Bailey wishes to see it down to 2%. This is a moderately hawkish hint. Overall, incoming CPI (and other economic) data will be important for the British pound.
Japanese yen (JPY)
Short-term outlook: bullish.
Unlike in July this year, the Bank of Japan (BoJ) recently kept the interest rate the same. So, our outlook remains largely unchanged. However, a rise in USD/JPY could raise the possibility of the BoJ's intervention.
Governor Ueda of the BoJ noted not long ago that despite domestic economic recovery, recent exchange rate movements have reduced the upside risk of inflation (which has been on an upward trajectory).
As recently as 31 October 2024, Ueda also stated that hikes would continue if the central bank's projections were realised. Interestingly, you can diarise his upcoming speech on Thursday.
The 139.579 support area is proving quite strong, boosting the yen since mid-September. Still, the major resistance (at 161.950) is too far for traders to worry about.
Long-term outlook: weak bullish.
Lower US Treasury yields are one potential bullish catalyst for the yen (the opposite is true). Inflation pressures and wage growth also provide the potential for upward momentum. We should also consider that the dovish tendencies of other major central banks and worsening US macro conditions are JPY-positive.
Still, as a slight downer, near-term inflation risks subsiding (according to the BoJ) reduce the urgency for a rate hiking cycle.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The Reserve Bank of Australia (RBA) kept its interest rate unchanged last week, marking the eighth consecutive hold. They emphasised that policy will remain restrictive until inflation moves toward its target. The RBA also lowered its GDP forecasts while the labour market remains tight.
As with GBP/USD, the Aussie is currently more of a seller's market than a buyer's one. The key resistance level lies ahead at 0.69426, while the major support remains at 0.63484. Despite this bearish setup, consider the interesting dynamic with the opposite fundamentals of AUD and USD in your overall analysis.
Long-term outlook: weak bullish.
While the RBA suggests that rate hikes won't be necessary going forward, it hasn't ruled anything out. Governor Bullock recently mentioned that they would act if the economy dropped more than desired. It's crucial to be data-dependent on the Aussie, especially with core inflation as the RBA's key focus area.
Also, the Australian dollar is pro-cyclical, with particular exposure to China's geopolitics. Trump's recent win in the US election means the prospect of trade tariffs with China has increased (potentially causing headwinds for AUD).
New Zealand dollar (NZD)
Short-term outlook: bearish.
Unsurprisingly, the Reserve Bank of New Zealand (RBNZD) cut its interest rate by 50 bps recently and sees further easing ahead. This affirms another cut next month of potentially the same magnitude.
Furthermore, the central bank is confident that inflation will remain in the target zone, adding more impetus to the bearish bias.
Due to the rate cut, the Kiwi has been on a downward spiral, proving the strength of the major resistance level at 0.63790. Conversely, the major support is at 0.58498, an area which it has just touched. It will be interesting to see how it reacts this week.
Long-term outlook: bearish.
The central bank's latest dovish stance (where it cut the interest rate) firmly puts the Kiwi in a 'bearish bracket.' A 50bps rate cut is predicted for the meeting later this month. They also revised the OCR rates lower and signalled steady winnings in the inflation battle.
As with the Aussie, potential headwinds for NZD are considered due to the trade tariff issues between China and the United States.
Canadian dollar (CAD)
Short-term outlook: bearish.
The Bank of Canada (BoC) unsurprisingly delivered a 50 bps cut on Wednesday. Further cuts remain on the cards, with the long-term target being 3%.
The BoC is signalling victory over inflation due to the cuts, with Governor Macklem suggesting that they would probably cut further until they achieve the optimal low inflation. In their words, 'stick the landing.'
Overall, the bias remains bearish - expect strong rallies in CAD to find sellers.
While the short-term fundamental biases of USD and CAD are bearish, CAD is the weakest on the charts. USD/CAD has finally exceeded the key resistance at 1.34197. We have to go onto a higher time frame for the next target. For now, let's see what happens around this area. Meanwhile, the key support lies far down at 1.33586.
Long-term outlook: weak bearish.
Expectations of a rate cut remain the focal point, with STIR markets indicating a 67% chance of a 25 bps cut and a 33% chance of a 50 bps cut in December. The Bank of Canada has recognised the lower economic growth, and Macklem wishes to see this improve. Furthermore, any big misses in upcoming GBP, inflation, and labour data would send CAD lower.
Still, encouraging oil prices and general economic data improvement would save the Canadian dollar's blushes - the opposite is true.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets were, as usual, correct in their 43% chance of a 25 bps rate cut (from 1.25% to 1%) recently. In the Sept. 26 meeting, the Swiss National (SNB) indicated its preparedness to intervene in the FX market and further rate cuts in the coming quarters.
The central bank's new Chair (Schlegel) said they "cannot rule out negative rates." Finally, the October CPI came in weak at 0.6% (another poor result, as for the September data).
Still, the Swiss franc can strengthen during geopolitical tensions like a worsening Middle East crisis.
USD/CHF keeps rising steadily towards the major support level at 0.83326, while the major resistance level is at 0.92244.
Long-term outlook: weak bearish.
The bearish sentiment remains after the last SNB meeting, while inflation is being tamed with lower revisions. We should also remember that the SNB's intervention prevents the appreciation of the Swiss franc.
The new chairman is more keen to cut rates than his predecessor, Jordan. The SNB aims for neutral rates between 0 and 0.50% (currently at 1%). However, STIR markets only see a 33% chance of a 50 bps cut next month.
Conclusion
In summary:
The US dollar remains one of the key currencies to watch, given the recent elections and Trump's potential to affect trade relations with the likes of Australia and New Zealand.
Inflation is a common theme among central banks. Watch out for the new YoY inflation rate for GBP on Wednesday.
Our short and long-term fundamental outlooks remain unchanged from the last few weeks.
As always, hope for the best and prepare for the worst. This report should help you determine your bias toward each currency in the short and long term.
CTI
Market News Report - 03 November 2024While it was a mild past week, the USD was pretty strong again. Other bullish currencies include the euro and the British pound. Speaking of the latter, the Bank of England will announce its interest rate soon. Then, we had the most anticipated new Federal Funds on Thursday and the US elections.
All of this and more will be covered in our market report of the major forex pairs.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: weak bearish.
Despite a recent 50 basis points (bps) rate cut, the Fed may not need to cut rates as aggressively going forward. This is partly due to recent positive job numbers and earnings data that exceeded expectations.
While the NFP data last Friday was negative, the drop was due to the impact of US hurricanes and labour disputes with Boeing.
The US elections on Tuesday may provide a notable boost for USD if Trump wins. However, we also have the new Fed interest rate two days later, where a cut is anticipated. So, the bias remains weak bearish in the near term.
The Dixie continues to head north after weeks of ranging around the key support area at 100.157. We have spoken several times about a potential technically-driven retracement (despite the bearish fundamentals).
Meanwhile, the key resistance is far away at 107.348, which will remain untouched for some time.
Long-term outlook: weak bearish.
While there is no extreme dovish pricing anymore (thanks to some economic improvements), the Fed is still expected to cut the interest. Labour data will be another key driver in the long term for USD.
However, the upcoming US elections could be a huge redeeming factor for the greenback if Trump wins (who is highly favoured against Harris).
Euro (EUR)
Short-term outlook: bearish.
The short-term interest rate (STIR) markets were predictably accurate as the European Central Bank (ECB) cut the interest rate last month. However, they remain data-dependent on what to do in the future (although they are quite concerned about slow growth).
Short-term interest rate markets have indicated an 84% chance of a rate cut in December. Also, we have seen weaker economic data across various European nations (although the Eurozone Gross Domestic/GDP growth was above expectations).
The euro has finally made its bearish intention known on the charts, breaking the key support at 1.07774 (but only just). We need to see how this level reacts over the coming weeks- so it's not out of the question. Meanwhile, the key resistance remains far higher at 1.12757.
Long-term outlook: bearish.
The latest rate cut and the avoidance of indicating a clear future move for the December meeting are among the key down-trending factors.
However, any improvements in economic data (according to the ECB) would be a turnaround. Higher German inflation and stronger European growth in Q3 have saved the euro from a downward spiral.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) kept the interest rate steady in its recent meeting. Still, the language indicates they need to be “restrictive for sufficiently long” and the "gradual need" for decreasing the rate. STIR pricing indicates an 86% chance of a cut on Thursday
As with the ECB, the central bank's current key theme is fighting persistent inflation in the United Kingdom. So, it makes more sense to be dovish than hawkish. Not long ago, Governor Bailey hinted that "aggressive rate cuts" were possible if inflation went lower.
We mentioned that the current retracement may be the start of a more serious bear move. So far, that's what the pound is experiencing. The nearest key support is at 1.26156, while the resistance target is 1.34343.
Long-term outlook: weak bearish.
Sequential rate cuts by the BoE may soon be a reality due to the points discussed earlier. However, a new development is the UK budget, which has been seen as a reason for the central to proceed slowly in this regard. As usual, data remains essential going forward with GBP.
Japanese yen (JPY)
Short-term outlook: bullish.
Unlike in July this year, the Bank of Japan (BoJ) kept the interest rate the same last week. So, our outlook remains largely unchanged. However, a rise in USD/JPY could raise the possibility of the BoJ's intervention.
Governor Ueda of the BoJ noted not long ago that despite domestic economic recovery, recent exchange rate movements have reduced the upside risk of inflation (which has been on an upward trajectory). As recently as 31 October 2024, Ueda also stated that hikes would continue if the central bank's projections were realised.
The 139.579 support area is proving quite strong, boosting the yen since mid-September. Still, the major resistance (at 161.950) is too far for traders to worry about.
Long-term outlook: weak bullish.
Lower US Treasury yields are one potential bullish catalyst for the yen (the opposite is true). Inflation pressures and wage growth would also provide upward momentum. We should also consider that the dovish tendencies of other major central banks and worsening US macro conditions are JPY-positive
Still, as a slight downer, near-term inflation risks subsiding (according to the BoJ) reduce the urgency for a rate hiking cycle.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The Reserve Bank of Australia (RBA) kept the interest rate unchanged during the Sept. 25 meeting. They further stated that they "did not explicitly consider rate hikes" for the future, which is a marginally dovish statement.
The Aussie remains sensitive to China’s recent economic woes, with some promising developments at times.
Finally, recent positive unemployment and labour data gives a base case for a hold in the RBA interest rate on Monday this week (priced at 97% probability according to STIR markets).
After failing to break the 0.69426 resistance level several times, the Aussie has retraced noticeably from this area. While this market looked bullish, this pullback does surprisingly indicate otherwise.
Still, we are quite far from the major support level at 0.63484, but consider the interesting dynamic with the opposite fundamentals of AUD and USD.
Long-term outlook: weak bullish.
While the RBA hasn’t ruled anything out, the central bank isn’t explicitly suggesting rate hikes in the future.
It’s crucial to be data-dependent with the Aussie, especially with core inflation as the RBA's key focus area.
However, the Australian dollar is pro-cyclical, meaning it is exposed to the economies and geopolitics of other countries, especially China.
New Zealand dollar (NZD)
Short-term outlook: bearish.
Unsurprisingly, the Reserve Bank of New Zealand (RBNZD) cut its interest rate by 50 bps recently and sees further easing ahead. This affirms another cut next month of potentially the same magnitude.
Furthermore, the central bank is confident that inflation will remain in the target zone, adding more impetus to the bearish bias.
Due to the rate cut, the Kiwi has been on a downward spiral, proving the strength of the major resistance level at 0.63790. Conversely, the major support is at 0.58498.
Long-term outlook: bearish.
The central bank's latest dovish stance (where it cut the interest rate) firmly puts the Kiwi in a 'bearish bracket.' They also revised the OCR rates lower and signalled steady winnings in the inflation battle.
Canadian dollar (CAD)
Short-term outlook: bearish.
The Bank of Canada (BoC) unsurprisingly delivered a 50 bps cut on Wednesday. Further cuts remain on the cards, with the long-term target being 3%.
The BoC is signalling victory over inflation due to the cuts, with Governor Macklem suggesting that they would probably cut further until they achieve the optimal low inflation. In their words, 'stick the landing.'
Overall, the bias remains bearish - expect strong rallies in CAD to find sellers.
While the short-term fundamental biases of USD and CAD are bearish, CAD is the weakest on the charts. USD/CAD has finally touched the key resistance at 1.39468. This week will determine whether this area will be breached or not. Meanwhile, the key support lies far down at 1.33586.
Long-term outlook: weak bearish.
Expectations of a rate cut remain the focal point. The Bank of Canada has recognised the lower economic growth, and Macklem wishes to see this increase. Furthermore, any big misses in upcoming GBP, inflation, and labour data would send CAD lower.
Still, encouraging oil prices and general economic data improvement would save the Canadian dollar's blushes.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets were, as usual, correct in their 43% chance of a 25 bps rate cut (from 1.25% to 1%) recently. In the Sept. 26 meeting, the Swiss National (SNB) indicated its preparedness to intervene in the FX market and further rate cuts in the coming quarters.
The central bank's new Chair (Schlegel) said they "cannot rule out negative rates." Finally, the September CPI came in weak at 0.8%, against the expected year-on-year 1.1%.
Still, the Swiss franc can strengthen during geopolitical tensions like a worsening Middle East crisis.
USD/CHF has just broken out of the range (but only just) discussed in our last few reports. While remaining largely bearish, this market could return closer to the major support level at 0.83326 or climb its way to the higher major resistance level at 0.92244.
Long-term outlook: weak bearish.
The bearish sentiment remains after the last SNB meeting, while inflation is being tamed with lower revisions. We should also remember that the SNB's intervention prevents the appreciation of the Swiss franc.
The new chairman is more keen to cut rates than his predecessor, Jordan. The SNB aims for neutral rates between 0 and 0.50% (currently at 1%). However, STIR markets only see a 20% chance of a 50 bps cut next month.
Conclusion
In summary:
The USD will certainly be the talk of the town this week due to the upcoming elections and Fed rates.
Other noteworthy economic releases include the new interest rates for the British pound and the Australian dollar.
Our short and long-term fundamental outlooks remain unchanged from the last few weeks.
As always, hope for the best and prepare for the worst. This report should help you determine your bias toward each currency in the short and long term.
Market News Report - 27 October 2024The greenback was again a bullish force in the past week. Other currencies that put up an upward fight include the Swiss franc and euro. Then, the Bank of Canada delivered an expected cut in the CAD interest rate.
