There is a bit of a flag pattern forming in gold as price action continues to sit near fresh record highs this week. There was an attempt to breach the key resistance region around $2,475-80 on Wednesday but buyers cooled off after. And after a slight setback, they are quickly turning things around again as we get closer to the weekend now.

As the Fed looks to cut and yields are weighed lower, the simple case is for a bullish argument for gold. That being said, the technicals are another thing. There has been almost no semblance of a pullback since the surging run higher in March this year.

Sure, there was a bit of a consolidation from mid-April to end-June. However, it’s not exactly a retracement of any sort. For some context, gold rose by a little over 13% over the course of 2023. Meanwhile, it is up nearly 20% already in just 2024 currently.

There are reasons to stay bullish in gold in the long-term and also some reasons to expect a pullback from a technical perspective.

But perhaps price action and price patterns make for the simplest argument for gold at the moment.

And that is to go with the break of the flag pattern above. That is either on a topside run above $2,475-80 or a push back lower below $2,400 to threaten the 100-day moving average (red line) near $2,362 currently.

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

• Prior €13.9 billion

Looking at the first half of the year, euro area exports totaled to €1,430.1 billion from January to June this year. That is down by 0.8% compared to the same period last year. Meanwhile, imports during that period totaled to €1,322.6 billion. And that is down 8.4% compared to the same period in 2023.

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

It’s pretty much a broad based move with lower yields weighing slightly on the session. USD/JPY is down 0.4% to 148.75 while GBP/USD is up 0.3% to 1.2885 currently. Even with equities holding a little firmer, USD/CHF is also down 0.5% to 0.8688 as it succumbs to a push back against a recent key technical level:

The pair is nudging lower after testing its 50.0 Fib retracement level of the swing lower since July in trading yesterday.

Besides that, AUD/USD is up 0.3% to 0.6630 and NZD/USD up 0.6% to 0.6018 at the moment.

Traders are still largely digesting the dollar mood with 10-year Treasury yields seen down 2.3 bps to 3.903%.

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

• Eurostoxx +0.3%
• Germany DAX +0.3%
• France CAC 40 +0.2%
• UK FTSE -0.1%
• Spain IBEX +0.3%
• Italy FTSE MIB +2.0%

Italian stocks are leading the way as they have some catching up to do amid a market holiday yesterday. As a whole, European indices were looking quite bad after the drop at the end of July and the start of August. But the recovery in the latter stages last week was impressive and it is carrying over to this week. S&P 500 futures are also still seen up 0.2% currently.

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

Global Markets:

•  Asian Stock Markets : Nikkei up 3.88%, Shanghai Composite down 0.08%, Hang Seng up 1.73% ASX up 1.37%
• Commodities : Gold at $2494.35 (0.06%), Silver at $28.23 (-0.40%), Brent Oil at $80.7 (-0.26%), WTI Oil at $77.79 (-0.34%)
• Rates : US 10-year yield at 3.911, UK 10-year yield at 3.9241, Germany 10-year yield at 2.241

News & Data:

• (USD) Core Retail Sales m/m  0.4% vs 0.1% expected
• (USD) Retail Sales m/m  1.00% vs 0.4% expected
• (USD) Unemployment Claims  227K vs 236K expected

Markets Update:

Japan’s stocks led gains across Asia on Friday, with the Nikkei 225 surging over 3%, marking its best week in four years. This followed a strong rally on Wall Street, where fresh economic data alleviated recession fears.

U.S. retail sales for July exceeded expectations, rising by 1% compared to the Dow Jones estimate of 0.3%. Additionally, weekly jobless claims fell, further boosting confidence. Stephanie Roth, chief economist at Wolfe Research, noted, “Today’s solid retail sales and claims data is a reminder that the sky is not falling on the U.S. economy. While economic momentum has cooled, a recession does not appear imminent.”

In Asia, Singapore’s non-oil domestic exports surged by 15.7% in July, a significant rebound from June’s 8.8% decline and well above the 1.2% growth forecast by Reuters. Total trade also saw a robust 13.7% increase in July, driven by rising exports and imports.

Japan’s broader Topix index gained over 2%, while South Korea’s Kospi rose by 1.75% after returning from a public holiday. The small-cap Kosdaq climbed 0.94%. Australia’s S&P/ASX 200 posted a 1.18% gain, although Reserve Bank of Australia Governor Michelle Bullock cautioned that it was “premature” to anticipate rate cuts, citing persistently high inflation.

