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IC Markets Asia Fundamental Forecast | 22 July 2024

What happened in the U.S. session?

Federal Reserve Bank of New York President John Williams participated in a panel discussion titled “A New Era for Monetary Policy” at the 15th Bretton Woods Conference in Peru where there was nothing newsworthy to report on. However, President Williams’ interview with the Wall Street Journal last week showed that he shares the same view as Fed Governor Christopher Waller in noting that the path towards looser monetary policy is getting shorter. The dollar index (DXY) gained 0.32% as it bucked a two-week decline to close at 104.36 last Friday. Following the large declines in the first half of July where the DXY tumbled over 1.6%, this index looks to have stabilized around 104.

What does it mean for the Asia Session?

It is practically an empty calendar on the first trading day of the week with no potential catalysts for financial markets. It could be a very subdued day of trading with the DXY initially falling towards the 104-threshold as markets re-opened this morning but demand for the dollar could pick up as the day progresses.

The Dollar Index (DXY)

Key news events today

No major news events.

What can we expect from DXY today?

The dollar index (DXY) gained 0.32% as it bucked a two-week decline to close at 104.36 last Friday. Following the large declines in the first half of July where the DXY tumbled over 1.6%, this index looks to have stabilized around 104 last week. The DXY initially fell towards the 104-threshold as markets re-opened this morning but demand for the dollar could pick up as the day progresses – these are the support and resistance levels for today.

Support: 103.70

Resistance: 105.10

Central Bank Notes:

• The Federal Funds Rate target range remained unchanged at 5.25% to 5.50% for the seventh meeting in a row.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year.
• The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks. Inflation has eased over the past year but remains elevated and in recent months, there has been modest further progress toward the Committee’s 2% inflation objective.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while job gains have remained strong, and the unemployment rate has remained low.
• In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks and does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.
• The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities.
• Next meeting runs from 30 to 31 July 2024.

Next 24 Hours Bias

Weak Bullish

Gold (XAU)

Key news events today

No major news events.

What can we expect from Gold today?

After gaining nearly 4.5% since the end of June, gold finally stalled and reversed last week as it tumbled 0.89% with spot prices closing at $2,400.30/oz last Friday. Overhead pressures are likely to remain for this precious metal as the new trading week gets underway – these are the support and resistance levels for today.

Support: 2,350/oz

Resistance: 2,450/oz

Next 24 Hours Bias

Weak Bearish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

Following five weeks of strong gains, the Aussie stalled around 0.6800 last week to reverse and fall 1.5% to close at 0.6680. This currency pair was trading around 0.6690 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.6630

Resistance: 0.6750

Central Bank Notes:

• The RBA kept the cash rate target unchanged at 4.35%, marking the ninth pause out of the last ten board meetings.
• Over the year to April, the monthly CPI indicator rose by 3.6% in headline terms, and by 4.1% excluding volatile items and holiday travel, which was similar to its pace in December 2023.
• The central forecasts published in May were for inflation to return to the target range of 2–3% in the second half of 2025 and to the midpoint in 2026 while there have been indications that momentum in economic activity is weak, including slow growth in GDP, a rise in the unemployment rate and slower-than-expected wages growth.
• Inflation is easing but has been doing so more slowly than previously expected and it remains high and the Board expects that it will be some time yet before inflation is sustainably in the target range.
• The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out.
• Next meeting is on 6 August 2024.

Next 24 Hours Bias

Weak Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

The Kiwi has shed nearly 2.3% over the last couple of weeks as it closed at 0.6008 on Friday. This currency pair was hovering above the 0.6000-threshold at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 0.5980

Resistance: 0.6065

Central Bank Notes:

• The Monetary Policy Committee kept the OCR unchanged at 5.50% for the eighth meeting in a row and agreed that restrictive monetary policy is reducing domestic demand and consumer price inflation.
• The Committee is confident that inflation will return to within its 1-3% target range over the second half of 2024.
• The decline in inflation reflects receding domestic pricing pressures, as well as lower inflation for goods and services imported into New Zealand while recent monthly Selected Price Indexes suggest weakening in some of the more volatile inflation components, while survey measures of cost pressures and pricing intentions have continued to decline.
• Non-performing bank loans and corporate insolvencies have increased from low levels in line with declining economic activity while bank credit growth also remains very subdued, in line with weakness in the domestic economy and low business and consumer confidence.
• Next meeting is on 14 August 2024.

