The fall today also sees sellers resume near-term control, with a push below its 100 and 200-hour moving averages as well. The former is at 147.67 while the latter is at 147.28. Hence, the drop now back towards near 146.00 sees sellers back in charge of the near-term bias. Going back to the daily chart, the pair looks poised for another decent shove lower after the Friday move.

The drop coincides with a rejection at the 38.2 Fib retracement level of the swing lower in July at 149.42. So, there’s that to argue from a technical perspective.

The pair also continues to move in lockstep with Treasury yields for the most part, though 10-year yields are not quite doing as much so far today.

The only news out of Japan is the one on the LDP leadership election date here. Besides that, some selling in the Nikkei could be playing some part in the flows. The index is down 1.7% currently ahead of the final hour of trading.

Going back to USD/JPY, the pair had previously sit in a bit of a consolidation range recently in the past week or so. That seen between 146.00 to 148.00 mostly, before the jump higher last Thursday.

So, we’re moving back into that range again now and we’ll see if sellers will have any appetite to chase further downside towards 145.00. That will be a crucial psychological level to any downside momentum.

For now, traders will have to look to themselves mostly for any catalysts. Fedspeak is the main thing to watch in trading this week and we might not get anything too noteworthy until Thursday itself.

This article was written by Justin Low at www.forexlive.com.

The Japanese yen is the main mover so far on the day as it extends the bounce back from Friday. USD/JPY is down 0.9% to 146.30 with the greenback holding a little lower across the board as well. The pair is facing a bit of a stern rejection from the 38.2 Fib retracement level of the swing lower in July.

Overall, steadier risk sentiment is also helping the likes of the aussie and kiwi on the day. AUD/USD is up 0.4% to 0.6690, trading up to its highest levels in a month. The July high around 0.6780-00 will be a key resistance region to watch next.

As we get into the new week, traders won’t have much to work with in the early stages. Adam also highlighted how we might have to wait until Thursday to really get some help to move markets along.

On the economic calendar today, there isn’t anything particularly noteworthy and that includes for European trading. The only release will be the Swiss total sight deposits for w.e. 16 August at 0800 GMT. So, yeah.

I wish you all the best of days to come and good luck with your trading! Stay safe out there.

This article was written by Justin Low at www.forexlive.com.

DXY (US Dollar Index):

Potential Direction: Bullish
Overall momentum of the chart: Bearish

Price could potentially make a bullish bounce off the pivot and head towards the 1st resistance.

Pivot: 101.99
Supporting reasons: Identified as an overlap support, reinforced by the 78.60% Fibonacci Retracement and the 127.20% Fibonacci Extension, indicating a confluence of support that could encourage buying activity.

1st support: 100.81
Supporting reasons: Identified as swing low support, suggesting a significant area where previous declines have been halted, potentially providing a strong base for a reversal or continuation of bullish momentum.

1st resistance: 103.65
Supporting reasons: Identified as an overlap resistance, indicating a level where the price might face selling pressure, which could either stall the bullish momentum or confirm a break to higher levels.

EUR/USD:

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price could potentially make a bearish reaction off the pivot and drop to the 1st support.

Pivot: 1.1107
Supporting reasons: Identified as swing high resistance, reinforced by the 100% Fibonacci Projection, suggesting a significant level where bullish momentum may face resistance and potentially reverse.

1st support: 1.0948
Supporting reasons: Identified as an overlap support, indicating an area where previous declines have found a stable base, which could serve as a target for a potential bearish move.

1st resistance: 1.1279
Supporting reasons: Identified as swing high resistance, representing a level where previous bullish advances have faced selling pressure, making it a key level to watch if the price continues to rise.

EUR/JPY:

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price could potentially make a bearish reaction off the pivot and drop to the 1st support.

Pivot: 164.48
Supporting reasons: Identified as pullback resistance, reinforced by the 50% Fibonacci Retracement, indicating a key level where bearish momentum could resume.

1st support: 157.95
Supporting reasons: Identified as an overlap support, marking an area where previous declines have stabilized, potentially serving as a target for a bearish move.