Let's see what to expect for our beloved forex market in the coming weeks in our market report.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
Despite a recent 50 basis points (bps) rate cut, the Fed may not need to cut rates as aggressively going forward. This is partly due to recent positive job numbers and earnings data that exceeded expectations.
Still, the central bank has signalled the potential for two 25 bps drops by the end of this year. Meanwhile, a 50 bps cut has pretty much been priced out, with STIR (short-term interest rate) markets seeing a 14% chance of a hold next month.
Keep an eye out for NFP (Non-Farm Payrolls) data this coming Friday. This will probably be the next USD driver, along with the US elections next Tuesday.
The Dixie continues to head north after weeks of ranging around the key support area at 100.157. We have spoken several times about a potential technically-driven retracement (despite the bearish fundamentals).
Meanwhile, the key resistance is far away at 107.348, which will remain untouched for some time.
Long-term outlook: weak bearish.
The latest strong NFP report has raised expectations for a 25 bps rate cut (instead of 50 bps), which is giving USD a boost in the near term. So, there is no extreme dovish pricing anymore.
While the bearish bias remains, the dollar is gaining amid a broad pullback. This idea could prove even more relevant if Donald Trump wins the election on 05 November. Upcoming labour and GDP data will also be key in determining USD's long-term future.
Euro (EUR)
Short-term outlook: bearish.
The STIR markets were predictably accurate as the European Central Bank (ECB) cut the interest rate recently. However, they remain data-dependent on what to do in the future (although they are quite concerned about slow growth).
Also, the past week saw weaker economic data across various European nations. Finally, short-term interest rate markets have indicated an 84% chance of a rate cut in December.
The euro has finally made its bearish intention known on the charts, breaking the key support at 1.07774 (but only just). We need to see how this level reacts this week - so it's not out of the question. Meanwhile, the key resistance remains far higher at 1.12757.
Long-term outlook: bearish.
The latest rate cut and the avoidance of indicating a clear future move for the December meeting are among the key down-trending factors. Furthermore, a threat of a trade tariff with Trump could be negative.
However, any improvements in economic data (according to the ECB) would be a turnaround. So, we are changing our long-term bias from 'bearish' to 'weak bearish' now.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) kept the interest rate steady in its recent meeting. Still, the language indicates they need to be “restrictive for sufficiently long.” Also, the central bank's higher-ups stressed "a gradual need" to cut rates.
As with the ECB, the central bank's current key theme is fighting persistent inflation in the United Kingdom. So, it makes more sense to be dovish than hawkish. Not long ago, Governor Bailey hinted that "aggressive rate cuts" were possible if inflation went lower.
We mentioned that the current retracement may be the start of a more serious bear move. So far, that's what the pound is experiencing. The nearest key support is at 1.26156, while the resistance target is 1.34343.
Long-term outlook: weak bearish.
Sequential rate cuts by the BoE may soon be a reality. Also, weak CPI, labour, or GDP data should be expected to back up the bearish bias. To add further to this point, the last GDP print shows a poor UK economy. However, the central bank hopes for lower service inflation, which may provide relief.
Another interesting point is the latest CFTC (Commodity Futures Trading Commission) report, showing that GBP longs have been stretched to the upside. So, bullishness should be limited at some point.
Japanese yen (JPY)
Short-term outlook: bullish.
The primary bullish catalyst is the Bank of Japan’s (BoJ) recent decision to hike the interest rate. STIR markets expect a hold at the next meeting on Wednesday (but a hike at the start of next year).
Governor Ueda of the BoJ noted that despite domestic economic recovery, recent exchange rate movements have reduced the upside risk of inflation (which has been on an upward trajectory). All of this backs up the potential for a rate hold or hike.
The 139.579 support area is proving quite strong, boosting the yen since mid-September. Still, the major resistance (at 161.950) is too far for traders to worry about.
Long-term outlook: weak bullish.
Lower US Treasury yields are one potential bullish catalyst for the yen (the opposite is true). Inflation pressures and wage growth would also provide upward momentum. We should also consider that the dovish tendencies of other major central banks and worsening US macro conditions are JPY-positive
Still, as a slight downer, near-term inflation risks subsiding (according to the BoJ) reduce the urgency for a rate hiking cycle.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The Reserve Bank of Australia (RBA) kept the interest rate unchanged during the Sept. 25 meeting. They further stated that they "did not explicitly consider rate hikes" for the future, which is a marginally dovish statement.
The Aussie remains sensitive to China’s recent economic woes. However, high iron prices have supported the former.
Finally, recent positive unemployment data gives a base case for a hold in the RBA interest rate meeting early next month.
After failing to break the 0.69426 resistance level several times, the Aussie has retraced noticeably from this area. While this market looked bullish, this pullback does surprisingly indicate otherwise.
Still, we are quite far from the major support level at 0.63484, but consider the interesting dynamic with the opposite fundamentals of AUD and USD.
Long-term outlook: weak bullish.
While the RBA hasn’t ruled anything out, the central bank isn’t explicitly suggesting rate hikes in the future.
It’s crucial to be data-dependent with the Aussie, especially with core inflation as the RBA's key focus area.
However, the Australian dollar is pro-cyclical, meaning it is exposed to the economies and geopolitics of other countries, especially China.
New Zealand dollar (NZD)
Short-term outlook: bearish.
Unsurprisingly, the Reserve Bank of New Zealand (RBNZD) cut its interest rate by 50 bps recently and sees further easing ahead. This affirms another cut next month of potentially the same magnitude.
Furthermore, the central bank is confident that inflation will remain in the target zone, adding more impetus to the bearish bias.
Due to the rate cut, the Kiwi has been on a downward spiral, proving the strength of the major resistance level at 0.63790. Conversely, the major support is at 0.58498.
Long-term outlook: bearish.
The central bank's latest dovish stance (where it cut the interest rate) firmly puts the Kiwi in a 'bearish bracket.' They also revised the OCR rates lower and signalled steady winnings in the inflation battle.
Canadian dollar (CAD)
Short-term outlook: bearish.
The Bank of Canada (BoC) unsurprisingly delivered a 50 bps cut on Wednesday. Further cuts remain on the cards, with the long-term target being 3%.
The BoC is signalling victory over inflation due to the cuts, with Governor Macklem suggesting that they would probably cut further until they achieve the optimal low inflation. In their words, 'stick the landing.'
Overall, the bias remains bearish - expect strong rallies in CAD to find sellers.
While the short-term fundamental biases of USD and CAD are bearish, CAD is weaker on the charts. USD/CAD is almost at the point of knocking on the key resistance at 1.39468, while the key support lies down at 1.33586.
Long-term outlook: weak bearish.
Expectations of a rate cut remain the focal point. The Bank of Canada has recognised the lower economic growth, and Macklem wishes to see this increase. Furthermore, any big misses in upcoming GBP, inflation, and labour data will send CAD lower.
Still, encouraging oil prices and general economic data improvement would save the Canadian dollar's blushes.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets were, as usual, correct in their 43% chance of a 25 bps rate cut (from 1.25% to 1%) recently. In the Sept. 26 meeting, the Swiss National (SNB) indicated its preparedness to intervene in the FX market and further rate cuts in the coming quarters.
The central bank's new Chair (Schlegel) said they "cannot rule out negative rates." Finally, the September CPI came in weak at 0.8%, against the expected year-on-year 1.1%.
Still, the Swiss franc can strengthen during geopolitical tensions like a worsening Middle East crisis.
USD/CHF has just broken out of the range (but only just) discussed in our last few reports. While remaining largely bearish, this market could return closer to the major support level at 0.83326 or climb its way to the higher major resistance level at 0.92244.
Long-term outlook: weak bearish.
The bearish sentiment remains after the last SNB meeting, while inflation is being tamed with lower revisions. We should also remember that the SNB's intervention prevents the appreciation of the Swiss franc. The new chairman is more keen to cut rates than his predecessor, Jordan.
Conversely, 'safe haven flows,' and geopolitical risks can positively support the currency.
As with other central banks, inflation is a crucial metric in the SNB's policy rates.
Conclusion
In summary:
The USD seems particularly strong (despite being fundamentally bearish), with the upcoming NFP release and US elections as the events to watch.
This week's main high-impact news event is Wednesday's JPY interest rate decision.
Our short and long-term fundamental outlooks remain unchanged from the last few weeks.
As always, hope for the best and prepare for the worst. This report should help you determine your bias toward each currency in the short and long term.
Market News Report - 20 October 2024While it was a mild week, the US dollar was again among the strongest currencies. Other ones include CAD and GBP, while NZD was among the weakest.
Let's dive into what we should expect for each major forex market in our latest fundamental report.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
Despite a recent 50 basis points (bps) rate cut, the Fed may not need to cut rates as aggressively going forward. This is partly due to positive job numbers and earnings data that exceeded expectations.
Still, the central bank has signalled the potential for two 25 bps drops by the end of this year. Meanwhile, a 50 bps cut has pretty much been priced out, with STIR (short-term interest rate) markets seeing a 14% chance of a hold next month.
The Dixie continues to head north after weeks of ranging around the key support area at 100.157. We have spoken about a potential technically-driven retracement (despite the bearish fundamentals).
Meanwhile, the key resistance is far away at 107.348, which will remain untouched for some time.
Long-term outlook: weak bearish.
The latest strong NFP report has raised expectations for a 25 bps rate cut (instead of 50 bps), which is giving USD a boost in the near term. So, there is no extreme dovish pricing anymore.
While the bearish bias remains, the dollar may gain amid a broad pullback. This idea could prove even more relevant if Donald Trump wins the upcoming election.
Euro (EUR)
Short-term outlook: bearish.
The STIR markets were predictably accurate as the European Central Bank (ECB) cut the interest rate last week.
However, they remain data-dependent on what to do in the future (although they are quite concerned about slow growth).
Also, the past week saw weaker economic data across various European nations. Finally, short-term interest rate markets have indicated an 83% chance of a rate cut in December.
The euro has finally made its bearish intention known on the charts after spending weeks near the resistance at 1.12757. It is close to the key support at 1.07774.
Long-term outlook: bearish.
The latest rate cut and the avoidance of indicating a clear future move for the December meeting are among the key down-trending factors. Furthermore, a threat of a trade tariff with Trump could be negative. Couple this with potential USD strength, and we have a clear bearish bias for the euro.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) kept the interest rate steady in its recent meeting. Still, the language indicates they need to be “restrictive for sufficiently long.” Also, the central bank's higher-ups stressed "a gradual need" to cut rates.
As with the ECB, the central bank's current key theme is fighting persistent inflation in the United Kingdom. So, it makes more sense to be dovish than hawkish. Not long ago, Governor Bailey hinted that "aggressive rate cuts" were possible if inflation went lower.
We mentioned that the current retracement may be the start of a more serious bear move. So far, that's what the pound is experiencing. The nearest key support is at 1.26156, while the resistance target is 1.34343.
Long-term outlook: weak bearish.
Sequential rate cuts by the BoE may soon be a reality. Also, weak CPI, labour, or GDP data should be expected to back up the bearish bias. However, the central bank hopes for lower service inflation, which may provide relief.
Another interesting point is the latest CFTC (Commodity Futures Trading Commission) report, showing that GBP longs have been stretched to the upside. So, bullishness should be limited at some point.
Japanese yen (JPY)
Short-term outlook: bullish.
The primary bullish catalyst is the Bank of Japan’s (BoJ) recent decision to hike the interest rate. STIR markets expect a hold at the next meeting but a hike at the start of next year.
Governor Ueda of the BoJ noted that despite domestic economic recovery, recent exchange rate movements have reduced the upside risk of inflation (which has been on an upward trajectory). All of this backs up the potential for a rate hold or hike.
The 139.579 support area is proving quite strong, boosting the yen since mid-September. Still, the major resistance (at 161.950) is too far for traders to worry about.
Long-term outlook: weak bullish.
Lower US Treasury yields are one potential bullish catalyst for the yen (the opposite is true). Inflation pressures and wage growth would also provide upward momentum. We should also consider that the dovish tendencies of other major central banks and worsening US macro conditions are JPY-positive
Still, as a slight downer, near-term inflation risks subsiding (according to the BoJ) reduce the urgency for a rate hiking cycle.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The Reserve Bank of Australia (RBA) kept the interest rate unchanged during the Sept. 25 meeting. They further stated that they "did not explicitly consider rate hikes" for the future, which is a marginally dovish statement.
The Aussie remains sensitive to China’s recent economic woes. However, high iron prices have supported the former.
Finally, recent positive unemployment data gives a base case for a hold in the next RBA interest rate meeting.
After failing to break the 0.69426 resistance level several times, the Aussie has retraced noticeably from this area. Still, this market is bullish and far from the major support level at 0.63484.
Long-term outlook: weak bullish.
While the RBA hasn’t ruled anything out, the central bank isn’t explicitly suggesting rate hikes in the future.
It’s crucial to be data-dependent with the Aussie, especially with core inflation as the RBA's key focus area.
However, the Australian dollar is pro-cyclical, meaning it is exposed to the economies and geopolitics of other countries, especially China.
New Zealand dollar (NZD)
Short-term outlook: bearish.
Unsurprisingly, the Reserve Bank of New Zealand (RBNZD) cut its interest rate by 50 bps recently and sees further easing ahead. This affirms another cut next month of potentially the same magnitude.
Furthermore, the central bank is confident that inflation will remain in the target zone, adding more impetus to the bearish bias.
Due to the rate cut, the Kiwi has been on a downward spiral, proving the strength of the major resistance level at 0.63696. Conversely, the major support is at 0.58498.
Long-term outlook: bearish.
The central bank's latest dovish stance (where it cut the interest rate) firmly puts the Kiwi in a 'bearish bracket.' They also revised the OCR rates lower and signaled steady winnings in the inflation battle.
Canadian dollar (CAD)
Short-term outlook: bearish.
The Bank of Canada (BoC) recently dropped the interest rate to 4.25%, as anticipated by the markets for some time. Further cuts in the next few meetings are on the cards, with the long-term target being 3%.
Unemployment, weak economic growth, and mortgage stress are the key drivers for this dovishness.
Watch out for the new interest rate for CAD on Wednesday, where a 50 bps cut is predicted (77% chance).
While the short-term fundamental biases of USD and CAD are bearish, CAD is weaker on the charts. USD/CAD is making a steady uptick towards the key resistance at 1.39468, while the key support lies down at 1.33586.
Long-term outlook: weak bearish.
Expectations of a rate cut remain the focal point. Governor Macklem himself stated a while ago that it's reasonable to expect more cuts in the future. Any big misses in upcoming GBP, inflation, and labour data will send CAD lower.
