Market News Report - 21 July 2024
As 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.
https://www.tradingview.com/x/hf9tbrA9/
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.
https://www.tradingview.com/x/hf9tbrA9/
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.
https://www.tradingview.com/x/Am7qf4N7/
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.
https://www.tradingview.com/x/OUx9Dyzh/
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.
https://www.tradingview.com/x/uD5l2ne2/
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.
https://www.tradingview.com/x/lLq1M7gy/
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.
https://www.tradingview.com/x/dmcvwz1u/
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.
https://www.tradingview.com/x/gnqUrtJa/
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 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.
https://www.tradingview.com/x/hf9tbrA9/
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.
https://www.tradingview.com/x/hf9tbrA9/
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.
https://www.tradingview.com/x/Am7qf4N7/
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.
https://www.tradingview.com/x/OUx9Dyzh/
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.
https://www.tradingview.com/x/uD5l2ne2/
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.
https://www.tradingview.com/x/lLq1M7gy/
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.
https://www.tradingview.com/x/dmcvwz1u/
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.
https://www.tradingview.com/x/gnqUrtJa/
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.
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- Est. Since 2018.
- Up to 100% Profit Share.
- Balance Based Drawdown.
- 1-Step & 2-Step Funded Accounts.
citytradersimperium.com/
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