1st resistance: 170.74
Supporting reasons: Identified as pullback resistance, supported by the 78.60% Fibonacci Retracement, suggesting a significant level where bullish attempts may face selling pressure.

EUR/GBP:

Potential Direction: Bullish
Overall momentum of the chart: Bullish

Price could potentially make a bullish bounce off the pivot and head towards the 1st resistance.

Pivot: 0.8498
Supporting reasons: Identified as pullback support, reinforced by the 50% Fibonacci Retracement, suggesting a potential area for bullish momentum to resume.

1st support: 0.8427
Supporting reasons: Identified as pullback support, supported by the 78.60% Fibonacci Retracement, indicating a key level where the price could find strong support.

1st resistance: 0.8609
Supporting reasons: Identified as multi-swing high resistance, marking a significant area where bullish movements may encounter selling pressure.

GBP/USD:

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price could potentially make a bearish reaction off the pivot and drop to the 1st support.

Pivot: 1.2965
Supporting reasons: Identified as pullback resistance, reinforced by the 78.60% Fibonacci Retracement, suggesting a potential area where bearish momentum may resume.

1st support: 1.2858
Supporting reasons: Identified as pullback support, indicating a significant area where price may find support after a decline.

1st resistance: 1.3134
Supporting reasons: Identified as swing high resistance, marking a level where bullish movements may encounter selling pressure.

GBP/JPY:

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price could potentially make a bearish break off the pivot and drop towards the 1st support.

Pivot: 191.76
Supporting reasons: Identified as an overlap resistance, indicating a potential level where the price might face selling pressure.

1st support: 183.17
Supporting reasons: Identified as multi-swing low support, marking a significant area where previous declines have found support.

1st resistance: 197.95
Supporting reasons: Identified as pullback resistance, reinforced by the 61.80% Fibonacci Retracement, suggesting a potential reversal point where bullish attempts may falter.

USD/CHF:

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price could potentially make a bearish continuation towards the 1st support.

Pivot: 0.8749
Supporting reasons: Identified as an overlap resistance, supported by the 50% Fibonacci Retracement, indicating a potential level where the price might encounter selling pressure.

1st support: 0.8500
Supporting reasons: Identified as swing low support, marking a significant area where previous declines have found support.

1st resistance: 0.8922
Supporting reasons: Identified as an overlap resistance, reinforced by the 78.60% Fibonacci Retracement, suggesting a potential reversal point where bullish attempts may struggle.

USD/JPY:

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price could potentially make a bearish reaction off the pivot and drop to the 1st support.

Pivot: 150.88
Supporting reasons: Identified as pullback support, indicating a potential level where a temporary rebound might occur before continuing the bearish trend.

1st support: 146.48
Supporting reasons: Identified as an overlap support, suggesting a significant area where previous price declines have found buying interest.

1st resistance: 154.76
Supporting reasons: Identified as an overlap resistance, reinforced by the 61.80% Fibonacci Retracement, marking a potential area where bullish attempts might face selling pressure

USD/CAD:

Potential Direction: Bullish
Overall momentum of the chart: Bearish

Price is falling towards the pivot and could potentially make a bullish bounce off this level to rise towards the 1st resistance.

Pivot: 1.3596
Supporting reasons: Identified as a pullback support, indicating a potential area where buying interests could pick up to stage a minor rebound.

1st support: 1.3485
Supporting reasons: Identified as a pullback support that aligns close to a 61.8% Fibonacci retracement level, indicating a potential area where price could find strong support.

1st resistance: 1.3756
Supporting reasons: Identified as a pullback resistance, indicating a potential area that could halt any further upward movement.

AUD/USD:

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price is rising towards the pivot and could potentially make a bearish reversal off this level to pull back towards the 1st support.

Pivot: 0.6693
Supporting reasons: Identified as a pullback resistance that aligns with a confluence of Fibonacci levels i.e. the 78.6% retracement and projection levels, indicating a potential area where selling pressures could intensify.

1st support: 0.6565
Supporting reasons: Identified as a pullback support, suggesting a significant area where price has recently found support.