Also, mortgage stress remains a major factor in this interest rate policy, and the BoC will have to cut rates to alleviate it.
Still, encouraging oil prices and general economic data improvement would save the Canadian dollar's blushes.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets were, as usual, correct in their 43% chance of a 25 bps rate cut (from 1.25% to 1%) recently. In the Sept. 26 meeting, the Swiss National (SNB) indicated its preparedness to intervene in the FX market and further rate cuts in the coming quarters.
The central bank's new Chair (Schlegel) said they "cannot rule out negative rates." Finally, the September CPI came in weak at 0.8%, against the expected year-on-year 1.1%.
Still, the Swiss franc can strengthen during geopolitical tensions, such as a worsening Middle East crisis.
USD/CHF has just broken out of the range (but only just) discussed in our last few reports. While remaining largely bearish, this market could return closer to the major support level at 0.83326 or climb its way to the higher major resistance level at 0.92244.
Long-term outlook: weak bearish.
The bearish sentiment remains after the last SNB meeting, while inflation is being tamed with lower revisions. We should also remember that the SNB's intervention prevents the appreciation of the Swiss franc.
The new chairman is more keen to cut rates than his predecessor, Jordan. STIR markets are currently pricing a 23% chance of a 50 bps cut at the December meeting.
On the other hand, 'safe haven flows' and geopolitical risks can be positively supportive of the currency. As with other central banks, inflation is a crucial metric in the SNB's policy rates.
Conclusion
In summary:
This week's main high-impact news event is Wednesday's CAD interest rate decision.
Our short and long-term fundamental outlooks remain unchanged from the last few weeks.
As always, hope for the best and prepare for the worst. This report should help you determine your bias toward each currency in the short and long term.
Market News Report - 13 October 2024The US dollar was buoyant this week against many currencies, continuing the same trend from the previous week. CHF was a close second, while the Japanese yen found itself among the weakest currencies.
Let's dive into what we should expect for each major forex market in our latest fundamental report.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
Despite a recent 50 basis points (bps) rate cut, the Fed may not need to cut rates as aggressively going forward. This is partly due to positive job numbers and earnings data that exceeded expectations.
Still, the central bank has signalled the potential for two 25 bps drops by the end of this year. Meanwhile, a 50 bps cut has pretty much been priced out, with STIR (short-term interest rate) markets seeing a 14% chance of a hold next month.
After weeks of ranging around the key support area at 100.157, the DXY made its intention known to head north. We spoke about a potential technically-driven retracement (despite the bearish fundamentals).
Meanwhile, the key resistance is far away at 107.348, which will remain untouched for some time.
Long-term outlook: weak bearish.
The latest strong NFP report has raised expectations for a 25 bps rate cut (instead of 50 bps), which is giving USD a boost in the near term. So, there is no extreme dovish pricing anymore. While the bearish bias remains, the dollar may gain amid a broad pullback.
Euro (EUR)
Short-term outlook: bearish.
As usual, the STIR (short-term interest markets) were predictably accurate as the European Central Bank (ECB) cut the interest rate a few weeks ago. While 'being mum' about forward guidance, they revised core inflation projections higher.
Also, the past week saw weaker economic data across various European nations. Finally, short-term interest rate (STIR) markets have indicated a 92% chance of a rate cut at the October 17 meeting.
The euro has finally made its bearish intention known on the charts after spending weeks near the resistance at 1.12757. Meanwhile, this market isn't too far away from the key support at 1.07774.
Long-term outlook: bearish.
The ECB has yet to commit to a specific future path with the interest rate for some time. Due to lingering concerns over services inflation, a rate cut has become more likely than before and will be a key driver soon.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) kept the interest rate steady in its recent meeting. Still, the language indicates that they need to be “restrictive for sufficiently long.” Also, the central bank's higher-ups stressed "a gradual need" to cut rates.
As with the ECB, the central bank's current key theme is fighting persistent inflation in the United Kingdom. So, it makes more sense to be dovish than hawkish. Not long ago, Governor Bailey hinted that "aggressive rate cuts" were possible if inflation went lower.
This week, watch out for several key economic releases for GBP, such as the YoY inflation rate and unemployment rate.
We mentioned that the past week's downturn may be the start of a more serious bear move. So far, that's what the pound is experiencing. The next resistance target is 1.34825, while the nearest key support is at 1.26156.
Long-term outlook: weak bearish.
Sequential rate cuts by the BoE may soon be a reality. Also, expect any weak CPI, labour, and GDP data to back up the bearish bias. However, the central bank hopes for lower service inflation, which may provide relief.
Another interesting point is the latest CFTC (Commodity Futures Trading Commission) report, showing that GBP longs have been stretched to the upside. So, bullishness should be limited at some point.
Japanese yen (JPY)
Short-term outlook: bullish.
The primary bullish catalyst is the Bank of Japan’s (BoJ) recent decision to hike the interest rate. STIR markets expect a hold (99% probability) at the next meeting but a hike at the start of next year.
Governor Ueda of the BoJ noted that despite domestic economic recovery, recent exchange rate movements have reduced the upside risk of inflation (which has been on an upward trajectory). All of this backs up the potential for a rate hold or hike.
Keep an eye on the latest YoY inflation for JPY this Friday.
The 140.252 support area is proving quite strong, boosting the yen since mid-September. Still, the major resistance (at 161.950) is too far for traders to worry about.
Long-term outlook: weak bullish.
Lower US Treasury yields are one potential bullish catalyst for the yen (the opposite is true). Inflation pressures and wage growth would also provide upward momentum. We should also consider that the dovish tendencies of other major central banks and worsening US macro conditions are JPY-positive
Still, as a slight downer, near-term inflation risks subsiding (according to the BoJ) reduce the urgency for a rate hiking cycle.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The Reserve Bank of Australia (RBA) kept the interest rate unchanged during the Sept. 25 meeting. They further stated that they "did not explicitly consider rate hikes" for the future, which is a marginally dovish statement.
The Aussie remains sensitive to China’s recent economic woes, especially with declining iron ore prices from the country’s steelmakers. As always, it depends on drops or rises in economic data like GDP, inflation, and labour.
After failing to break the 0.69426 resistance level several times, the Aussie retraced noticeably from this area. Still, this market is bullish and far from the major support level at 0.63484.
Long-term outlook: weak bullish.
The RBA has certainly changed their tune from hawkish to slightly hawkish/dovish. Overall, it's crucial to be data-dependent with the Aussie, especially with core inflation as the RBA's key focus area.
However, the Australian dollar is pro-cyclical, meaning exposure to the economies of other countries.
New Zealand dollar (NZD)
Short-term outlook: weak bearish.
Unsurprisingly, the Reserve Bank of New Zealand (RBNZD) cut its interest rate by 50 bps last Wednesday and sees further easing ahead. This affirms another cut next month of potentially the same magnitude.
Furthermore, the central bank is confident that inflation will remain in the target zone, adding more impetus to the bearish bias.
Due to the recent rate cut, the Kiwi has been on a downward spiral, proving the strength of the major resistance level at 0.63696. Conversely, the major support is at 0.58498.
Long-term outlook: bearish.
The central bank's latest dovish stance (where it cut the interest rate) firmly puts the Kiwi in a 'bearish bracket.' They also revised the OCR rates lower and signaled steady winnings in the inflation battle.
Canadian dollar (CAD)
Short-term outlook: bearish.
The Bank of Canada (BoC) recently dropped the interest rate to 4.25%, as anticipated by the markets for some time. Further cuts in the next few meetings are on the cards (with a 37% chance of a 50 bps cut next month), with the long-term target being 3%.
Unemployment, weak economic growth, and mortgage stress are the key drivers for this dovishness.
Watch out for the new YoY inflation rate for the Canadian dollar on Tuesday.
While the short-term fundamental biases of USD and CAD are bearish, CAD is weaker on the charts. USD/CAD is making a steady uptick towards the key resistance at 1.39468, while the key support lies down at 1.33586.
Long-term outlook: weak bearish.
Expectations of a rate cut remain the focal point. Governor Macklem himself stated a while ago that it's reasonable to expect more cuts in the future. Any big misses in the upcoming data for GBP, inflation, and GDP will probably boost the chance of a rate cut. STIR markets see a 63% chance of the latter happening later this month.
Also, mortgage stress remains a major factor in this interest rate policy, and the BoC will have to cut rates to alleviate it.
Expect encouraging oil prices and general economic data improvement to save the Canadian dollar's blushes.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets were, as usual, correct in their 43% chance of a 25bps rate cut (from 1.25% to 1%) recently. In the Sept. 26 meeting, the Swiss National (SNB) indicated its preparedness to intervene in the FX market and further rate cuts in the coming quarters.
The central bank's new Chair (Schlegel) said they "cannot rule out negative rates." Finally, the September CPI came in weak at 0.8%, against the expected year-on-year 1.1%.
Still, the Swiss franc can strengthen during geopolitical tensions, such as a worsening Middle East crisis.
USD/CHF has just broken out of the range (but only just) discussed in our last report. While remaining largely bearish, this market could return closer to the major support level at 0.83326 or climb its way to the higher major resistance level at 0.92244.
Long-term outlook: weak bearish.
The bearish sentiment remains after the last SNB meeting, while inflation is being tamed with lower revisions. We should also remember that the SNB's intervention prevents the appreciation of the Swiss franc.
The new chairman is more keen to cut rates than his predecessor, Jordan. STIR markets are currently pricing a 23% chance of a 50 bps cut at the December meeting.
On the flip side, 'safe haven flows' and geopolitical risks can be positively supportive for the currency. As with other central banks, inflation is a crucial metric in the SNB's policy rates.
Conclusion
In summary:
-There are plenty of new inflation rate announcements to diarise this week.
-The euro's interest rate decision is the most anticipated news event heading into the new week.
- All our fundamental outlooks for each currency remain unchanged except for a higher bearish inclination for NZD.
As always, hope for the best and prepare for the worst. This report should help you determine your bias toward each currency in the short and long term.
Market News Report - 06 October 2024The last were turned this week for AUD, which went from being one of the top-performing currencies to among the worst. Conversely, the dollar gained the upper hand partly because of positive job numbers.
Let's see how the coming weeks may turn out for the major currencies in our latest market news report.
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 recent historic 50 basis points (bps) rate cut keeps the bearish bias firmly in place. However, the stronger-than-expected jobs report put a spanner in the works, pricing out a 50 bps cut in the next meeting.
However, the central bank has signalled the potential for two 25 bps drops by the end of this year. STIR (short-term interest rate) markets see a 97% chance of this cut in the meeting next month.
After weeks of ranging around the key support area at 100.617, the DXY made its intention known to head north. We spoke about a potential technically-driven retracement (despite the bearish fundamentals).
Meanwhile, the key resistance is far away at 107.348, which will remain untouched for some time.
Long-term outlook: weak bearish.
Markets anticipate several rate cuts before the year ends, with the Fed keen to harness a soft landing. Also, any data on weakened jobs would be another bearish driver for the dollar.
However, the recent upbeat Non-Farm Payrolls figure makes rate cuts less urgent, allowing for potential further USD retracement.
Euro (EUR)
Short-term outlook: bearish.
As usual, the STIR (short-term interest markets) were predictably accurate as the European Central Bank (ECB) cut the interest rate a few weeks ago. While 'being mum' about forward guidance, they revised core inflation projections higher.
Also, the past week saw weaker economic data across various European nations. Finally, short-term interest rate (STIR) markets have indicated a 100% chance (up from 93% last week) of a rate cut at the October 17 meeting.
The euro stayed around the 1.1200 area for over two months. However, it broke the range, showing the first of bearish pressure. Still, this market finds itself not far between the major resistance at 1.12757 and key support at 1.07774.
Long-term outlook: bearish.
After a long period, we have changed the long-term bias to 'bearish' (from 'weak bearish'). The ECB has yet to commit to a specific future path with the interest rate for some time.
Due to lingering concerns over services inflation, a rate cut in October has become more likely than before.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) kept the interest rate steady in its meeting. Still, the language indicates that they need to be “restrictive for sufficiently long.” Also, the central bank's higher-ups stressed "a gradual need" to cut rates.
As with the ECB, the central bank's current key theme is fighting persistent inflation in the United Kingdom. So, it makes more sense to be dovish than hawkish. Governor Bailey even hinted last Thursday that "aggressive rate cuts" were possible if inflation went lower.
This past week's downturn may be the start of a more serious bear move. Nonetheless, the next resistance target is 1.34825. Meanwhile, the nearest key support is at 1.26156.
Long-term outlook: weak bearish.
Sequential rate cuts by the BoE may soon be a reality. Also, expect any weak CPI, labour, and GDP data to back up the bearish bias. However, the central bank hopes for lower service inflation, which may provide relief.
Another interesting point is the latest CFTC (Commodity Futures Trading Commission) report, showing that GBP longs have been stretched to the upside. So, bullishness should be limited at some point.
Japanese yen (JPY)
Short-term outlook: bullish.
The primary bullish catalyst is the Bank of Japan’s (BoJ) recent decision to hike the interest rate. STIR markets expect a hold (99% probability) at the next meeting but a hike at the start of next year.
Governor Ueda of the BoJ noted that despite domestic economic recovery, recent exchange rate movements have reduced the upside risk of inflation. All of this backs up the potential for a rate hold or hike.
The 140.252 support area is proving quite strong, boosting the yen since mid-September. Still, the major resistance (at 161.950) is too far for traders to worry about.
Long-term outlook: weak bullish.
Lower US Treasury yields are one potential bullish catalyst for the yen (the opposite is true). Inflation pressures and wage growth would also provide upward momentum. We should also consider that the dovish tendencies of other major central banks and worsening US macro conditions are JPY-positive
Still, as a slight downer, near-term inflation risks subsiding (according to the BoJ) reduce the urgency for a rate hiking cycle.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The Reserve Bank of Australia (RBA) kept the interest rate unchanged during the Sept. 25 meeting. They further stated that they "did not explicitly consider rate hikes" for the future, which is a marginally dovish statement.
The Aussie remains sensitive to China’s recent economic woes, especially with declining iron ore prices from the country’s steelmakers. As always, it depends on drops or rises in economic data like GDP, inflation, and labour.
After failing to break the 0.68711 resistance level several times, the Aussie retraced noticeably from this area. Still, this market is bullish and far from the major support level at 0.63484.
Long-term outlook: weak bullish.
The RBA has certainly changed their tune from hawkish to slightly hawkish/dovish. Overall, it's crucial to be data-dependent with the Aussie, especially with core inflation as the RBA's key focus area.
However, the Australian dollar is pro-cyclical, so it is exposed to economic growth in other countries.