Hong Kong’s Hang Seng index rose 1.69%, and mainland China’s CSI 300 saw a marginal increase. Taiwan and Hong Kong’s second-quarter GDP data were awaited after market hours. Overnight, U.S. markets continued to rally, with the Dow Jones, S&P 500, and Nasdaq Composite all posting significant gains.

Upcoming Events: 

• 12:30 PM GMT – CAD Manufacturing Sales m/m
• 12:30 PM GMT – USD Building Permits 
• 12:30 PM GMT – USD Housing Starts

The post Friday 16th August 2024: Japan Leads Asian Markets Amid Wall Street Rally first appeared on IC Markets | Official Blog.

IC Markets Europe Fundamental Forecast | 16 August 2024

What happened in the Asia session?

During her testimony before the House of Representatives Standing Committee on Economics in Canberra, RBA Governor Michele Bullock dashed hopes of a potential rate cut in Australia by declaring that it is too premature to consider such a policy action while also flagging China’s slowdown as a major risk given Australia’s reliance on iron ore exports to the world’s second largest economy.

Governor Bullock’s concerns on the stubbornly sticky inflation levels is preventing her and her fellow policymakers from projecting any future rate cuts. The RBA’s cash rate target currently stands at 4.35% while headline CPI accelerated from 3.6% in the first quarter of this year to 3.8% YoY in the second quarter – well above the RBA’s inflation target band of 2 to 3%. The Aussie was trading around 0.6630 by Asia midday and should remain elevated as the final trading day of the week comes to a close.

What does it mean for the Europe & US sessions?

Retail sales in the UK have been pretty weak over the past seven months as consumer spending declined 1.2% MoM in June. However, July’s estimate of 0.6% points to a decent rebound in sales. Should the final print beat market expectations, it could function as a potential bullish catalyst for the Pound.

Should we see another round of better-than-expected macroeconomic data, the dollar could see strong bids once more later today as building permits and the preliminary findings from the University of Michigan’s (UoM) Consumer Sentiment survey are due for release.

The Dollar Index (DXY)

Key news events today

Building Permits (12:30 pm GMT)

UoM Consumer Sentiment (2:00 pm GMT)

What can we expect from DXY today?

Building permits – a leading indicator for the residential construction sector – rebounded in June rising 3.9% MoM to register 1.45M new permits. The residential construction sector was beginning to look ‘soft’ as permits declined for three consecutive months from March through May, dropping as low as 1.4M in May which was the lowest level since December 2022. Permits are expected to rise 1.43M in July to signal some stabilization for this sector.

Meanwhile, the preliminary findings from the University of Michigan’s (UoM) Consumer Sentiment survey are expected to show sentiment remaining relatively unchanged in August with a reading of 66.7. Consumer confidence has moderated lower after its high of 79.4 in March as Americans remain guarded about their outlook. Should markets receive an overall positive outcome from the above macroeconomic data, it could provide some much-needed support for the dollar later today.

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 Bearish

Gold (XAU)

Key news events today

Building Permits (12:30 pm GMT)

UoM Consumer Sentiment (2:00 pm GMT)

What can we expect from Gold today?

Building permits – a leading indicator for the residential construction sector – rebounded in June rising 3.9% MoM to register 1.45M new permits. The residential construction sector was beginning to look ‘soft’ as permits declined for three consecutive months from March through May, dropping as low as 1.4M in May which was the lowest level since December 2022. Permits are expected to rise 1.43M in July to signal some stabilization for this sector.

Meanwhile, the preliminary findings from the University of Michigan’s (UoM) Consumer Sentiment survey are expected to show sentiment remaining relatively unchanged in August with a reading of 66.7. Consumer confidence has moderated lower after its high of 79.4 in March as Americans remain guarded about their outlook. Should markets receive an overall positive outcome from the above macroeconomic data, it could provide some much-needed support for the dollar and potentially cap the recent gains in gold later today.

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

RBA Gov Bullock Speaks (11:30 pm GMT 15th August)

What can we expect from AUD today?

During her testimony before the House of Representatives Standing Committee on Economics in Canberra, RBA Governor Michele Bullock dashed hopes of a potential rate cut in Australia by declaring that it is too premature to consider such a policy action while also flagging China’s slowdown as a major risk given Australia’s reliance on iron ore exports to the world’s second largest economy.