1st resistance: 0.6784
Supporting reasons: Identified as a swing-high resistance that aligns with a 100% Fibonacci projection level, indicating a significant area that could halt further upward movement.

NZD/USD

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price is rising towards the pivot and could potentially make a bearish reversal off this level to pull back towards the 1st support.

Pivot: 0.6144
Supporting reasons: Identified as a pullback resistance that aligns with a confluence of Fibonacci levels i.e. the 78.6% retracement and projection levels, indicating a potential area where selling pressures could intensify.

1st support: 0.6044
Supporting reasons: Identified as an overlap support, suggesting a potential area where price could find strong support.

1st resistance: 0.6200
Supporting reasons: Identified as a swing-high resistance that aligns close to a 100% Fibonacci projection level, indicating a significant area that could halt further upward movement.

US30 (DJIA):

Potential Direction: Bearish

Overall Momentum of the Chart: Bullish

Price is rising towards the pivot and could potentially make a bearish reversal off this level to pull back towards the 1st support.

Pivot: 40,901.78

Supporting reasons: Identified as a pullback resistance, suggesting a potential area where selling pressures could intensify.

1st Support: 39,956.90

Supporting Reasons: Identified as a pullback support, suggesting a potential area where price could find support.

1st Resistance: 41,277.57

Supporting Reasons: Identified as a swing-high resistance that aligns close to the all-time high, indicating a significant area that could halt further upward movement.

DE40 (DAX):

Potential Direction: Bearish

Overall Momentum of the Chart: Bullish

Price is rising towards the pivot and could potentially make a bearish reversal off this level to pull back towards the 1st support.

Pivot: 18,544.40

Supporting reasons: Identified as a pullback resistance that aligns close to a 78.6% Fibonacci retracement level, suggesting a potential area where selling pressures could intensify.

1st Support: 18,003.90

Supporting Reasons: Identified as a pullback support, indicating a potential area where price could find support.

1st Resistance: 18,873.20

Supporting Reasons: Identified as a swing-high resistance that aligns close to the all-time high, indicating a significant area that could halt further upward movement.

US500 (S&P 500): 

Potential Direction: Bearish

Overall Momentum of the Chart: Bullish

Price is rising towards the pivot and could potentially make a bearish reversal off this level to pull back towards the 1st support.

Pivot: 5,673.33

Supporting reasons: Identified as a swing-high resistance that aligns with a confluence of Fibonacci levels i.e. the 78.6% projection and 127.2% extension levels, suggesting a potential area where selling pressures could intensify.

1st support: 5,402.66

Supporting reasons: Identified as a pullback support, suggesting a potential area where price could find support.

1st resistance: 5,832.00

Supporting reasons: Identified as a resistance that aligns with a confluence of Fibonacci levels i.e. the 100% projection and 127.2% extension levels, suggesting a critical area that could halt further upward movement.

BTC/USD (Bitcoin):

Potential Direction: Bearish

Overall momentum of the chart: Neutral

Price is rising towards the pivot and could potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 61,687.65

Supporting reasons: Identified as a pullback resistance that aligns with a 61.8% Fibonacci retracement level, indicating a potential area where selling pressures could intensify.

1st support: 54,036.82

Supporting reasons: Identified as a pullback support that aligns with a 61.8% Fibonacci retracement level, indicating a significant area where price has found support in the past.

1st resistance: 68,173.09

Supporting reasons: Identified as a swing-high resistance, indicating a potential barrier that could halt further upward movement.

ETH/USD (Ethereum):

Potential Direction: Bearish

Overall momentum of the chart: Neutral

Price is rising towards the pivot and could potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 2,863.34

Supporting reasons: Identified as a pullback resistance that aligns close to a 50% Fibonacci retracement level, indicating a potential area where selling pressures could intensify. The presence of a bearish Ichimoku Cloud adds further significance to the strength of this resistance zone.

1st Support: 2,085.55

Supporting Reasons: Identified as an overlap support that aligns with a 78.6% Fibonacci retracement level, indicating a potential area where price could find support.