New Zealand dollar (NZD)
Short-term outlook: weak bearish.
In its latest meeting, the central bank's dovish stance (where it cut the interest rate) puts the Kiwi in a 'bearish bracket.'
The Reserve Bank of New Zealand (RBNZD) also revised cash rate projections lower, which further signals a dovish move. Finally, various core inflation metrics are consistent with stable and low inflation.
The markets see a 100% chance (up from 70% last week) of a 0.5% rate cut at Tuesday's meeting.
The major resistance level at 0.63696 is proving past strength as we see a noteworthy retracement (similar to its neighbouring Aussie).
Conversely, the major support is at 0.58498, an area which it is unlikely to test soon.
Long-term outlook: weak bearish.
In its latest meeting, the central bank's dovish stance (where it cut the interest rate) puts the Kiwi in a 'bearish bracket.'
However, as a risk-sensitive currency like the Aussie, any growth data in China could trigger bullishness for NZD. So, traders should be data-dependent.
Canadian dollar (CAD)
Short-term outlook: bearish.
The Bank of Canada (BoC) recently dropped the interest rate to 4.25%, as anticipated by the markets for some time. Further cuts in the next few meetings are on the cards (with a 63% chance of a 50 bps cut next month), with the long-term target being 3%.
Unemployment, weak economic growth, and mortgage stress are the key drivers for this dovishness.
Speaking of the former, keep an eye on the CAD unemployment rate on Friday (where no change is expected).
The CAD continues to strengthen mildly due to USD weakness. It now looks to test the next major support target at 1.33586, while the major resistance is far ahead at 1.39468.
Long-term outlook: weak bearish.
Expectations of a rate cut remain the focal point. Governor Macklem himself stated a while ago that it's reasonable to expect more cuts in the future. Any big misses in the upcoming data for GBP, inflation, and GDP will probably boost the chance of a rate cut. STIR markets see a 63% chance of the latter happening later this month.
Also, mortgage stress remains a major factor in this interest rate policy, and the BoC will have to cut rates to alleviate it.
Expect encouraging oil prices and general economic data improvement to save the Canadian dollar's blushes.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets were, as usual, correct in their 43% chance of a 25bps rate cut (from 1.25% to 1%) this past week. In the Sept. 26 meeting, the Swiss National (SNB) indicated its preparedness to intervene in the FX market and further rate cuts in the coming quarters.
The central bank's new Chair (Schlegel) said they "cannot rule out negative rates." Finally, the September CPI came in weak at 0.8%, against the expected year-on-year 1.1%.
Still, the Swiss franc can strengthen during geopolitical tensions, such as a worsening Middle East crisis.
While we see a clear range, this market is looking to break it (even though it remains a strong bear move).
The major support level is closer at (0.83326), while the major resistance level is far higher at 0.92244.
Long-term outlook: weak bearish.
The bearish sentiment remains after the last SNB meeting, while inflation is being tamed with lower revisions. We should also remember that the SNB's intervention prevents the appreciation of the Swiss franc.
The new chairman is more keen to cut rates than his predecessor, Jordan. STIR markets are currently pricing a 22% chance of a 50 bps cut at the meeting in December.
On the flip side, 'safe haven flows' and geopolitical risks can be positively supportive for the currency. As with other central banks, inflation is a crucial metric in the SNB's policy rates.
Conclusion
Besides the NZD interest rate decision, this week isn't filled with high-impact economic events, reducing the chance of high volatility.
Still, hope for the best and prepare for the worst. This report should help you determine your bias toward each currency in the short and long term.
Market News Report - 29 September 2024Due to an unsurprising rate hold, the Aussie was among the top-performing currencies in the major forex markets. Meanwhile, the dollar fell against AUD and several other currencies as the recent Fed cut continues to downplay the greenback.
Have any fundamental outlooks changed for this week compared to our last report? Let's find out.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
Unsurprisingly, the Fed's recent historic 50 basis points (bps) rate cut is still a hot topic, keeping the bearish bias firmly in place. The central bank has signalled the potential for two 25 bps drops by the end of this year.
In line with this sentiment, the Fed also revised 'dots' lower, Gross Domestic Product (GDP) and unemployment higher.
Negative expected jobs and ISM services data coming this week will add further to the bearish pressure.
Despite these fundamentals, the DXY has yet to break the support area at 100.617, instead ranging around this level for quite a while now. So, be mindful of a potential technically-driven retracement.
Meanwhile, the key resistance is far away at 107.348, which will remain untouched for some time.
Long-term outlook: weak bearish.
Markets anticipate rate cuts before the year ends, with the Fed keen to harness a soft landing. Also, any data on weakened jobs would be another bearish driver for the dollar.
However, any potential strength in upcoming GDP (Gross Domestic Product) and jobs would make rate cuts less urgent, allowing for a USD retracement.
Euro (EUR)
Short-term outlook: weak bearish.
As usual, the STIR (short-term interest markets) were predictably accurate as the European Central Bank (ECB) cut the interest rate a few weeks ago. While 'being mum' about forward guidance, they revised core inflation projections higher.
Also, the past week saw weaker economic data across various European nations. Finally, short-term interest rate (STIR) markets have indicated a 93% chance of a rate cut in October.
Meanwhile, the chart tells a slightly different story. After recently breaking a major resistance, the next target is 1.12757. Meanwhile, the key support area lies far below at 1.07774.
Long-term outlook: bearish.
After a long period, we have changed the long-term bias to 'bearish' (from 'weak bearish'). The ECB has yet to commit to a specific future path with the interest rate for some time.
Due to lingering concerns over services inflation, a rate cut in October has become more likely than before. There is a 7% chance (down from 67% of a hold (according to STIR markets). All of this accents the bearish bias.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) kept the interest rate steady in its meeting. Still, the language indicates that they need to be “restrictive for sufficiently long.” Early last week, the central bank's higher-ups stressed "a gradual need" to cut rates.
As with the ECB, the central bank's current key theme is fighting persistent inflation in the United Kingdom. So, it makes more sense to be dovish than hawkish. Expect any shocks in inflation (or other data like labour) to send the pound lower.
Like the euro, the British pound has been saved by dollar weakness on the charts. However, it is more bullish. We must go onto the weekly chart to see the next resistance target at (1.34825).
On the other hand, the nearest key support is far away at 1.26156.
Long-term outlook: weak bearish.
Sequential rate cuts by the BoE may soon be a reality. Also, expect any weak CPI, labour, and GDP data to back up the bearish bias. However, the central bank hopes for lower service inflation, which may provide relief.
Another interesting point is the latest CFTC (Commodity Futures Trading Commission) report, showing that GBP longs have been stretched to the upside. So, bullishness should be limited at some point.
Japanese yen (JPY)
Short-term outlook: bullish.
The primary bullish catalyst is the Bank of Japan’s (BoJ) recent decision to hike the interest rate. STIR markets expect a hold (99% probability) at the next meeting but a hike at the start of next year.
Governor Ueda of the BoJ noted that despite domestic economic recovery, recent exchange rate movements have reduced the upside risk of inflation. All of this backs up the potential for a rate hold or hike.
USD/JPY has long been bearish, recently surpassing (but not breaking with confidence) the major resistance at 140.252. Meanwhile, the major resistance (at 161.950) is too far for traders to worry about.
Long-term outlook: weak bullish.
Lower US Treasury yields are one potential bullish catalyst for the yen (the opposite is true). Inflation pressures and wage growth would also provide upward momentum. We should also consider that the dovish tendencies of other major central banks and worsening US macro conditions are JPY-positive
Still, as a slight downer, near-term inflation risks subsiding (according to the BoJ) reduce the urgency for a rate hiking cycle.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The Reserve Bank of Australia (RBA) kept the interest rate unchanged during the Sept. 24 meeting. They further stated that they "did not explicitly consider rate hikes" for the future, which is a marginally dovish statement.
The Aussie remains sensitive to China’s recent economic woes, especially with declining iron ore prices from the country’s steelmakers. As always, it depends on drops or rises in economic data like GDP, inflation and labour.
The Aussie market has risen noticeably of late, having exceeded the recent resistance level at 0.68711. However, as it has yet to break the level confidently, we need to see how it behaves near the latter.
Meanwhile, the major support level is down at 0.63484.
Long-term outlook: weak bullish.
The RBA has certainly changed their tune from hawkish to slightly hawkish/dovish. Overall, it's crucial to be data-dependent with the Aussie, especially with core inflation as the RBA's key focus area.
However, the Australian dollar is pro-cyclical, so it is exposed to economic growth in other countries.
New Zealand dollar (NZD)
Short-term outlook: weak bearish.
In its latest meeting, the central bank's dovish stance (where it cut the interest rate) puts the Kiwi in a 'bearish bracket.'
Furthermore, the Reserve Bank of New Zealand (RBNZD) also revised cash rate projections lower, which signals a dovish move. The markets see a 70% chance of an 0.5% rate cut next month.
The Kiwi has recently breached a major resistance at 0.62220. While the next target is at 0.63696 (where it is very close to hitting), the latter area is still worth considering.
Conversely, the major support is at 0.58498, an area which it is unlikely to test soon.
Long-term outlook: weak bearish.
In its latest meeting, the central bank's dovish stance (where it cut the interest rate) puts the Kiwi in a 'bearish bracket.'
However, as a risk-sensitive currency like the Aussie, any growth data in China could trigger bullishness for NZD. So, traders should be data-dependent.
Canadian dollar (CAD)
Short-term outlook: bearish.
The Bank of Canada (BoC) recently dropped the interest rate to 4.25%, as anticipated by the markets for some time. Further cuts in the next few meetings are on the cards (with a 57% chance of a 50bps cut next month), with the long-term target being 3%.
Unemployment, weak economic growth, and mortgage stress are the key drivers for this dovishness.
The CAD continues to strengthen mildly due to USD weakness. It now looks to test the next major support target at 1.33586, while the major resistance is far ahead at 1.39468.
Long-term outlook: weak bearish.
Expectations of a rate cut remain the focal point. Governor Macklem himself stated a while ago that it's reasonable to expect more cuts in the future. Any big misses in the upcoming data for GBP, inflation, and GDP will probably boost the chance of a rate cut next month.
Also, mortgage stress remains a major factor in this interest rate policy, and the BoC will have to cut rates to alleviate it.
Expect encouraging oil prices, along with general economic data improvement, to save the Canadian dollar's blushes.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets were, as usual, correct in their 43% chance of a 25bps rate cut (from 1.25% to 1%) this past week. In the Sept. 26 meeting, the Swiss National (SNB) indicated its preparedness to intervene in the FX market and further rate cuts in the coming quarters.
Still, the Swiss franc can strengthen during geopolitical tensions, such as a worsening Middle East crisis.
We are seeing a clear range on USD/CHF in a strong bear move. So, let's see which side the market is going to incline more towards going forward (although it looks more south than north).
The major support level is closer at (0.83326), while the major resistance level is far higher at 0.92244.
Long-term outlook: weak bearish.
The bearish sentiment remains after the last SNB meeting, while inflation is being tamed with lower revisions. We should also remember that the SNB's intervention prevents the appreciation of the Swiss franc.
On the flip side, 'safe haven flows' and geopolitical risks can be positively supportive for the currency. As with other central banks, inflation is a crucial metric in the SNB's policy rates.
Conclusion
We have kept our fundamental outlooks the same, except for the long-term outlook on the euro. Anyone trading the latter in the coming weeks should bear this in mind. Besides the US-related news, this week isn't filled with high-impact economic events, meaning less volatility.
Still, hope for the best and prepare for the worst. This report should help you determine your bias toward each currency in the short and long term.
Market News Report - 22 September 2024It was a historic week in FX, as the Fed delivered a half-percent interest rate cut for the first time since 2020. Based partly on this news, currencies like the British pound and the Australian dollar found strength across numerous markets.
In our latest news report, let's see what to expect from all the major forex markets performance-wise.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
Unsurprisingly, the Fed delivered a dovish move with a historic 50 basis points (bps) rate cut. So, the bearish bias firmly remains, with signals of two 25 bps cuts in the pipeline for the rest of 2024.
Furthermore, unemployment was recently revised higher.
The DXY chart aligns perfectly with the fundamentals, having recently reached a major support area (100.617) on the daily chart. Interestingly, a clear break has yet to occur after several weeks. So, be mindful of a potential technically driven retracement.
Meanwhile, the key resistance is far away at 107.348, which will remain untouched for some time.
Long-term outlook: weak bearish.
Markets anticipate several full rate cuts before the year ends, with the Fed being keen to harness a soft landing. Also, any data on weakened jobs would be another bearish driver for the dollar.
However, any potential strength in upcoming GDP (Gross Domestic Product) and jobs would make rate cuts less urgent, allowing for a USD retracement.
Euro (EUR)
Short-term outlook: weak bearish.
As usual, the STIR (short-term interest markets) were predictably accurate as the European Central Bank (ECB) cut the interest rate. While 'being mum' about forward guidance, they revised core inflation projections higher.
Sources report that a cut in October is unlikely, but one in December is more likely.
Meanwhile, the chart tells a slightly different story. After recently breaking a major resistance, the next target is 1.12757. Meanwhile, the key support area lies far below at 1.07774.
Long-term outlook: weak bearish.
The ECB hasn't committed to a specific future path with the interest rate. Due to lingering concerns over services inflation, a rate cut in October is less likely, with a 76% chance of a hold (according to STIR markets).
So future inflation data remains key, with improvements likely to tick the euro higher. We should note that the interest rate differential has become more positive for EUR after the latest Fed cut.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) kept the interest rate steady in last week's meeting. Still, the language indicates they need to be "restrictive for sufficiently long."
As with the ECB, the central bank's current key theme is fighting persistent inflation in the United Kingdom. So, it makes more sense to be dovish than hawkish. Expect any shocks in inflation (or other data like labour) to send the pound lower.
Like the euro, the British pound has been saved by dollar weakness on the charts. However, it is more bullish. We must go onto the weekly chart to see the next resistance target at (1.34825). However, it hasn't yet properly broken the closest area at 1.32666.
On the other hand, the nearest key support is far away at 1.26156.
Long-term outlook: bearish.
Sequential rate cuts by the BoE may soon be a reality. Also, expect any weak CPI, labour, and GDP data to back up the bearish bias.
Another interesting point is the latest CFTC (Commodity Futures Trading Commission) report, showing that GBP longs have been stretched to the upside. So, bullishness should be limited.
Japanese yen (JPY)
Short-term outlook: bullish.
The primary bullish catalyst is the Bank of Japan's (BoJ) recent decision to hike the interest rate.