Next 24 Hours Bias

Weak Bearish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The yen has strengthened in recent weeks causing USD/JPY to reverse off the 162-level and dip under 156 before retracing higher to close at 157.44 last Friday. This currency pair was trading around 157.50 as Asian markets came online – these are the support and resistance levels for today.

Support: 154.70

Resistance: 159.00

Central Bank Notes:

• The Bank considers that the policy framework of Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control and the negative interest rate policy to date have fulfilled their roles. With the price stability target of 2%, it will conduct monetary policy as appropriate, guiding the short-term interest rate as a primary policy tool.
• The Bank of Japan decided on the following measures:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0 to 0.1% while continuing its Japanese government bonds (JGB) purchases in accordance with the decisions made at the March 2024 MPM.
  2. The Bank decided, by an 8-1 majority vote, that it would reduce its purchase amount of JGBs thereafter to ensure that long-term interest rates would be formed more freely in financial markets.
• Underlying CPI inflation is expected to increase gradually, since it is projected that the output gap will improve and that medium- to long-term inflation expectations will rise with a virtuous cycle between wages and prices continuing to intensify.
• In the second half of the projection period of the April 2024 Outlook for Economic Activity and Prices (Outlook Report), it is likely to be at a level that is generally consistent with the price stability target of 2%.
• The year-on-year rate of increase in the CPI (all items less fresh food), has been in the range of 2.0-2.5% recently, as services prices have continued to rise moderately, reflecting factors such as wage increases, although the effects of a pass-through to consumer prices of cost increases led by the past rise in import prices have waned. Inflation expectations have risen moderately.
• Japan’s economy has recovered moderately, although some weakness has been seen in part while is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• Next meeting is on 31 July 2024.

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

After hitting a high of 1.0948 last week, the Euro pulled back to close at 1.0891 last Friday. This currency pair was trading around 1.0890 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 1.0850

Resistance: 1.0950

Central Bank Notes:

• The Governing Council today decided to keep the three key ECB interest rates unchanged in July, following a 25 basis points cut in June.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 4.25%, 4.50% and 3.75% respectively.
• Monetary policy is keeping financing conditions restrictive but at the same time, domestic price pressures are still high, services inflation is elevated and headline inflation is likely to remain above the target well into next year.
• While some measures of underlying inflation ticked up in May owing to one-off factors, most measures were either stable or edged down in June.
• The incoming information indicates that the euro area economy grew in the second quarter, but likely at a slower pace than in the first quarter.
• Services continue to lead the recovery, while industrial production and goods exports have been weak – investment indicators point to muted growth in 2024, amid heightened uncertainty.
• The Eurosystem no longer reinvests all of the principal payments from maturing securities purchased under the pandemic emergency purchase programme (PEPP), reducing the PEPP portfolio by €7.5 billion per month on average and the Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024.
• The Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner and will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim and is not pre-committing to a particular rate path.
• Next meeting is on 12 September 2024.

Next 24 Hours Bias

Weak Bearish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

The franc weakened towards the end of last week as USD/CHF retraced higher to close at 0.8884 last Friday. This currency pair was edging higher towards 0.8900 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.8820

Resistance: 0.8900

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 25 basis points for the second consecutive meeting, going from 1.50% to 1.25% in June.
• The underlying inflationary pressure has decreased again compared to the previous quarter but inflation had risen slightly since the last monetary policy assessment, and stood at 1.4% in May.
• The inflation forecast puts average annual inflation at 1.3% for 2024, 1.1% for 2025 and 1.0% for 2026, based on the assumption that the SNB policy rate is 1.25% over the entire forecast horizon.
• Swiss GDP growth was moderate in the first quarter of 2024 with the services sector continuing to expand, while manufacturing stagnated.
• Growth is likely to remain moderate in Switzerland in the coming quarters as the SNB anticipates GDP growth of around 1% this year while currently expecting growth of around 1.5% for 2025.
• Next meeting is on 26 September 2024.