1st Resistance: 3,316.28

Supporting Reasons: Identified as a pullback resistance that aligns close to a 78.6% Fibonacci retracement level, indicating a historical barrier where that could halt further upward movement.

WTI/USD (Oil):

Potential Direction: Bullish

Overall Momentum of the Chart: Bearish

Price is falling towards the pivot and could potentially make a bullish bounce off this level to rise towards the 1st resistance.

Pivot: 73.14

Supporting Reasons: Identified as a multi-swing-low support that aligns with a 61.8% Fibonacci projection level, indicating a potential area where buying interests could pick up to stage a minor rebound.

1st Support: 70.35

Supporting Reasons: Identified as a pullback support that aligns with a 78.6% Fibonacci projection level, indicating a significant area where price has found support in the past.

1st Resistance: 80.03

Supporting Reasons: Identified as a pullback resistance that aligns with a 61.8% Fibonacci retracement level, indicating a potential barrier that could halt further upward movement.

XAU/USD (GOLD):

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price could potentially make a bearish continuation towards the 1st support.

Pivot: 2510.97
Supporting reasons: Identified as pullback resistance, indicating a level where a reversal could occur as sellers potentially regain control.

1st support: 2469.28
Supporting reasons: Identified as pullback support, suggesting an area where the price might find temporary support before continuing the downward move.

1st resistance: 2550.10
Supporting reasons: Supported by the 100% Fibonacci Projection, indicating a significant level where the price could encounter strong resistance.

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The post Monday 19th August 2024: Technical Outlook and Review first appeared on IC Markets | Official Blog.

IC Markets Asia Fundamental Forecast | 19 August 2024

What happened in the U.S. session?

Building permits – a leading indicator for the residential construction sector – missed its estimate of 1.43M as only 1.39M permits were registered for the month of July, falling 4% MoM to mark the largest decline since March. In addition, housing starts also fell short of market estimates as 1.24M new homes began construction, dropping 6.8% MoM – this was the biggest fall since March. In short, this latest result casts some doubts over the strength of the residential construction sector.

Meanwhile, the preliminary findings from the University of Michigan’s (UoM) Consumer Sentiment survey showed sentiment improving slightly in August with a reading of 67.8, edging higher from 66.4 in July. Consumer confidence has moderated lower after its high of 79.4 in March as Americans remain guarded about their outlook. Overall, expectations strengthened for both personal finances and the five-year economic outlook, which reached its highest reading in four months.

The dollar index (DXY) fell over 0.6% last week as it shed 64 pips to close at 102.39. This index has now dropped over the past four consecutive weeks as demand for the greenback has dissipated significantly.

What does it mean for the Asia Session?

The DXY opened at 102.40 this morning and edged lower – overhead pressures remain and we can expect the other major currencies to outperform the dollar once more. Moving over to commodities, spot prices for gold remain elevated as it was trading around $2,500/oz while crude prices continued to slide lower this morning with WTI oil dipping under $76.50 per barrel.

The Dollar Index (DXY)

Key news events today

CB Leading Economic Index (2:00 pm GMT)

What can we expect from DXY today?

The Conference Board will release its Leading Economic Index (LEI) for the month of July later today. After falling slightly from 101.3 to 101.1 in June, this index is expected to edge lower again down to 100.7 as concerns surrounding gloomy consumer expectations, weak new orders, negative interest rate spread, and an increased number of initial claims for unemployment continue to gain traction. Should the LEI drop more than anticipated, it could add further downward pressure on the dollar.

Central Bank Notes:

• The Federal Funds Rate target range remained unchanged at 5.25% to 5.50% for the eighth 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 continue to move into better balance.
• The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while job gains have moderated, and the unemployment rate has moved up but remains 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 slowed 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 17 to 18 September 2024.

Next 24 Hours Bias

Weak Bullish

Gold (XAU)

Key news events today

CB Leading Economic Index (2:00 pm GMT)

What can we expect from Gold today?