Governor Bullock’s concerns on the stubbornly sticky inflation levels is preventing her and her fellow policymakers from projecting any future rate cuts. The RBA’s cash rate target currently stands at 4.35% while headline CPI accelerated from 3.6% in the first quarter of this year to 3.8% YoY in the second quarter – well above the RBA’s inflation target band of 2 to 3%. The Aussie was trading around 0.6630 by Asia midday and should remain elevated as the final trading day of the week comes to a close.

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

RBNZ Gov Orr Speaks (2:30 am GMT)

What can we expect from NZD today?

RBNZ Governor Adrian Orr will be speaking about monetary policy at an event hosted by the Wellington Chamber of Commerce where audience questions are expected. Following Wednesday’s surprise rate cut, Governor Orr could provide further insight into the outlook for future monetary policy action which could inject higher volatility for the Kiwi this morning.

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?

Better-than-expected macroeconomic data out of the U.S. lifted USD/JPY overnight as it broke above the 149-level. However, this currency pair pulled back and was trading around 148.90 as Asian markets came online – these are the support and resistance levels for today.

Support: 145.55

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 Bearish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

Better-than-expected macroeconomic data out of the U.S. sent the Euro tumbling under 1.0950 overnight. This currency pair retraced higher and was trading around 1.0980 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 1.0940

Resistance: 1.1020

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

Medium Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Following the release of better-than-anticipated macroeconomic data out of the U.S., USD/CHF broke above the 0.8700-level to hit an overnight high of 0.8748. However, this currency pair retreated away from this level and was trading around 0.8710 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.8630

Resistance: 0.8800

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 Bearish

The Pound (GBP)

Key news events today

Retail Sales (6:00 am GMT)

What can we expect from GBP today?

Retail sales in the UK have been pretty weak over the past seven months as consumer spending declined 1.2% MoM in June. However, July’s estimate of 0.6% points to a decent rebound in sales. Should the final print beat market expectations, it could function as a potential bullish catalyst for the Pound.

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 was mixed as USD/CAD swung widely between 1.3740 and 1.3695 overnight. This currency pair was trading around 1.3725 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 1.3700

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

Weak Bearish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Following yesterday’s better-than-anticipated macroeconomic data out of China, prices for crude oil stabilized and proceeded to climb higher. WTI oil reversed off its lows of $77 per barrel and climbed above $78.50 overnight. This benchmark was trading around $78 per barrel as Asian markets came online.

Next 24 Hours Bias

Weak Bullish

The post IC Markets Europe Fundamental Forecast | 16 August 2024 first appeared on IC Markets | Official Blog.

• Prior -1.2%
• UK retail sales +1.4% vs +1.4% y/y expected
• Prior -0.2%; revised to -0.3%
• UK retail sales (ex autos, fuel) +0.7% vs +0.8% m/m expected
• Prior -1.5%; revised to -1.3%
• UK retail sales (ex autos, fuel) +1.4% vs +1.4% y/y expected
• Prior -0.8%

It’s one of those few times that UK retail sales does meet estimates, reaffirming a slight bounce back after the drop in June.

Looking at the details, there were increases in department store sales (+4.0%), other non-food store sales (+2.5%), and non-store retailing (+0.7%). But that is offset by declines in clothing store sales (-0.6%), household goods store sales (-0.6%), and automotive fuel sales (-1.9%). Food store sales were flat on the month.

There is also still a big divergence between the value and volume of overall retail sales. And that continues to highlight the impact of inflation on consumption activity in the UK economy since the pandemic.

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

The dollar is slightly lower on the day, giving back some of the gains from yesterday. The more solid US retail sales data helped to give the greenback a lift, alongside risk trades. It’s a repeat lesson to the old saying: Never underestimate the power of US the consumer

Looking to the session ahead, we’ll be turning our attention to another retail sales data. This time the one from the UK. And if there is a saying of sorts to this, it is that more often than not UK retail sales will end up disappointing. That at least since the pandemic. And inflation is the main thing to blame there.

It’s been the case for well more than a year already, as highlighted here in 2023. And that divergence between sales volume and sales value hasn’t really closed meaningfully.

At some point, there will be a change up to the benchmark in the report. However, that will only serve to mask the struggles of the UK consumer more so than anything else.

For today, the estimate is that we should see UK retail sales rise by 0.5% in July. After the disappointment in June here, perhaps there is a scope for a slight bounce amid the start of summer. But we’ll see.

