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.