The Conference Board will release its Leading Economic Index (LEI) for the month of July later today. After falling slightly from 101.3 to 101.1 in June, this index is expected to edge lower again down to 100.7 as concerns surrounding gloomy consumer expectations, weak new orders, negative interest rate spread, and an increased number of initial claims for unemployment continue to gain traction. Should the LEI drop more than anticipated, it could add further downward pressure on the dollar and potentially boost gold later today.

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?

The Aussie gained almost 1.4% as it closed at 0.6670 last Friday to notch its second consecutive week of gains. This currency pair was rising strongly towards the threshold of 0.6700 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.6565

Resistance: 0.6790

Central Bank Notes:

• The RBA kept the cash rate target unchanged at 4.35%, marking the sixth consecutive pause.
• Inflation has fallen substantially since its peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance but it still remains above the midpoint of the 2 to 3% target range.
• The CPI rose by 3.9% over the year to the June quarter, demonstrating that inflation is proving persistent. In year-ended terms, underlying inflation has now been above the midpoint of the target for 11 consecutive quarters while quarterly underlying CPI inflation has fallen very little over the past year.
• The central forecasts set out in the latest SMP are for inflation to return to the target range of 2 to 3% in late 2025 and approach the midpoint in 2026. This represents a slightly slower return to target than forecast in May, based on estimates that the gap between aggregate demand and supply in the economy is larger than previously thought.
• Momentum in economic activity has been weak, as evidenced by slow growth in GDP, a rise in the unemployment rate and reports that many businesses are under pressure. In addition, there is a risk that household consumption picks up more slowly than expected, resulting in continued subdued output growth and a noticeable deterioration in the labour market.
• Inflation in underlying terms remains too high, and the latest projections show that it will be some time yet before inflation is sustainably in the target range while recent data have reinforced the need to remain vigilant to upside risks to inflation and the Board is not ruling anything in or out.
• Policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range and will rely upon the incoming data and the evolving assessment of risks to guide its decisions.
• Next meeting is on 5 November 2024.

Next 24 Hours Bias

Medium Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

Despite a surprise rate cut by the RBNZ last Wednesday, the Kiwi rose almost 1% last week as it closed at 0.6054 to register a third consecutive week of gains. This currency pair was trading around 0.6060 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 0.5975

Resistance: 0.6100

Central Bank Notes:

• The Monetary Policy Committee agreed to reduce the OCR by 25 basis points, bringing it down to 5.25% in August as inflation converges on target.
• The Committee is confident that inflation is returning to within its 1-3% target band as surveyed inflation expectations, firms’ pricing behaviour, headline inflation, and a variety of core inflation measures are moving consistent with low and stable inflation.
• Economic growth remains below trend and inflation is declining across advanced economies – imported inflation into New Zealand has declined to be more consistent with pre-pandemic levels.
• Services inflation remains elevated but is also expected to continue to decline, both at home and abroad, in line with increased spare economic capacity.
• Consumer price inflation in New Zealand is expected to remain near the target mid-point over the foreseeable future.
• A broad range of high-frequency indicators point to a material weakening in domestic economic activity in recent months – these include various survey measures of business activity, electronic card transactions, vehicle traffic, house sales, filled jobs, and job vacancies; these indicators collectively provide a consistent signal that the economy contracted in recent months.
• The pace of further easing will depend on the Committee’s confidence that pricing behaviour remains consistent with a low inflation environment, and that inflation expectations are anchored around the 2% target.
• Next meeting is on 9 October 2024.

Next 24 Hours Bias

Medium Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The Japanese strengthened significantly for most parts of July as USD/JPY lost 9%.1 shedding over 1,400 pips over this period. However, demand for the yen waned over the last couple of weeks causing USD/JPY to stabilize around 144 before retracing higher to close at 147.56 last Friday. This currency pair was trading around 147.75 as Asian markets came online – these are the support and resistance levels for today.