STIR markets expect a hold (99% probability) at the next meeting but a hike at the start of next year.
Governor Ueda of the BoJ noted that despite domestic economic recovery, recent exchange rate movements have reduced the upside risk of inflation. All of this backs up the potential for a rate hold or hike.
USD/JPY has long been bearish, recently surpassing (but not breaking with confidence) the major resistance at 140.252. Meanwhile, the major resistance (at 161.950) is too far for traders to worry about.
Long-term outlook: weak bullish.
Lower US Treasury yields are one bullish catalyst for the yen. Inflation pressures and wage growth would also provide upward momentum.
We should also consider that the dovish tendencies of other major central banks are JPY-positive.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The Reserve Bank of Australia (RBA) unsurprisingly kept the interest rate unchanged not long ago to keep the fight against persistent inflation rate. (Diarise the upcoming rate statement on Tuesday for AUD.)
Governor Bullock also stressed that the latter's results need to improve before a cut is envisioned.
The Aussie remains sensitive to China's recent economic woes, especially with declining iron ore prices from the country's steelmakers.
The Aussie market has risen noticeably of late, having exceeded the recent resistance level (at 0.68239). While the next nearby target is 0.68711, we need to see how it behaves near the latter.
Meanwhile, the major support level is down at 0.63484.
Long-term outlook: weak bullish.
The RBA remains hawkish as per their last meeting, focusing on core inflation. Overall, it's crucial to be data-dependent with the Aussie, with recent labour data keeping the bullish script alive.
However, the Australian dollar is pro-cyclical, so it is exposed to slow economic growth in other countries.
New Zealand dollar (NZD)
Short-term outlook: weak bearish.
New Zealand's central bank recently dropped the Kiwi's interest rate from 5.50% to 5.25%.
Lower-revised cash rate projections also hint at the potential for further cuts in the near future.
The Kiwi has recently breached a major resistance at 0.62220. While the next target is at 0.63696, the latter area is still worth considering.
Conversely, the major support is at 0.58498, an area which it is unlikely to test soon.
Long-term outlook: weak bearish.
In its latest meeting, the central bank's dovish stance (where it cut the interest rate) puts the Kiwi in a 'bearish bracket.'
However, as a risk-sensitive currency like the Aussie, any growth data in China could trigger bullishness for NZD. As with its counterpart, traders should be data-dependent.
Canadian dollar (CAD)
Short-term outlook: bearish.
The Bank of Canada (BoC) dropped the interest rate to 4.25%, as anticipated by the markets for some time. Further cuts in the next few meetings are on the cards, with the long-term target being 3%.
Rising unemployment and weak economic growth are the key drivers for this dovishness. The ongoing mortgage stress remains another bearish catalyst.
The CAD continues to strengthen mildly due to USD weakness. It now looks to test the next major support target at 1.33586, while the major resistance is far ahead at 1.39468.
Long-term outlook: weak bearish.
Expectations of a rate cut remain the focal point. Governor Macklem himself stated some time ago that it's reasonable to expect more cuts in the future. Moreover, STIR markets have priced in an additional cut sometime 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. Still, this narrative is getting tired.
Expect encouraging oil prices, along with general economic data improvement, to save the Canadian dollar's blushes.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets forecast a 25bps rate cut this week (a 43% chance, up from 36% in the last week) and a 50bps cut in December this year.
Secondly, SNB expects a moderate improvement in inflation, GDP (Gross Domestic Product), and unemployment to rise slightly in the near term.
Still, the Swiss franc can strengthen during geopolitical tensions, such as a worsening Middle East crisis.
We are seeing a clear range on USD/CHF in a strong bear move. So, let's see which side the market is going to incline more towards going forward.
The major support level is closer at (0.83326), while 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 should be milder than the previous one filled with interest rate decisions. The main high-impact economic release to watch out for is the RBA rate statement on Tuesday.
As always, hope for the best and prepare for the worst, but this report should help you determine your bias toward each currency.
Market News Report - 15 September 2024This past week, the Japanese yen was the strongest currency against all the major forex markets. Meanwhile, its counterparts performed mildly.
How long will the yen be dominant? What about the other currencies? This week consists of several high-impact, interest rate-related events that will surely be a spectacle.
Let's discuss each major forex currency's short and long-term outlooks in our latest report.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
STIR (short-term interest rate) markets expect at least four full rate cuts before the end of this year. They also suggest a 50% chance (up from 36% last week) of a 50 bps (basis points) cut at this week's meeting. So, diarise this high-impact news event.
However, any sense of the Fed holding back on a cut would send the dollar sharply higher.
The DXY chart aligns perfectly with the fundamentals. It recently reached a major support area (100.617) on the daily chart and is still near this level.
Meanwhile, the key resistance is far away at 107.348 and will likely remain untouched for some time.
Long-term outlook: bearish.
Markets anticipate several full rate cuts before the year ends. However, the meeting on Thursday may strengthen the USD if the Fed doesn't proceed with a 50 bps cut. Still, data on weakened jobs is another bearish driver for the dollar.
Only geopolitical risks, bond market selling, and interest rate differentials can affect this sentiment.
Euro (EUR)
Short-term outlook: weak bearish.
The European Central Bank (ECB) lowered the interest rate as we've predicted for several weeks. However, STIR markets have shifted towards a hawkish direction for future ECB meetings. We should also note that the central bank remains 'data-dependent' and not committed to the potential for cuts going forward.
We've seen some bearishness on the euro chart. It is some distance from the major resistance at 1.127575, and it's hard to tell where it may attempt to reach this area soon. Meanwhile, the key support area lies far below at 1.07774.
Long-term outlook: weak bearish.
The ECB hasn't committed to a specific future path with the interest rate. Furthermore, the central bank is overly concerned about services inflation, reducing the chance of a rate cut next month. Also, STIR markets anticipate a 67% chance of a hold during this meeting.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) cut the interest rate by 25 basis points at the beginning of last month. However, the BoE remains data-dependent and has no set future path. STIR markets are currently pricing two additional cuts for the remainder of 2024.
The central bank's current key theme is fighting persistent inflation in the United Kingdom. Any future failures here would likely weaken the GBP.
Watch out for the new interest rate (or 'Official Bank Rate') this Thursday.
As with the euro, the British pound has been saved by dollar weakness on the charts. It recently breached the major resistance at 1.31424. So, the next area of interest is near by at 1.32666.
On the other hand, the nearest key support is far below at 1.26156.
Long-term outlook: weak bearish.
While the interest rate is the chief bearish driver for the pound, the BoE has yet to signal a future path in this regard.
STIR markets predict a rate hold next for the Thursday meeting (79% chance vs. 74% chance last week). Furthermore, two-way risks remain based on upcoming economic data, particularly inflation.
Japanese yen (JPY)
Short-term outlook: bullish.
The primary bullish catalyst is the Bank of Japan’s (BoJ) recent decision in July to hike the interest rate (15 bps hike vs the 10 bps expected).
STIR markets expect a hold (99% probability) at the next meeting this Friday but a hike at the start of next year. So, the bullish bias is intact, more so with the rate-cutting mood of other major centrals like the Fed, ECB, and BoE.
The USD/JPY market perfectly reflects the fundamental outlook of the dollar and yen. Very few would have predicted the current picture of this chart. This pair is very close to touching the major support area 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 (and the potential for a hold at the next meeting), lower US Treasury yields are other bullish catalysts for the yen.
Also, the Bank of Japan is actively intervening in the forex markets, contributing to the JPY's upside for many weeks.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The Reserve Bank of Australia (RBA) unsurprisingly kept the interest rate unchanged not long ago to keep the fight against persistent inflation.
Moreover, Governor Bullock expressed last week that the central bank must see 'results' on the latter before lowering rates. Inflation is also a problem for the RBA, indicating that rate cuts would be premature.
Like many currencies, the Aussie remains data-sensitive, whether we consider economic growth, labour, or inflation going forward. As a pro-cyclical currency, China's economic woes have been negative for the Aussie (something else to keep in mind).
The Aussie market has risen noticeably of late, having reached a recent resistance level (0.67986). While dipping last week, the next target at 0.68711 isn't so far away.
Meanwhile, the major support level is down at 0.63484.
Long-term outlook: weak bullish.
The RBA remains hawkish as per the recent meeting, focusing on core inflation. Overall, it's crucial to be data-dependent with the Aussie, with recent labour data keeping the bullish script alive.
However, the Australian dollar is pro-cyclical. So, it is exposed to slow economic growth in other countries.
New Zealand dollar (NZD)
Short-term outlook: weak bearish.
New Zealand's central bank dropped the Kiwi's interest rate from 5.50% to 5.25% last month.
Lower-revised cash rate projections and a variety of core inflation measures also hint at the potential for further cuts in the near future. However, it is the usual data-dependency for NZD that could drive the currency either direction.
The Kiwi has recently breached a major resistance at 0.62220 - the next target is 0.63696. Conversely, the major support is at 0.58498, an area that it is unlikely to test soon.
Long-term outlook: weak bearish.
In its latest meeting, the central bank's dovish stance (where it cut the interest rate) puts the Kiwi in a 'bearish bracket.'
However, as a risk-sensitive currency like the Aussie, any growth data in China could trigger bullishness for the NZD. As with other currencies, traders should be data-dependent, especially around inflation and wages.
Canadian dollar (CAD)
Short-term outlook: bearish.
The Canadian dollar is fresh off an interest rate cut (from 4.50% to 4.25%). Furthermore, STIR markets indicate a 91% chance of another cut next month and two full rate cuts before the end of 2024.
Rising unemployment and weak economic growth are key drivers of the Bank of Canada's dovish stance. Let's not forget the ongoing mortgage stress, a long-running bearish theme for CAD.
Among other factors, Canada's ongoing mortgage stress has forced its central bank to be dovish.
Despite the above, the CAD continues to strengthen mildly due to USD weakness. It now looks to test the next major support target at 1.33586, while the major resistance is far ahead at 1.39468.
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. In the recent meeting, they also wished for economic growth.
The mortgage stress remains a major factor in this interest rate policy, and the BoC will have to cut rates to alleviate it.
However, expect encouraging oil prices, along with general economic data improvement, to save the Canadian dollar's blushes.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets forecast a 25 bps rate cut later this month and in December this year. Also, despite the positive trend of falling inflation, the Swiss National Bank is pressured to weaken the Swiss franc to facilitate more exports.
However, the CHF can strengthen during geopolitical tensions like the Middle East crisis.
USD/CHF has trended down nicely for several weeks, now looking to test the support area at 0.83326. 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 fundamental outlooks of each currency have remained unchanged from our previous report. Getting three interest rate decision events a day after another in a week happens once in a blue moon. Thus, we should expect higher-than-average volatility.
Otherwise, keep our fundamental outlooks in mind as you tackle this - hope for the best and prepare for the worst!
Market News Report - 08 September 2024Our fundamental outlooks for the major currencies remain the same from the past week. However, those that we considered bearish, like the British pound and the US dollar have shown strength recently.
Nonetheless, let's see what to expect from all the major forex markets performance-wise in our latest news report.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
STIR (short-term interest rate) markets expect at least four full rate cuts before the end of this year. They also suggest a 36% chance of a 50 bps (basis points) cut at the meeting next week on the 18th.
Another bearish focus for the US is the slowing labour market, according to the latest jobs revisions data from the Bureau of Labor Statistics.
Diarise the upcoming inflation rate and initial jobless claims for the dollar this week.
The DXY chart aligns perfectly with the fundamentals. It recently reached a major support area (100.617) on the daily chart and is still near this level.
Meanwhile, the key resistance is far away at 107.348 and will likely remain untouched for some time.
Long-term outlook: bearish.
Markets anticipate several full rate cuts before the year ends. Also, data on weakened jobs is another bearish driver for the dollar.
Only geopolitical risks, bond market selling, and interest rate differentials can affect this sentiment.
Euro (EUR)
Short-term outlook: weak bearish.
The primary bearish driver is the interest rate, with STIR markets anticipating a very high chance of a 25 bps rate cut at the meeting this Thursday. Furthermore, the Governing Council affirmed that rates need to remain "sufficiently restrictive for as long as
necessary."
However, the European Central Bank (ECB) has also stressed that it is data-dependent. This means that certain economic data, like employment data, may boost the euro.
Meanwhile, the chart tells a slightly different story. After breaking the last major resistance (although dropping slightly now), the next target is 1.12757. Meanwhile, the key support area lies far below at 1.07774.
Long-term outlook: weak bearish.
The ECB hasn't committed to a specific future path with the interest rate. They are data-dependent, meaning data around inflation, growth, and wage improvement can lift the euro. However, their meeting in July was slightly more dovish than hawkish.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) cut the interest rate by 25 basis points at the beginning of last month. However, the BoE remains data-dependent and has no set future path. STIR markets are currently pricing two additional cuts for the remainder of 2024.
The central bank's current key theme is fighting persistent inflation in the United Kingdom. Any future failures here would likely weaken the GBP.
Watch out for the new unemployment and inflation rates on Tuesday and Wednesday, respectively.
As with the euro, the British pound has been saved by dollar weakness on the charts. It has just broken the major resistance at 1.31424. So, the next area of interest is near by at 1.32666.
On the other hand, the nearest key support is far below at 1.26156.
Long-term outlook: weak bearish.
While the interest rate is the chief bearish driver for the pound, the BoE has yet to signal a future path in this regard.
STIR markets predict a rate hold next month (74% chance vs. 62% chance last week). Furthermore, two-way risks remain based on upcoming economic data, particularly with inflation. Also, GBP/USD has been pushing higher of late due to USD weakness on Fed easing hopes.
Japanese yen (JPY)
Short-term outlook: bullish.
The primary bullish catalyst is the Bank of Japan’s (BoJ) recent decision in July to hike the interest rate (15 bps hike vs the 10 bps expected).
STIR markets expect a hold (99% probability, up from 95% last week) at the next meeting but a hike at the start of next year. So, the bullish bias is intact, more so with the rate-cutting mood of other major centrals like the Fed, ECB, and BoE.
The USD/JPY market perfectly reflects the fundamental outlook of the dollar and yen. This pair looks to now target the major support area 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.
Also, the Bank of Japan is actively intervening in the forex markets, contributing to the JPY's upside.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The Reserve Bank of Australia (RBA) unsurprisingly kept the interest rate unchanged not long ago to keep the fight against persistent inflation. Moreover, Governor Bullock expressed last week that the central bank must see 'results' on the latter before lowering rates.
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.