Next 24 Hours Bias

Weak Bullish

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

After hitting a high of 1.3048 last week, Cable retreated away from this level to close at 1.2912 last Friday. This currency pair was drifting lower towards 1.2900 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 1.2860

Resistance: 1.3050

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 7-to-2 to maintain its Official Bank Rate at 5.25% for the seventh consecutive meeting.
• Two members preferred to reduce the Bank Rate by 25 basis points to 5%, an increase of one from the previous meeting.
• Twelve-month CPI inflation fell to 2.0% in May from 3.2% in March, close to the May Monetary Policy Report projection. CPI inflation is expected to rise slightly in the second half of this year, as declines in energy prices last year fall out of the annual comparison.
• Reflecting a margin of slack in the economy, CPI inflation had been projected to be 1.9% in two years’ time and 1.6% in three years.
• UK GDP appears to have grown more strongly than expected during the first half of this year. Business surveys, however, remain consistent with a slower pace of underlying growth, of around 0.25% per quarter.
• UK real GDP had increased by 0.6% in 2024 Q1, 0.2% stronger than had been expected in the May Monetary Policy Report and Bank staff now expect GDP growth of 0.5% in 2024 Q2 as a whole, stronger than the 0.2% rate that had been incorporated in the May Report.
• The MPC remains prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably. It will therefore continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including a range of measures of the underlying tightness of labour market conditions, wage growth and services price inflation.
• Next meeting is on 1 August 2024.

Next 24 Hours Bias

Weak Bearish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

The Loonie has lost ground against the dollar last week as USD/CAD climbed higher to close at 1.3730 last Friday. This currency pair remained elevated to hover around 1.3725 as Asian markets came online – these are the support and resistance levels for today.

Support: 1.3660

Resistance: 1.3750

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 25 basis points to 4.75% while continuing its policy of balance sheet normalization.
• Canada’s economic growth resumed in the first quarter of 2024 after stalling in the second half of last year. At 1.7%, first-quarter GDP growth was slower than forecast in the MPR but consumption growth was solid at about 3%, and business investment and housing activity also increased.
• Inflation remains above the 2% target and shelter price inflation is high but total CPI inflation has declined consistently over the course of this year, and indicators of underlying inflation increasingly point to a sustained easing.
• CPI inflation has eased from 3.4% in December to 2.7% in April while the preferred measures of core inflation have come down from about 3.5% last December to about 2.75% in April and the 3-month rate of core inflation slowed from about 3.5% in December to under 2% in March and April.
• In the labour market, businesses are continuing to hire workers as employment has been growing, but at a slower pace than the working-age population while elevated wage pressures look to be moderating gradually.
• The Governing Council is closely watching the evolution of core inflation and remains particularly focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour.
• Recent data has increased the council’s confidence that inflation will continue to move towards the 2% target. Nonetheless, risks to the inflation outlook remain.
• Next meeting is on 24 July 2024.

Next 24 Hours Bias

Weak Bullish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Prices for crude oil dropped nearly 4.5% over the last couple of weeks with WTI oil falling sharply on Thursday and Friday to close at $80.29 per barrel. Overhead pressures remain strong for this commodity and oil prices could slide lower as the day progresses.

Next 24 Hours Bias

Medium Bearish

The post IC Markets Asia Fundamental Forecast | 22 July 2024 first appeared on IC Markets | Official Blog.

US Stocks Hit on Friday – Dow Off 1% and Biden Out of Presidential Race

It was a volatile trading day on Friday to close the week with US stock indices taking a hit again and investors are preparing for more of the same on the open this morning in Asia as news hit the market that Joe Biden has pulled out of running for a second term as US president. A global cyber outage on Friday further dented investor confidence and US stocks experienced another down day, the Dow lost 0.93%, the S&P 0.71% and the Nasdaq finished 0.81% in the red. US treasury yields popped again, the 2-year rising 4.8 basis points to 4.509% and the 10-year jumped 5.1 basis points to 4.239% and the dollar pushed higher, gaining 0.24% on the index. Oil prices crashed as hopes of a ceasefire in Gaza increased, Brent dropping 2.9% to trade back to $82.63 a barrel and WTI lost 3.3% to fall off to $80.13 a barrel. Gold dropped again on Friday in line with the stronger dollar, losing just under 2% on the day to close at $2,399 but has jumped on the news out of the US this morning to trade back up to $2,410.