Support: 142.10

Resistance: 150.90

Central Bank Notes:

• The Policy Board of the Bank of Japan decided, by a 7-2 majority vote, to set the following guideline for money market operations for the intermeeting period and decided on the following measures:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.25% while reducing its purchase amount of Japanese government bonds (JGB) by a unanimous vote.
  2. The Bank decided, by a unanimous vote, on a plan to reduce the amount of its monthly outright purchases of JGBs so that it will be about 3 trillion yen in January-March 2026; the amount will be cut down by about 400 billion yen each calendar quarter in principle.
• The year-on-year rate of increase in the CPI (all items less fresh food) is likely to be at around 2.5% for fiscal 2024 and then be at around 2% for fiscal 2025 and 2026.
• Meanwhile, 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, it is likely to be at a level that is generally consistent with the price stability target of 2%.
• Japan’s economy 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 20 September 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?

The Euro saw a strong bid last Friday as it rose strongly from 1.0966 to close at 1.1028. This currency pair was trading around 1.1030 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 1.0900

Resistance: 1.1105

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 Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Demand for the franc has waned over the last couple of weeks as USD/CHF reversed off 0.8437 in early August to gain nearly 1% over this period, closing at 0.8659 last Friday. This currency pair gapped lower this morning to open at 0.8642 before climbing above 0.8650 – these are the support and resistance levels for today.

Support: 0.8585

Resistance: 0.8750

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 falling for four consecutive weeks, the Pound finally found a strong bid last week as Cable stabilized around 1.2750 before rising strongly to close at 1.2945 last Friday. This currency pair opened at 1.2931 this morning and was edging higher towards 1.2950 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 1.2810

Resistance: 1.3050

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 5-to-4 to reduce its Official Bank Rate by 25 basis points to 5.00% on 1st August 2024.
• Five members preferred to reduce the Bank Rate by 25 basis points to 5%, an increase of two from the previous meeting while four members preferred to maintain the Bank Rate at 5.25%.
• Twelve-month CPI inflation was at the MPC’s 2% target in both May and June but it is expected to increase to around 2.75% in the second half of this year as declines in energy prices last year fall out of the annual comparison, revealing more clearly the prevailing persistence of domestic inflationary pressures. Private sector regular average weekly earnings growth has fallen to 5.6% in the three months to May, and services consumer price inflation has declined to 5.7% in June.
• GDP has picked up quite sharply so far this year, but underlying momentum appears weaker. GDP had grown by 0.7% in 2024 Q1, with that strength appearing to have continued into Q2. Growth in the first half of the year had been stronger than expected at the time of the May Report. 
• Business surveys had continued to point to underlying growth of around 0.3% per quarter, somewhat weaker than headline GDP growth. A margin of slack should emerge in the economy as GDP falls below potential and the labour market eases further.
• The Committee noted that it is now appropriate to reduce slightly the degree of policy restrictiveness but monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further.
• The Committee continues to monitor closely the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• Next meeting is on 19 September 2024.

Next 24 Hours Bias

Medium Bullish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

Demand for the Loonie increased significantly over the last couple of weeks as USD/CAD fell 1.4% over this period. This currency pair opened at 1.3678 this morning to resume its downward slide – these are the support and resistance levels for today.

Support: 1.3600

Resistance: 1.3760

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 25 basis points to 4.50% while continuing its policy of balance sheet normalization.
• Canada’s economic growth likely picked up to about 1.5% through the first half of this year and is forecasted to increase in the second half of 2024 and through 2025.
• Overall, the Bank forecasts GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.4% in 2026, reflecting stronger exports and a recovery in household spending and business investment as borrowing costs ease.
• CPI inflation moderated to 2.7% in June after increasing in May as broad inflationary pressures eased.
• The Bank’s preferred measures of core inflation have been below 3% for several months and the breadth of price increases across components of the CPI is now near its historical norm but shelter price inflation remains high, driven by rent and mortgage interest costs, and is still the biggest contributor to total inflation.
• These preferred measures of core inflation are expected to slow to about 2.5% in the second half of 2024 and ease gradually through 2025 and CPI inflation is expected to come down below core inflation in the second half of this year, largely because of base year effects on gasoline prices.
• There are signs of slack in the labour market with the unemployment rate rising to 6.4%, as employment continues to grow more slowly than the labour force and job seekers taking longer to find work. Wage growth is showing some signs of moderation, but remains elevated.
• The Governing Council’s future monetary policy decisions will be guided by incoming information and assessment of their implications for the inflation outlook.
• 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 4 September 2024.