The Aussie market has risen noticeably of late, having reached a recent resistance level (0.67986). While dipping last week, the next target at 0.68711 isn't so far away.
Meanwhile, the major support level is down at 0.63484.
Long-term outlook: weak bullish.
The RBA remains hawkish as per the recent meeting, focusing on core inflation. Overall, it's crucial to be data-dependent with the Aussie, with recent labour data keeping the bullish script alive.
However, the Australian dollar is pro-cyclical. So, it is exposed to slow economic growth in other countries.
New Zealand dollar (NZD)
Short-term outlook: weak bearish.
New Zealand's central bank recently dropped the Kiwi's interest rate from 5.50% to 5.25%.
Lower-revised cash rate projections also hint at the potential for further cuts in the near future.
The Kiwi has recently breached a major resistance at 0.62220 - the next target is 0.63696. Conversely, the major support is at 0.58498, an area that it is unlikely to test soon.
Long-term outlook: weak bearish.
The central bank's dovish stance in its latest meeting (where it cut the interest rate) puts the Kiwi in a 'bearish bracket.'
However, as a risk-sensitive currency like the Aussie, any growth data in China could trigger bullishness for the NZD. As with its counterpart, traders should be data-dependent.
Canadian dollar (CAD)
Short-term outlook: bearish.
The Canadian dollar is fresh off an interest rate cut (from 4.50% to 4.25%), confirming the overwhelming probability suggested by STIR markets. Furthermore, the latter indicates a 91% chance of another cut next month and two full rate cuts before the end of 2024.
Among other factors, Canada's ongoing mortgage stress has forced its central bank to be dovish.
Despite the above, the CAD continues to strengthen mildly due to USD weakness (although the dollar gained the upper hand this past week). It now looks to test the next major support target at 1.33586, while the major resistance is far ahead at 1.39468.
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. In last week's meeting, they also wished for economic growth.
The mortgage stress remains a major factor in this interest rate policy, and the BoC will have to cut rates to alleviate it.
However, expect encouraging oil prices, along with general economic data improvement, to save the Canadian dollar's blushes.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets forecast a rate cut later this month and December this year. Also, despite the positive trend of falling inflation, the Swiss National Bank is pressured to weaken the Swiss franc to make exports easier.
However, the CHF can strengthen during geopolitical tensions like the Middle East crisis.
USD/CHF has trended down nicely for several weeks, now looking to test the support area at 0.83326. 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 fundamental outlooks of each currency have remained mostly unchanged from the previous report. Thursday will arguably be the most anticipated day due to the ECB's interest rate decision. However, keep an eye on the high-impact news events for the dollar and the British pound.
As always, hope for the best and prepare for the worst, but this report should help you determine your bias toward each currency in the short and long term.
Market News Report - 01 September 2024This past week, the euro faltered the most compared to other currencies. Meanwhile, the winners included the New Zealand and Canadian dollars.
Let's see what to expect from all the major forex markets performance-wise in our latest news report.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
STIR (short-term interest rate) markets expect at least four full rate cuts before the end of this year. They also suggest a 30% chance of a 50 bps cut at the next meeting in mid-September.
Another bearish focus for the US is the slowing labour market. As with the beginning of any month, watch out for the unemployment rate and Non-Farm Payrolls on Friday.
The DXY chart aligns perfectly with the fundamentals, having recently reached a major support area (100.617) on the daily chart. Meanwhile, the key resistance is far away at 107.348 and will likely remain untouched for some time.
Long-term outlook: bearish.
Markets anticipate several full rate cuts before the year ends. Also, data on weakened jobs is another bearish driver for the dollar.
Only geopolitical risks, bond market selling, and interest rate differentials can affect this sentiment.
Euro (EUR)
Short-term outlook: weak bearish.
The European Central Bank (ECB) has stressed that it is data-dependent. This means that certain economic data, like employment data, may boost the euro.
However, the primary bearish driver is the interest rate, with STIR markets anticipating a 100% chance of a 25 bps rate cut at the next meeting this month.
On the bright side, German inflation recently fell to its lowest level since March 2021, to 1.9% (from 2.3% in July 2024).
Meanwhile, the chart tells a slightly different story. After breaking the last major resistance, the next target is 1.12757. Meanwhile, the key support area lies far below at 1.07774.
Long-term outlook: weak bearish.
The ECB hasn't committed to a specific future path with the interest rate. They are data-dependent, meaning data around inflation, growth, and wage improvement can lift the euro. However, their meeting in July was slightly more dovish than hawkish.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) cut the interest rate by 25 basis points at the beginning of last month. However, the BoE remains data-dependent and has no set future path. STIR markets are currently pricing two additional cuts for the remainder of 2024.
The central bank's current key theme is fighting persistent inflation in the United Kingdom. Any future failures here would likely weaken the GBP.
As with the euro, the British pound has been saved by dollar weakness on the charts. It has just broken the major resistance at 1.31424. Despite this, it remains an area of interest due to appearing in a high time frame.
On the other hand, the nearest key support is far away at 1.26156.
Long-term outlook: weak bearish.
While the interest rate is the chief bearish driver for the pound, the BoE has yet to signal a future path in this regard.
STIR markets predict a rate hold next month (74% chance vs. 62% chance last week). Furthermore, two-way risks remain based on upcoming economic data, particularly with inflation.
Japanese yen (JPY)
Short-term outlook: bullish.
The yen is the only currency where a change to the short-term outlook is necessary (from 'weak bullish' to 'bullish')
The primary bullish catalyst is the Bank of Japan’s (BoJ) recent decision to hike the interest rate.
STIR markets expect a hold (99% probability, up from 95% last week) at the next meeting but a hike at the start of next year. So, the bias is intact, and we should expect buyers on dips, more so with the dollar's macro outlook indicating a decline.
After cooling down recently, USD/JPY looks to have resumed its downtrend, aligning with the outlook mentioned.
The major support level to watch is 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.
Also, the Bank of Japan is actively intervening in the forex markets, contributing to the JPY's upside.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The Reserve Bank of Australia (RBA) unsurprisingly kept the interest rate unchanged not long ago 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.
The Aussie market has risen noticeably of late, having reached a recent resistance level. While the next nearby target is 0.68711, we need to see how it behaves at the latter.
Meanwhile, the major support level is down at 0.63484.
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, with recent labour data keeping the bullish script alive.
However, the Australian dollar is pro-cyclical, so it is exposed to slow economic growth in other countries.
New Zealand dollar (NZD)
Short-term outlook: weak bearish.
New Zealand's central bank recently dropped the Kiwi's interest rate from 5.50% to 5.25%.
Lower-revised cash rate projections also hint at the potential for further cuts in the near future.
The Kiwi has recently breached a major resistance at 0.62220. While we can look towards a future level, this area is still worth considering.
Conversely, the major support is at 0.58498, an area which it is unlikely to test soon.
Long-term outlook: weak bearish.
In its latest meeting, the central bank's dovish stance (where it cut the interest rate) puts the Kiwi in a 'bearish bracket.'
However, as a risk-sensitive currency like the Aussie, any growth data in China could trigger bullishness for NZD. As with its counterpart, traders should be data-dependent.
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 increased the probability to over 90% of the same in Wednesday's meeting.
The CAD continues to strengthen mildly due to USD weakness. It now looks to test the next major support target at 1.33586, while the major resistance is far ahead at 1.39468.
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 have priced in an additional cut sometime 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. Still, this narrative is getting tired.
Expect encouraging oil prices, along with general economic data improvement to save the Canadian dollar's blushes.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets forecast a rate cut later this month (a 35% 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.
After a notable retracement at the start of last month, USD/CHF is looking to test the support area at 0.83326. 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 fundamental outlooks of each currency have remained mostly unchanged from the previous report, except for JPY and NZD. Key news events to watch this week include the US unemployment rate and the CAD interest rate decision.
As always, hope for the best and prepare for the worst, but this report should help guide you in determining the bias you should have for each currency.
Market News Report - 25 August 2024While the yen was a bit stronger this week, the US dollar was the biggest loser, as it has done for several months this year.
While other currencies piggybacked off dollar weakness, the future is never guaranteed in the forex world.
Let's see what to expect from the major currency markets 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 was overall dovish, with Powell indicating a rate cut was on the table next month. STIR (short-term interest rate) markets have suggested a 73% probability of this happening (up from 53% the previous week).
There is some cooling in the labour market. Unemployment recently rose from 4.1% to 4.3%, and revisions data from the Bureau of Labour Statistics have shown a gap of 818K jobs missing.
Watch out for the upcoming initial jobless claims this week. These are often a precursor to the new unemployment rate released at the start of the month.
The DXY chart aligns perfectly with the fundamentals, testing a major support area (100.617) on the daily chart. 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. Weakened jobs data is another bearish driver for the dollar.
Only geopolitical risks, bond market selling, and interest rate differentials can affect this sentiment.
Euro (EUR)
Short-term outlook: weak bearish.
The latest EU retail sales indicate that the consumer is taking some time to recover from the inflation shock.
The European Central Bank (ECB) has stressed that it is data-dependent. For fundamental analysts, this means that certain economic data, like employment data, may boost the euro.
While also indicating that their interest rate meeting is 'wide open,' markets see a 95% chance of a cut next month (up from 87% last week).
Interestingly, the chart tells a different story. After breaking the last major resistance, the next target is 1.12757. Meanwhile, the key support area lies far below at 1.06494.
Long-term outlook: weak bearish.
The ECB hasn't committed to a specific future path with the interest rate. They are data-dependent, meaning data around 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.
The central bank's current key theme is fighting persistent inflation in the United Kingdom. Any future failures here would likely weaken the GBP.
As with the euro, the British pound has been saved by dollar weakness on the charts. Just as we thought the major resistance (1.31424) was too far, it has surpassed this level. However, considering its significance, we should only know how convincing the break is during the week.
On the other hand, the nearest key support is far away at 1.26156.
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 (100% probability, from 95% last week) at the next meeting but a hike at the start of next year.
After cooling down last week, USD/JPY looks to have resumed its downtrend, confirming the poor dollar.
The major support level to watch is 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 last month. 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 not long ago 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.
Diarise Wednesday's upcoming CPI (Consumer Price Index) reading for the Aussie.
As further proof of the short-term outlook, the Aussie market has risen noticeably. In our last report, it was only 130 pips away from the nearest major resistance at 0.67986. It is now right onto this level. So, it will be interesting to see how it reacts this week.
Meanwhile, the major support level is down at 0.63484.
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, with recent labour data keeping the bullish script alive.
However, the Australian dollar is pro-cyclical, so it is exposed to slow economic growth in other countries.
New Zealand dollar (NZD)
Short-term outlook: bearish.
The New Zealand dollar is the only currency we have recently updated the short-term outlook (from neutral to bearish). This is mainly due to the central bank dropping the Kiwi's interest rate from 5.50% to 5.25% two weeks ago.
Lower-revised cash rate projections also hint at the potential for further cuts in the near future.
Similar to its closest relative, AUD, the Kiwi is near the major resistance at 0.62220. Only time will tell if it can break or pull back in the coming days. So, this remains the focal point, while the major support is at 0.58498, an area which it is unlikely to test soon.
Long-term outlook: weak bearish.
In its latest meeting, the central bank's dovish stance (where it cut the interest rate) puts the Kiwi in a 'bearish bracket.'
However, as a risk-sensitive currency like the Aussie, any growth data in China could trigger bullishness for NZD. As with its counterpart, traders should be data-dependent.
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 over 90% of the same next month.
Watch out for the upcoming data on the CAD inflation rate and retail sales this week.
Thanks to dollar weakness, the CAD continues to strengthen mildly. It now looks to test the next major support target (after breaking one at 1.35888) at 1.34780, while the major resistance is far ahead at 1.39468.
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 have priced in an additional cut sometime this year (aside from the one for next month).
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, along with data improvements (the name of the game) may save the Canadian dollar's blushes.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets forecast a rate cut in September (an 82% 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.
After a notable retracement, USD/CHF is looking to test the support area at 0.83326. 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 fundamental outlooks of each currency have remained unchanged from the previous time. However, as expected, prepare for anything on the charts while aligning this activity with our expert fundamental summaries.
Market News Report - 18 August 2024As it did last week, the yen was the biggest loser, losing against the New Zealand dollar, the Australian dollar, and the British pound.
Fundamentally, our outlooks from last week remain the same for all but one market. Let's cover each one in more detail now.
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 was overall dovish. However, STIR (short-term interest rate) markets have suggested a 53% probability for a rate cut next month, down from 68% last week.
The Fed isn't pressured to lower the interest rate due to recent positive retail sales and employment numbers. While this indicates steady growth, the fundamental bearish outlook remains.
Peep at the FOMC minutes on Wednesday in preparation for the new federal funds rate in mid-September.
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 despite there being less urgency on the Fed (as mentioned earlier). The latest Consumer Price Index (CPI) and jobs data indicate a cooling of the US economy, another bearish sign.
Only geopolitical risks, bond market selling, and interest rate differentials 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 latest EU retail sales indicate that the consumer is taking some time to recover from the inflation shock.
The European Central Bank (ECB) has stressed they are data-dependent. For fundamental analysts, it means that certain economic data like employment may boost the euro
While also indicating that their interest rate meeting is 'wide open,' markets see an 87% chance of a cut next month (up from 78% last week).
Interestingly, the chart tells a different story. The euro broke the latest major resistance, a possibility which we suggested in our last report. We must now zoom out to a daily chart to see the next target (1.11396) more clearly.
Meanwhile, the key support area lies far below at 1.06494.
Long-term outlook: weak bearish.
The ECB hasn't committed to a specific future path with the interest rate. They are data-dependent, meaning data around 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.
A key theme for the central bank currently is fighting persistent inflation in the United Kingdom. Any future misses here would likely weaken the GBP.
As with the euro, the British pound has been saved by dollar weakness on the charts. Still, the major resistance (1.31424) is some distance away, while the key support (1.26256) is also far away.
With both outlooks for GBP and USD being bearish, this market is open to moving in any direction going forward.
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 (100% probability, from 95% last week) at the next meeting.
Watch out for the year-on-year inflation rate for JPY on Friday.
USD/JPY continues to cool down or retrace after its multi-week massive decline.
The major support level to watch is 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 last month. 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.
As further proof of the short-term outlook, the Aussie market has risen noticeably. It's only about 130 pips away from the nearest major resistance at 0.67986, while the major support level is down at 0.63484.
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, with recent labour data keeping the bullish script alive.
However, 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: bearish.
The New Zealand dollar is the only currency for which we have updated the short-term outlook (from neutral to bearish). This is mainly due to the central bank dropping the Kiwi's interest rate from 5.50% to 5.25% last Monday.