Gold in Focus in the Week Ahead

Gold experienced a volatile trading week last week as it first hit a fresh all-time high before then taking a substantial hit as it dropped over $80 an ounce, or 3.6% on the back of profit taking flows and a stronger US dollar. It has already started this week in similar fashion with haven flows coming through on the Asian open in light of the news on Joe Biden out of the US, with the precious metal jumping $10 this morning. Traders are expecting trading conditions to remain ‘tricky’ in the sessions ahead as the market digests the consequences for the change in Democratic nominee and what that is likely to mean for global markets. Gold is now sitting in the middle of recent ranges with Support now coming in around the $2,360 level and resistance up at last weeks record high at $2,483.60 – expect to see sharp moves in the recent ranges for the next couple of sessions until the market settles.

Investors Poised for a Busy Start to the Week

Investors had been looking at a relatively quiet trading day ahead to start the week today, but Joe Biden’s decision to pull out of the presidential race has thrown the cat amongst the pigeons to kick off the Asian trading session. Traders will still turn their attention to the world’s second biggest economy early in the day when the PBOC announces any updates on the 1-year and 5-year Loan Prime Rates in China, however no change is widely expected. There is little else out on the global event calendar today, however most market participants are expecting plenty of volatility on the back of fresh updates on US politics especially when the US markets open later in the day.

The post General Market Analysis 22/07/2024 first appeared on IC Markets | Official Blog.

EUR, NZD, GBP, CAD and eyn are all weakening against the USD.

AUD takes the cake though, its under its late Friday low.

Ranges are not huge but for the Asian time zone are notable:

Political news has dominated.

However, market news centres on the People’s Bank of China and its easing today:

• China cuts 1 and 5 year loan prime rates by 10 basis points each

• PBoC announces cut to 7-day reverse repo rate to 1.70% from 1.80%

• PBOC to lower collateral for Medium-term Lending Facility (MLF) loans

Markets have been screaming at the PBOC for further support. These moves from the PBOC are being seen as ‘too little, too late’. Ungrateful lot, aren;t we?

This article was written by Eamonn Sheridan at www.forexlive.com.

Social media, and traditional media reporting a sum in excess of USD50mn has been donated to the Democrats.

One of the key concerns of the party was the drying up donations under an incumbent President deemed unfit to run.

That seems to have been reversed now.

This election looks like a contest again.

This article was written by Eamonn Sheridan at www.forexlive.com.

The People’s Bank of China has cut rates:

• PBoC announces cut to 7-day reverse repo rate to 1.70% from 1.80%

And have also eased MLF requirements:

• PBOC to lower collateral for Medium-term Lending Facility (MLF) loans

The Loan Prime Rate (LPR) setting is due at 0115 GMT (2115 US Eastern time). The cuts we have already seen are suggestive of a cut to one or both LPRs. Its not locked in, but expectations have heightened.

Current LPR rates are:

• 3.45% for the one year
• 3.95% for the five year

***

—

The PBOC’s Loan Prime Rate (LPR):

• Its an interest rate benchmark used in China, set by the People’s Bank of China each month.
• The LPR serves as a reference rate for banks when they determine the interest rates for (primarily new) loans issued to their customers.
• Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages.
• Its calculated based on the interest rates that a panel of 18 selected commercial banks in China submit daily to the PBOC.
  • The panel consists of both domestic and foreign banks, with different weights assigned to each bank’s contributions based on their size and importance in the Chinese financial system.
  • The LPR is based on the average rates submitted by these panel banks, with the highest and lowest rates excluded to reduce volatility and manipulation. The remaining rates are then ranked, and the median rate becomes the LPR.

This article was written by Eamonn Sheridan at www.forexlive.com.

The “calls to quit” line gets longer with Dem Senator Heinrich, and then you watch GOP Nominee Trump ramble and ramble in his acceptance speech when he had a chance to unite. SMH. Anyone one candidate is nominated. The Dems convention is not until August 19-22.

Will Biden step down this weekend?

PS Meanwhile, Biden says that he looks forward to getting back on the campaign trail next week.

PSS Add Dem Representative Landsman joining the “Joe Step Down” side.

Three Democratic senators have called for him to step down and 27 House Democrats have done the same. There are others likely hiding for now.

This article was written by Greg Michalowski at www.forexlive.com.

Via Reuters:

• All 50 Democratic party state chairs have thrown their weight behind Vice President Kamala Harris to be the party’s new presidential nominee, according to sources familiar with the matter.