Next 24 Hours Bias

Medium Bearish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Crude oil prices reversed sharply last Tuesday with WTI oil briefly touching $80.55 per barrel before tumbling hard to close at $76.50 on Friday. This benchmark opened at $76.46 per barrel this morning and was sliding lower towards the $76-mark – these are the support and resistance levels for today.

Support: 75.00

Resistance: 80.30

Next 24 Hours Bias

Weak Bearish

The post IC Markets Asia Fundamental Forecast | 19 August 2024 first appeared on IC Markets | Official Blog.

• USD/JPY losses accelerate on the day, under 146.70 now
• Federal Reserve Board Governor Christopher Waller speaks on Monday
• Finland central bank governor & ECB governing council member Olli Rehn speaks late Monday
• Japan’s LDP will hold its leadership election on September 27
• Japan seeking a 700 billion yen valuation for Tokyo Metro, listing as early as end-October
• Federal Reserve Chair Powell to retain optionality, more data to come before Sept meeting
• JP Morgan says recent sharp equity market sell-off a ‘dress rehearsal’ for what’s to come
• PBOC sets USD/ CNY reference rate for today at 7.1415 (vs. estimate at 7.1548)
• On Friday Powell is likely to highlight inflation progress, allows focus on employment
• Japan Machinery orders for June 2024: 2.1% m/m (expected +1.1%)
• China – the idea of government-issued consumption vouchers are back into the spotlight
• Here’s another forecast for a September Federal Open Market Committee (FOMC) rate cut
• UK house asking prices dip, but buyer interest picks up, after Bank of England cut
• New Zealand services PMI for July 2024: 44.6 (prior 40.2)
• UBS expect anther Bank of England rate cut in November
• The week starts on Tuesday
• Fed’s Goolsbee says US credit conditions are tight and are getting tighter
• Trade ideas thread – Monday, 19 August, insightful charts, technical analysis, ideas
• Fed’s Daly says its time to consider trimming rates
• Hamas has rejected the latest ceasefire and hostage deal proposal
• Monday morning open levels – indicative forex prices – 19 August 2024

Weekend

• Join me on Monday for a webinar on how to avoid 7 common trading traps
• Newsquawk Week Ahead: Jackson Hole, Fed and ECB Minutes, Canada and Japan CPI, Flash PMI
• Weekly Market Outlook (19-23 August)
• SOL price prediction in crypto: The balanced, realistic, unbiased outlook
• Goldman Sachs cut its US recession probability after last week’s data, see 25bp Sept cut
• Next week doesn’t start until Thursday

There
was no high
priority news
nor data from Japan today, although
we did get machinery orders improving beyond median expectations. JPY
swings
continued. After
early trades above 148.00 USD/JPY has dropped back to under 146.70. ADDED – the thing is making a liar out me … under 146.50 now. Japanese equity indexes fell heavily as the yen rose.

The
USD was weaker pretty much across the majors board. Ranges were not
large. The
Australian dollar and UK pound rose to one-month highs. NZD/USD
gained, as did CAD. EUR/USD consolidated above 1.1020.

News
and data flow were light.

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

I posted earlier on the lack of any obvious catalyst for the gains in JPY:

• USD/JPY extending its losses today

That’s still the case although I am beginning to see some generic ‘hedge funds now bullish yen’ tweets and what have you.

The USD/JPY slide began on Friday and its extended today. USD weakness is pretty much across the majors board, but it’s the yen the stand out.

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

We haven’t heard much out of Japan today:

• Japan Machinery orders for June 2024: 2.1% m/m (expected +1.1%)
• Japan’s LDP will hold its leadership election on September 27

The USD has weakened across the major FX board, but its against JPY that is most notable.