Lower-revised cash rate projections also hint at the potential for further cuts in the near future.
Diarise the upcoming new year-on-year retail sales number as the main high-impact news for the Kiwi.
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: weak bearish.
The central bank's dovish stance in its latest meeting (where it cut the interest rate) puts the Kiwi in a 'bearish bracket.'
However, as a risk-sensitive currency like the Aussie, any growth data in China could trigger bullishness for NZD. As with its counterpart, traders should be data-dependent.
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 99% (from 88% a week ago) of the same next month.
Watch out for the upcoming data on the CAD inflation rate and retail sales this week.
Thanks to dollar weakness, the CAD continues to strengthen mildly. It now looks to test a fairly recent major support target at 1.35896, while the major resistance is far ahead at 1.39468.
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 have priced in an additional cut sometime this year (aside from the one for next month).
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, along with improvements in jobs, inflation, and GDP, may redeem the Canadian dollar.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets forecast a rate cut in September (an 82% 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.
Despite a notable retracement, USD/CHF is largely bearish. The 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
The fundamental outlooks of each currency have remained unchanged from the previous weeks, except for the New Zealand dollar. However, as expected, prepare for anything on the charts while aligning this activity with the fundamental summaries.
Market News Report - 11 August 2024The 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.
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).
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.
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.
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.
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.
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.
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.
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.
Market News Report - 04 August 2024USD/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.
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.
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.
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.
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.
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.
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.
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.
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.
Market News Report - 28 July 2024It 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.
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.
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.
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.
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.
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.
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.
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.
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.
Market News Report - 21 July 2024As it did last week, the yen reigned supreme against several currencies. Other dominant markets in the past week include the Swiss franc and the euro. In our latest market report, we examine the performance of the major forex currencies and their fundamental outlooks.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: bearish.
The Fed is slowly winning the fight against inflation, with the latest Consumer Price Index (CPI) data coming at a lower-than-expected rate of 3%)
Despite this, the Fed has suggested at least one rate cut this year. Short-term interest rate (STIR) markets predict an 8% chance of this happening at the end of this month.
The news highlights to consider this week include the new QoQ GDP Growth Rate QoQ and the MoM Core PCE Price Index.
While 'Dixie' finally breached the major support at 103.993, it only just. Although, by right, the next level to watch is 103.172, this market may still find support around this area.
Still, the chart is bearish, with the resistance area far ahead 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: weak bearish.
The European Central Bank (ECB) kept its interest rate unchanged last week. Additionally, the European Council indicated that "we will keep policy rates sufficiently restrictive for as long as necessary…"
Christine Lagarde, the ECB President, also suggested slow economic growth in the Eurozone, with inflation expected to fluctuate around current levels.
The euro chart is the opposite of the DXY. While eclipsing the major resistance, the break wasn't as convincing as it should have been. 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 68% chance of a rate cut in September.
Still, the central bank is data-dependent, where any improvements in inflation, growth and wages 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 56% chance of a BoE rate cut next month.
While the British pound had firmer economic data in the past week, it failed to rally higher. This is another strong bearish indication.
Like its closest rival, the euro, the British pound is quite bullish. GBP has taken another step towards the major resistance at 1.31424 (although it's still some distance away).
Meanwhile, the new support area is 1.26156, which the pound is unlikely to get close to anytime soon.
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 53% 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.
In just under three weeks, USD/JPY is close to the major support at 154.546 after months of highs. The end of July will truly determine if this market is out of the bearish zone. However, fundamentals suggest it is heading in that direction on the charts.
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 a potential lowering in US Treasury yields.
Given the yen's recent overdue recovery 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.
The Aussie made a noticeable U-turn in the past week. While the fundamental bias suggests a buyer's market, there's a reasonable gap between the key resistance of 0.68711 and the key support at 0.65761, where the market can go either way.
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.
Like its closest relative (AUD), the Kiwi trended down in the past week. The market can trade either way between the key support and resistance levels of 0.58746 and 0.62220, respectively.
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 50/50 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.
STIR markets indicate a 50/50 chance for the Bank of Canada to cut rates this week. 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.
Strangely, however, recent CPI numbers were all positive for the Canadian dollar. Still, based on the recent weak labour data, we saw a slowing jobs market.
USD/CAD remains in full-on range mode, as it has done over the past few weeks. The major support lies at 1.35896, while the key resistance is at 1.37919.
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. Interestingly, the BoC faces mortgage stress, a major factor in this interest rate policy.
We should also consider other bearish catalysts associated with CAD, like general fundamental data and its status 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 like the Middle East crisis.
USD/CHF tested the major support area at 0.88268 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
The Japanese yen's chart is slowly aligning with its fundamentals. It will also be intriguing to see how the other markets perform.
As always, be prepared for anything as a trader technically and fundamentally. We hope that you have found this market report helpful.
Market News Report - 14 July 2024After many months of being beaten, the Japanese yen was the surprising dominant force in forex this past week. The British pound also enjoyed notable gains against other markets despite maintaining a bearish fundamental outlook.
Here's a recap of how the major markets performed on the charts and fundamentally to prepare yourself for the next 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 is slowly winning the fight against inflation, with the latest Consumer Price Index (CPI) data coming at a lower-than-expected rate of 3%)
Despite this, the Fed has suggested at least one rate cut this year. Short-term interest rate (STIR) markets predict an 11% chance of this happening at the end of this month.
The news highlight to consider this week includes new Retail Sales data.
The 'Dixie' has made a complete u-turn in the past few weeks, aligning with recent fundamental changes. It's now very close to testing the major support level at 103.993, while the major resistance is far away at 106.490. So, things look bearish here.
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: weak bearish.
This week, STIR markets have priced in a hawkish move in the European Central Bank's (ECB) interest rate decision. On the other hand, the ECB's President, Christine Lagarde, recently hinted at a 'strong likelihood' of 'dialling back.'
While the euro has benefitted from USD weakness, it may still dip depending on the US inflation story.
As mentioned in our last report, the euro is getting closer to reaching the major resistance at 1.09160. (While the fundamentals point to the bearish side), dollar weakness is taking precedence for the euro, moving it far away from the major support level at 1.06494.
Long-term outlook: weak bearish.
The euro may be a bullish candidate over time thanks to USD weakness, improving inflation, and the recent French elections. Still, the ECB is the main bearish driver unless they hold the interest rate at its current level for now.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) continues to show dovish tendencies. STIR markets now predict a 56% chance of a BoE rate cut next month.
Anticipate several high-impact news events for the British pound this week: inflation rate, CPI, and Retail Sales. Any weakness in either will most likely send GBP lower.
Like its closest rival, the euro, the British pound is quite bullish. This currency went one extra by breaking the recent major resistance with ease. The next target (last reached a year ago) is some distance at 1.31424. Meanwhile, the new support area is 1.26156, which the pound won't be near to anytime soon.
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.
Still, the BoE has clarified that the monetary policy should be restrictive indefinitely until inflation is properly fixed. So, 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 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.
Nonetheless, keep an eye on Friday's year-on-year inflation rate for JPY.
After weeks of making high after high (including reaching an all-time high), USD/JPY dropped drastically, which was a long-overdue move. Still, the bulls haven't let up, with the key support level quite far at 154.546. On the other hand, the key resistance is at 161.950.
Long-term outlook: weak bullish
In addition to the expected rate hike, other bullish catalysts for the yen include a potential lowering in US Treasury yields.
Given the yen's recent overdue recovery 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.
The Aussie will look to reach as close to the major resistance of 0.68711 as possible, another confirmation of the bullish outlook. Meanwhile, the major support remains far below at 0.65761, an area it is unlikely to visit anytime soon.
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.
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) kept the interest rate consistent at 5.5% early last week.
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.
Watch out for the new CPI print on Tuesday, where a high number would be bullish for the New Zealand dollar.
Unlike its closest relative (AUD), the Kiwi traded mildly in the past week, moving slightly away from the 0.62220 key resistance. Given the key support being considerably lower at 0.58746, this market remains well on the upside.
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 50/50 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.
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.
Strangely, however, recent CPI numbers were all positive for the Canadian dollar. Still, based on the recent weak labour data, we saw a slowing jobs market.
Diarise the new year-on-year inflation rate this week for CAD.
USD/CAD remains in full-on range mode, as it has done over the past few weeks. The major support at 1.35896 has been strong despite being only breached.
On the other hand, the key resistance is at 1.37919.
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. Interestingly, the BoC faces mortgage stress, which is a major factor in this interest rate policy.
We should also consider other bearish catalysts associated with CAD, like general fundamental data and its status 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 like the Middle East crisis.
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
The Japanese yen's chart is slowly aligning with its fundamentals. It will also be intriguing to see how the British pound performs this week. As always, expect the unexpected with these and other forex pairs - so long as you are prepared with what's coming technically and fundamentally.
Market News Report - 07 July 2024The 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.
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.
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.
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.
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.
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.
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.
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.
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.
Market News Report - 01 July 2024Introduction
The winners and losers in the past week within the FX market were the same as the previous. Yen remains heavily shorted, while the Australian and Canadian dollars reigned supreme against the competition.
While the USD dollar had mixed results on the economic calendar, it held decent strength against a few currencies.
These are a few markets that our latest report will cover to prepare you for the current week.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: weak bearish.
Last week's month-on-month CPI (Consumer Price Index) came in lower than expected. Furthermore, the Federal Reserve Bank recently indicated that we should expect at least one interest rate cut this year.
Despite the sentiment above, DYX made a new weekly high and looks set on its path to test the major resistance at 106.490, some distance away from the major support level at 103.993. Thus, the outlook is weak bearish rather than full-on bearish.
Long-term outlook: weak bearish.
The anticipated Fed rate cut is the primary bearish driver for the greenback. Traders should consider the upcoming ISM (Institute for Supply Management) index and NFP (Non-Farm Payrolls) numbers, both of which analysts predict lower results than previous figures.
Still, if either of these fundamentals turns out better than expected, bullish surprises for the dollar are possible.
Euro (EUR)
Short-term outlook: weak bearish.
While the ECB hasn't decided whether to be hawkish or dovish in the future, the recent rate cut drives the euro's bearish force. The second catalyst is the surprise drop in the PMI (Purchase Managers Index) on June 21 2024.
Another risk to the euro is the far-right National Rally political party amid the French elections.
The euro was close to reaching the major support at 1.06494 earlier in the week. The fundamentals suggest that this market will probably attempt to revisit this level instead of the further resistance (at 1.09160), confirming the bearish bias.
Long-term outlook: weak bearish.
Aside from the interest rate, other bearish drivers include the French legislative election. Euro traders should note several high-impact events this week, namely Langarde's speech and new Retail Sales data.
British pound (GBP)
Short-term outlook: bearish.
The Bank of England (BoE) continues to show dovish tendencies, partly due to the recent drop in UK services or PMI data. STIR (short-term interest rate) markets envision a 43% chance of a BoE rate cut next month.
The technicals match pretty well with the above sentiment, making low after low in the past few weeks. Although GBP is far from the major support level at 1.24457, seeing another low soon wouldn't be surprising. Meanwhile, the key resistance lies high up at 1.28606.
Long-term outlook: bearish.
The interest rate is the chief bearish driver for the pound amid a mostly bleak economic bleak. As always, any better-than-expected growth data can present some short-term upside.
Japanese yen (JPY)
Short-term outlook: weak bullish.
The 'weak bullish' aspect is due to the Bank of Japan's recent decision to keep the interest rate unchanged. The Bank of Japan Governor, Kazuo Ueda, also recently stated that "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."
Furthermore, STIR markets see a 60% chance of a rate hike in the meeting at the end of the month.
Despite the slightly bullish outlook, the yen made history by reaching an all-time high of 161.285, breaking its previous major resistance of 160.233. So, it's clear this market is all the way up.
The key support remains at 154.546. However, it would take a miracle for USD/JPY to move above this area.
Long-term outlook: weak bullish
On the one hand, the yen offers mild bullishness due to the expected rate hike. Furthermore, catalysts that push US Treasury yields lower (e.g., weaker jobs data, lower core PCE) would also be positive for the yen. Finally, a big beat in new CPI data is another consideration.
However, things don't look rosy on the charts. To combat this, the Ministry of Finance in Japan has hinted at intervention once the yen exceeds a value of 160.00 (which it already has).
Australian dollar (AUD)
Short-term outlook: weak bullish.
The recent Reserve Bank of Australia meeting on June 17 aligned with the sentiment of unceasing inflation. So, it's a given that the RBA should hike the interest rate next month.
Another point worth mentioning is the CPI print at the end of July, with expectations of a positive outcome.
Finally, the Australian dollar shares an interesting correlation with China. Data indicating growth in this region (stimulus, new infrastructure projects, solid economic data, etc.) should boost the former.
While showing some bullish fundamentals, the Aussie's range-bound conditions continue. The key support (0.65580) and key resistance (0.67141) levels remain neither far nor close to each other.
While this market can go either way, the short-term outlook suggests it may lean more towards the upper regions.
Long-term outlook: weak bullish.
The unchanging of the interest rate (along with a potential hike) are the main bullish drivers. However, a weak result in the upcoming CPI may encourage the bears.
Furthermore, the Australian dollar is exposed to slow economic growth in other countries.
New Zealand dollar (NZD)
Short-term outlook: weak bullish.
Like the RBA, the Reserve Bank of New Zealand (RBNZ) is also battling inflation. So, there is an incentive to be hawkish. However, as with the Aussie, the Kiwi is a pro-cyclical currency with high sensitivity to developments in China.
After showing similar price action to AUD, the New Zealand dollar has just broken a notable support level. The next target would, of course, be down at 0.58746, while the key resistance is at a higher level at 0.62220.
So, the technicals seem to contradict what is fundamentally happening with the Kiwi.
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: weak bearish.
STIR markets indicate a 50/50 chance for the Bank of Canada to cut rates this month. The Governor of the Bank of Canada, Macklem, has also suggested this would happen if inflation became stickier.
Interestingly, last week's CPI numbers were all positive for the Canadian dollar - hence the 'weak bearish' outlook.
CAD remains in full-on range mode. Just as it looked to break the key support at 1.35896, it quickly reverted. The key resistance is at 1.37919. Based on the chart dynamics, it's anyone's guess where the price will go this week.
Long-term outlook: weak bearish.
The long-term outlook is the same as the short-term. Expectations of a rate cut remain the centre of bearish attention. However, CAD may be redeemed by encouraging oil prices.
Swiss franc (CHF)
Short-term outlook: bearish.