The Democratic nomination is still a month away.

***

US President Biden removed himself from the race for the 2024 election. It was not entirely unexpected. Justing had the news over the weekend:

• It’s finally Joever

Markets:

• ‘Risk’ FX on the move higher now as confidence returns

This article was written by Eamonn Sheridan at www.forexlive.com.

Reuters with the info, and the worrisome headline:

• China hedge funds brace for upheaval from tough new rules

In brief:

• China’s $715 billion hedge fund
  industry is facing renewed pressure from stringent regulations
  coming into effect next month, forcing some investment firms to
  seek fresh capital from white knights or even shut shop.
• New guidelines for the fragmented industry from Aug. 1 will
  impose higher asset thresholds for funds to operate, and also
  stricter norms for their investments and marketing.
• Nearly 300 such funds out of the more than 8,000 in China
  have already terminated business so far this year

More at that link above

2024 has seen a recovery for Chinese stocks, but not without challenges:

This article was written by Eamonn Sheridan at www.forexlive.com.

It looks like another interesting week ahead for investors as markets navigate fresh economic data releases, significant rate decisions, geopolitical updates, and continue to respond to Friday’s global cyber outage.

Additionally, earnings season begins in earnest with two key ‘magnificent seven’ companies reporting their quarterly numbers. Both Tesla and Alphabet will release their results on Tuesday, and strong figures could alleviate some of the investor concerns that have contributed to recent declines.

The week concludes on Friday with the Fed’s preferred inflation data release, which could disrupt the currently anticipated rate cut in September.

Here is our usual day-by-day breakdown of the major risk events this week:

It’s a relatively quiet start to the week in terms of economic event risks, with the main update coming early in the day during the Asian session when China announces any changes to the main 1-year and 5-year Prime Loan rates. These rates are expected to remain steady at 3.45% and 3.95%, respectively, and any change could lead to a volatile first session of the day.

Another quiet day in terms of scheduled risk events, with nothing of significant note on the calendar during the first two trading sessions. The US session should be more active with Existing Home Sales data and the Richmond Manufacturing Index numbers due, as well as the key earnings reports from Tesla and Alphabet.

Wednesday has the potential to be the busiest day of the week for traders, with a series of Flash Manufacturing and Services PMI numbers due across the globe, alongside the key rate decision in Canada, where the central bank is expected to cut another 25 basis points.

Once again, the first two sessions of the trading day have little scheduled to move markets. However, Euro traders will closely watch the latest German Ifo Business Climate update in the London session. The New York day sees the usual weekly unemployment claims data released alongside the quarterly Advance GDP and Durable Goods numbers. We are also due to hear from ECB President Christine Lagarde later in the day.

Inflation data is set to dominate market focus on Friday, with the day bookended by the Tokyo Core CPI data release early in the Asian session and the key US Core PCE Price Index number later in the New York session. The revised University of Michigan Consumer Sentiment and Inflation Expectations are also due, and traders will keep a wary eye on any updates from the latest G20 meeting that kicks off in Rio de Janeiro.

The post The Week Ahead – Week Commencing 22 July 2024 first appeared on IC Markets | Official Blog.

New Zealand trade balance for June 2024

NZD/USD little changed on the data. NZD has been bid up early in the week on the political news.

• ‘Risk’ FX on the move higher now as confidence returns

This article was written by Eamonn Sheridan at www.forexlive.com.

As forex markets get a little more liquidity the buying of risk has come in.

Its still early, just after:

• 8.30 am in Sydney
• 10.30 am in New Zealand
• 7.30 am in Tokyo
• 6.30 am in Singapore and Hong Kong

Still, Globes is open on the CME so we have futures trade underway. ES and NQ are both trading higher.

Across major FX the US dollar is down as flows head into ’tisk’ FX:

Earlier:

• Updated US Presidential election odds: Trump 61%, Harris 31%

This article was written by Eamonn Sheridan at www.forexlive.com.

The not unexpected weekend news, a bombshell nonetheless. Justin all over it Sudnay US time:

• It’s finally Joever

Market response has been subdued, the latest:

Via twitter, the latest odds:

There are over 100 days until the election, and the Democrat convention is a month away, where we will learn who their nominee is. But, if you want to bet, the books are open!

This article was written by Eamonn Sheridan at www.forexlive.com.