On Friday USD/JPY fell towards 147.50. After trading above 148.00 in early Asia USD/JPY has now extended its down draft to lows just above 147.00. ..

There is no obvious smoking gun, apart from the continuation of the downtrend since 149.

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

A diary note for politics in Japan.

It’ll be interesting to get the new PM’s take on Bank of Japan policy.

Still a ways off.

–

Fuji News Network (FNN) with the info.

Japan’s parliament.

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

Japan’s national and Tokyo
governments are seeking a 700 billion yen ($4.7 billion)
valuation for Tokyo Metro

• Preparing to list the subway
  operator as early as October-end

Info via Reuters citing three unnamed sources

• would be Japan’s biggest IPO in roughly six years
• the two governments own 100% of Tokyo Metro
• meeting of brokerages planned within a week
• half the company to be sold

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

US Stocks Close on Friday to Round Out Best Week of the Year – Dow up 0.25%

US stock markets once again finished the trading day higher on Friday, capping off their best week of 2024. The Dow closed up 0.24%, the S&P added 0.20%, and the Nasdaq ended up 0.21%. US Treasury yields took another step lower, with the 2-year dropping 3.7 basis points to 4.064% and the benchmark 10-year falling 3.6 basis points to 3.890%. The dollar took a significant hit, dropping 0.56% on the index, and falling to its lowest recorded level against gold. Oil prices also declined as demand concerns outweighed potential supply issues in traders’ minds, with Brent losing 1.7% to $79.68 per barrel and WTI dropping 1.9% to $76.05 per barrel. Gold surged through resistance levels to reach a new all-time high of $2,509.60, with little retracement seen on the Asian open this morning.

FX Majors in Focus After Another Drop in the Dollar

FX traders are preparing for further market movements in the sessions ahead as Friday’s dollar decline has left several major currencies trading at critical levels on the Asian open this morning. Currencies have rallied strongly against the greenback since sharp dips a couple of weeks ago, and breaks at key technical levels could see these moves gain even more momentum. The Euro, Kiwi, and CAD are all sitting on key trendline levels against the dollar, with other pairs not far from breaking into new ranges. Traders will closely monitor updates from the Fed this week to determine whether these moves are justified, as any indication of a 50-basis point cut in September could tip the balance.

Another Quiet Monday to Start the Trading Week

The macroeconomic event calendar is relatively sparse this week, especially today, with little scheduled to disrupt current momentum—which, given last week’s moves, will likely cheer investors. There is nothing scheduled in the first two trading sessions of the day; however, we do have our first Fed speaker of the week later in the New York session when Christopher Waller speaks in Washington, D.C. Normally, this would be a tier 2 event, but there is significant focus on Fed updates this week, with the minutes out on Wednesday and Jerome Powell speaking on Friday. Anything deviating from market expectations could trigger exaggerated moves, especially on a ‘slow news’ day.

The post General Market Analysis – 19/08/24 first appeared on IC Markets | Official Blog.

A note from JPM analysts says a shock market meltdown could be a scenario that happens again.

“Many market participants are dismissing the recent blowup of various crowded trades as a fluke or flash cash, but we see it as more of a dress rehearsal for what’s to come”

JP Morgan are referring to early August, when the Nikkei collapsed 12.4% in a single day, its worst day since “Black Monday” in 1987. The domino effect triggered global sell offs. The Japanese collapse, the analysts say, was triggered by the small Bank of Japan rate hike and the unwinding of the yen “carry trade.” JPM says that while carry trades could become a problem again but they shouldn’t trigger another market meltdown:

• “Looking ahead, until the Sharpe ratios on the carry trades get high, we would not think these would be the catalyst for the next major correction”

JPMorgan said, though, that concerns about an economic slowdown could resurface:

• “Instead, we see the reemergence growth risk as the likely trigger.”

—

Well, yeah, a growth concern was a factor in the sell off too.

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

more to come

For the April to June quarter machinery orders fell 0.1% q/q

The outlook for the July to September quarter is for +0.2% q/q

—

The core machinery orders data is a highly volatile series

• its used as a leading indicator of capital spending in the coming six to nine months

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