STIR markets were predictably accurate with their 76% chance of the Swiss National Bank (SNB) cutting the interest rate last Thursday. Secondly, SNB expects a moderate improvement in inflation and GDP (Gross Domestic Product) and unemployment to rise slightly in the near term.
The market recently attempted to break a key support area for the Swiss franc. However, the latest expected rate cut for the Swiss franc's interest rate caused a U-turn.
Now, USD/CHF's key support and resistance levels lie at 0.88268 and 0.91582, respectively.
Long-term outlook: bearish.
The expected rate cut in the next SNB meetings (in September and December 2024) is the key bearish driver for the Swiss. However, the bank's willingness to intervene and geo-political events may give the latter some upside.
Conclusion
On the technical side, it will be interesting to see if Aussie and CAD could breach their ranges. Let's also see if the yen may find some strength for a change this week.
The key news to diarise this week includes the minutes by the RBA and Fed, the year-on-year euro inflation rate, and the CAD unemployment rate.
So, that's it for this report - we hope you are well-prepared!
Market News Report - 23 June 2024Introduction
The Japanese yen continues to take a beating in the forex markets. Meanwhile, the Aussie and Canadian dollar were the strongest currencies in the past week.
USD was the surprise from our initial short-term outlook thanks to a meagre rise in Retail Sales.
Read on to learn about what happened in forex last week and what to expect for this one.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: weak bearish.
The Fed recently indicated that we should expect at least one interest rate cut instead of three this year.
On the bright side, the Fed sees inflation moving in the right direction. This is due to progress in the latest CPI (Consumer Price Index) and PPI (Producer Price Index) readings.
Interestingly, the technicals tell a different story. The Dixie looks to test the major resistance at 106.490, while the major support is far below at 103.993. So, from a technical perspective, the dollar is more bullish than bearish.
Long-term outlook: weak bearish.
Traders will look forward to the new data on PPI in mid-July, which is expected to have a negative result. Along with an anticipated rate cut, these would be the two bearish drivers for the greenback in the long term.
However, the technicals are against this outlook, hence the ‘weak bearish’ bias.
Euro (EUR)
Short-term outlook: weak bearish.
The euro continues to suffer from the recent interest rate cut by the European Central Bank. However, incoming data, such as a boost in inflation at the start of next month, could marginally improve the weak bearish bias.
The 1.06494 support area continues to sustain the euro. However, considering the fundamental evidence, the market will still seek to retest this area. Although the key resistance is at 1.08524, the price will likely visit the support instead.
Long-term outlook: weak bearish.
No high-impact news is expected this week for the euro. The bearish bias remains intact. However, incoming growth in data like inflation could rescue the currency. Furthermore, US monetary policies have often impacted the euro both ways, meaning this is something to consider in your analysis.
British pound (GBP)
Short-term outlook: bearish.
As predicted, the Bank of England left the interest rate unchanged at the June 20th meeting. Furthermore, STIR (short-term interest rate) markets suggest a 43% chance of a rate cut in August.
As it did last week, the British pound has broken another minor support area. Still, the key support level is some distance away at 1.24457. On the other hand, the key resistance lies high up at 1.28606.
While the gap between these two points is wide, it makes more sense to have a bearish outlook when accounting for the fundamentals.
Long-term outlook: bearish.
Like the short-term outlook, the interest rate is the primary bearish driver for the pound. Traders will look forward to statements from Andrew Bailey (the Governor of the Bank of England) this week, as any indications of a rate cut in August would likely send GBP lower.
Japanese yen (JPY)
Short-term outlook: weak bullish.
The ‘weak bullish’ aspect is due to the Bank of Japan’s recent decision to keep the interest rate unchanged, with STIR markets forecasting a hike next month.
The yen continues to be a huge loser and is nearing its all-time high at 160.233 (key resistance). Even though the short-term outlook is favourable for the yen, this market is quite bullish.
The key support remains at 154.546. But it would take a miracle for USD/JPY to get anywhere near this area.
Long-term outlook: weak bullish
USD/JPY is an interesting case. On the one hand, there is mild bullishness due to the expected rate hike next month.
Furthermore, catalysts that push US Treasury yields lower (e.g., weaker jobs data, lower core PCE) would also be positive for the yen.
However, things don’t look rosy on the charts. To combat this, the Ministry of Finance in Japan has hinted at intervention once the yen exceeds a price of 160.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The recent Reserve Bank of Australia meeting on June 17 recognised that inflation is persistent. This is an impetus for the central bank to hike interest rates in August 2024 or, at the very least, leave them untainted, as they’ve done since November 2023.
The Australian dollar shares an interesting correlation with China. Data indicating growth in this region (stimulus, new infrastructure projects, solid economic data, etc.) should boost the former.
Despite the bullish outlook, the Aussie finds itself in a range, with 0.67141 as the key resistance. Conversely, the key support is at 0.65580.
The support that lies below the range would be an area of interest in the short term. However, fundamentals indicate a likelihood for the Aussie to move more bullishly.
Long-term outlook: weak bullish.
As hinted in our last report, the RBA kept the rates unchanged. Still, a weak result in the upcoming CPI (linked to inflation) may encourage more bears.
Furthermore, the Australian dollar is exposed to slow economic growth in other countries.
New Zealand dollar (NZD)
Short-term outlook: weak bullish.
Unsurprisingly, the Kiwi mirrors the sentiment of the Aussie. The Reserve Bank of New Zealand (RBNZ) is also battling inflation. So, there is an incentive to be hawkish.
However, as with AUD, NZD is a risk-sensitive or pro-cyclical currency, especially in relation to developments in China.
Like its neighbour, the Kiwi is in a range. The only difference is that this market is near minor support (0.62219) instead of major resistance (0.62219).
So, NZD appears a bit bearish on the charts compared to the Aussie.
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: weak bearish.
STIR markets indicate a 50/50 chance for the Bank of Canada to cut rates next month.
The upcoming CPI event (on 25 June 2024) will be significant, where negative numbers would likely push CAD lower and reassert the BoC’s stance on dropping the interest rate.
Conversely, a big beat in CPI, along with an upside in oil this week, may boost the Canadian dollar.
USD/CAD is in a range as with the Aussie and Kiwi charts. The key resistance is at 1.37919, while the key support lies at 1.35896.
Given that USD and CAD exhibit bearish fundamentals, this market can go either way.
Long-term outlook: weak bearish.
The long-term outlook is the same as the short-term. Expectations of a rate cut remain the centre of bearish attention. However, CAD may be redeemed with positive CPI data and oil prices.
Swiss franc (CHF)
Short-term outlook: weak bearish.
STIR markets were predictably accurate with their 76% chance of the Swiss National Bank (SNB) cutting the interest rate last Thursday. Secondly, SNB expects moderate improvement in inflation and GDP (Gross Domestic Product) and unemployment to rise slightly in the near term.
USD/CHF began last week by breaking a key support area at 0.88810. However, the latest expected rate cut for the Swiss franc’s interest rate caused a U-turn in this market.
Now, USD/CHF’s key support and resistance levels lie at 0.88268 and 0.91582, respectively.
Long-term outlook: weak bearish.
The expected rate cut in the next SNB meetings (in September and December 2024) is the key bearish driver for the Swiss. However, the bank's willingness to intervene and geo-political events may give the latter some upside.
Conclusion
Can the Aussie, Kiwi, and CAD break out of their ranges? Will USD/JPY reach 160 or higher? What will Bailey say? These are interesting questions that should be answered this week.
Hopefully, this report has prepared you in the simplest way on both the technical and fundamental side of things.
Market News Report - 16 June 2024The euro and Japanese yen were the biggest losers in the past week, facing losses against several currencies exceeding 1%. Both markets declined based on their expected short and long-term outlooks.
The British pound also lost some ground recently, aligning with a few fundamentals. Of course, there are other interesting developments to observe to begin yet another week in the ever-liquid forex market.
Market Overview
Below is a brief technical and fundamental analysis breakdown for all major currencies.
US dollar (USD)
Short-term outlook: weak bearish.
Building on the prior week's Non-Farm Payrolls, the US dollar benefitted from positive inflation figures.
Meanwhile, the Dixie or dollar index fooled many traders. It first broke the major resistance discussed last week, and just as it looked to test the previous support, it made a new high, breaking the resistance at 105.742.
So, the next resistance target is at 106.490, while the support lies far below at 104.257. In short, DXY looks more bullish than bearish.
Long-term outlook: weak bearish.
Despite the technicals, the long-term outlook is 'weak bearish.' This is based on the Fed keeping the interest rate unchanged last week and the potential for the central bank to cut it at least once this year. The latest inflation data also went against the greenback.
However, positive changes to upcoming news, such as retail sales, could strengthen the dollar.
Euro (EUR)
Short-term outlook: weak bearish.
The euro still feels the effects of the recent interest rate cut by the European Central Bank, along with negative inflation data.
The euro closed the week by breaking two support levels, confirming this short-term outlook. So, we should expect this market to test the nearby support at 1.06494. Meanwhile, it is a considerable distance from the resistance at 1.08524. Thus, the euro is likelier to test the former than the latter.
Long-term outlook: weak bearish.
The long-term outlook remains the same from the last few weeks, thanks to worsening inflation, a poor Gross Domestic Product, and the rate cut. With no high-impact news to anticipate this coming week, the bias must be bearish until new significant changes occur.
British pound (GBP)
Short-term outlook: bearish.
The British pound suffered from lacklustre economic data concerning unemployment and Gross Domestic Product (GDP). Moreover, the Bank of England (BoE) has left the interest rate unchanged since November 2023 and asserted that they must be dovish for some time.
The technical analysis aligns with this outlook. GBP broke the recent support (at 1.26866) discussed in last week's report. There are multiple resistance points of reference after this level. However, the key one lies far ahead at 1.24457. Meanwhile, the critical support lies at 1.28606
Long-term outlook: bearish.
The new Bank of England's bank rate (or interest rate) will be the most anticipated event happening on Thursday. The consensus is for the central bank to keep the rate unchanged or potentially cut it.
Still, we should expect surprises, such as the upcoming year-on-year inflation data the day prior, where the BoE remains confident of reaching its target.
Japanese yen (JPY)
Short-term outlook: weak bullish.
While the Bank of Japan kept interest rates unchanged last week, STIR (short-term interest rate) markets indicate a rate hike next month. Lower US Treasury yields, which usually offer a bullish JPY, would also be a catalyst.
Despite this outlook, the Japanese yen was technically among the biggest losers. Having breached the recent key resistance, all eyes will be on the next target at 160.233. This is significant as it would be an all-time high and a 'line in the sand' for the Bank of Japan.
On the other hand, the key support is far below at 154.546.
Long-term outlook: weak bullish
As with the short term, the anticipated rate hike would provide JPY with an upside. Additionally, it would also be declining Treasury yields. Finally, any intervention or active involvement of Japan's Ministry of Finance through selling the dollar to buy the yen is also worth considering.
Australian dollar (AUD)
Short-term outlook: weak bullish.
The interest rate linked to the Aussie has remained at 4.35% since November last year. Furthermore, the Reserve Bank of Australia (RBA) has revised its inflation forecasts higher.
The Australian dollar shares an interesting correlation with China. Data indicating growth in this region (stimulus, new infrastructure projects, solid economic data, etc.) should boost the former.
Technically, things are pretty interesting for the Aussie. We see a range amid an uptrend, along with a false break at last week's key resistance area (then 0.66986). The new support to watch is now 0.67043, while the key support lies not far below at 0.65580.
Long-term outlook: weak bullish.
Aussie traders will have keenly diarised the RBA interest rate on Tuesday. The central bank will likely keep the rate unchanged or raise it, which would benefit the currency. Still, the Australian dollar is exposed to slow economic growth in other countries.
New Zealand dollar (NZD)
Short-term outlook: weak bullish.
The Reserve Bank of New Zealand (RBNZ) is very much like the neighbouring RBA. While keeping rates the same, Governor Orr indicated a hike almost occurred. They also hinted last month that a rate hike would only "be meaningful if we thought inflation expectations were getting away on us again."
Like other central banks, the RBNZ is battling inflation and seeks to keep it at 2%.
It comes as no surprise that NZD mirrors the price action of AUD. This market also produced a false break at last week's support level (then 0.62155). The new key resistance level is now 0.62220, while 0.60888 is the key support.
Long-term outlook: weak bullish.
The hawkish stance suggested by the RBNZ is the key bullish catalyst. However, incoming data regarding the economy and labour will also play a role. Furthermore, the New Zealand dollar is also a risk-sensitive currency like the Aussie, which can also be detrimental.
Canadian dollar (CAD)
Short-term outlook: bearish.
After the recent rate cut two weeks ago, STIR markets show a 50/50 chance of the same next month. The Bank of Canada has also confirmed a dovish path.
USD/CAD spanned almost the range between last week's key support and resistance areas. So, really, this market can go either way. The key support is at 1.36630, while the key resistance is at 1.37919.
Long-term outlook: bearish.
Besides the expected rate drops, the Canadian dollar is often sensitive to oil prices.
However, any rise in the latter regard can strengthen CAD, along with upcoming positive inflation, jobs and GDP data.
Swiss franc (CHF)
Short-term outlook: weak bearish.
STIR markets see a 76% chance of the Swiss National Bank cutting rates on Thursday. Furthermore, the chairperson Thomas Jordan recently hinted at intervention, where they would sell currencies like the US dollar and euro to strengthen their own.
Surprisingly, USD/CHF hovers quite close to the key support at 0.88810 while being a considerable distance from the key resistance at 0.91582.
Long-term outlook: weak bearish.
Although high chances of a rate cut are bad news for the Swiss franc, SNB's willingness for intervention and geo-political risks may spell an upside for the currency.
Conclusion
The fundamental biases from last week's report remain the same for the current period. It will be interesting to see how the action unfolds on the charts, with high-impact news events to anticipate, like the interest rate decisions for GDP and AUD.
Understanding the fundamental and technical sides of trading in the simplest way possible is crucial in making well-informed decisions. That's the point of these reports by City Traders Imperium.
Introducing the Chop and Trend Index (CTI)Get ready to revolutionize your trading strategy with our latest tutorial on the Chop and Trend Index (CTI)! This unique indicator, unlike traditional oscillators, provides a fresh perspective on market conditions by identifying periods of market chop and strong trends. Whether you're trading stocks, forex, or commodities, on any timeframe, the CTI is a game-changer. In this video, we'll break down how it works, how to use it, and how it can enhance your trading strategy. Don't miss out on this opportunity to stay ahead of the market curve with the CTI!