Besides that, there isn’t much else of note on the agenda for the session ahead. So, traders will be left to continue to digest the broader market mood after the US retail sales data yesterday.

0600 GMT – UK July retail sales data0900 GMT – Eurozone June trade balance data

That’s all for the session ahead. 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.

The overblown panic on Monday last week suddenly looks quite silly now, doesn’t it?

Yes, the labour market did show further signs of softening in July. Perhaps Hurricane Beryl had something to do with it, even if the BLS said that it had “no discernable effect”.

However, the US economy as a whole is not doing that bad. In fact, it isn’t really bad at all. And one can keep circling back to the resilience of the US consumer to support said case in point.

That puts markets in a bit of a tough spot in trying to balance out the narrative of a weakening labour market. But on the other hand, consumption activity remains solid as the US households continue to power through. Even Walmart’s earnings report yesterday reaffirmed that sentiment.

So, where do we go from here?

It’s pretty clear by now that the market focus, at least for the Fed, is no longer so much so on inflation. Traders are pretty much convinced that the disinflation process will keep running from hereon. There might be bumps along the way but the narrative is set that the inflation beast has been tamed.

As things stand, the main focus now is on the health of the economy. It’s been the case for a few weeks now but the jobs report earlier this month and the panic that followed, as well as the reactions to the data releases this week, confirms it.

It is also the reason why the dollar managed to find a reprieve yesterday. We’re in this sort of a peculiar spot where the dollar and risk will both benefit from a more resilient US economy now.

That doesn’t mean we’ll keep at it for long though. It all depends on the market outlook for the Fed and the carry trade unwind and rewind at this point.

For the time being, traders are slowly paring back their call for a 50 bps rate cut next month. The odds of that have lessened to ~29% now. That is considerably lower than the ~52% probability seen going into the US CPI report on Wednesday here. And also down from the ~38% probability in trading yesterday after the US CPI report.

With each passing data point, it’s clear that markets have overreacted on Monday last week. It proves again that the kicking and screaming was a lot more to do with investors unable to stomach their losses. And not that the US economy is crumbling and brought down to its knees.

Is the Fed slow to begin the rate cut cycle? Possibly. However, is it that bad that they crashed the US economy because of it? Certainly not. If policymakers need to respond, the Fed put will certainly be in play. And they have plenty of ammunition to do so. Even if their job isn’t to appease markets, traders and investors are certainly treating it like it is.

And if the Fed can so easily be bullied that way, tell me again. Why the panic?

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 continuation towards the 1st resistance.

Pivot: 102.28
Supporting reasons: Identified as swing low support, indicating a potential area where the price could find a strong base and push higher.

1st support: 101.28
Supporting reasons: Identified as an overlap support, suggesting a critical level where price could stabilize or reverse on a decline.

1st resistance: 103.67
Supporting reasons: Identified as an overlap resistance, reinforced by the 50% Fibonacci retracement, indicating a significant level where price might encounter selling pressure or a reversal.

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: 1.0990
Supporting reasons: Identified as an overlap resistance, suggesting a potential area where selling pressure could emerge, leading to a decline.

1st support: 1.0942
Supporting reasons: Identified as pullback support, reinforced by the 61.80% Fibonacci retracement, indicating a significant level where the price might find support.

1st resistance: 1.1045
Supporting reasons: Identified as swing high resistance, where previous rallies have faced selling pressure or reversed.

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: 165.30
Supporting reasons: Identified as an overlap resistance, reinforced by the 50% Fibonacci retracement, indicating a potential level where selling pressure may emerge.

1st support: 161.42
Supporting reasons: Identified as an overlap support, suggesting a significant area where previous declines have found support.

1st resistance: 168.02
Supporting reasons: Identified as an overlap resistance, where previous rallies have faced selling pressure or reversed.

EUR/GBP:

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: 0.8518
Supporting reasons: Identified as an overlap support, reinforced by the 50% Fibonacci retracement and 127.20% Fibonacci extension, indicating Fibonacci confluence and suggesting a strong potential for a bullish move.

1st support: 0.8475
Supporting reasons: Identified as pullback support, suggesting an area where the price may find support before continuing its bullish direction.

1st resistance: 0.8563
Supporting reasons: Identified as pullback resistance, indicating a potential area where the price could face selling pressure or reversal.

GBP/USD:

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: 1.2886
Supporting reasons: Identified as an overlap resistance, indicating a potential area where sellers could enter the market, reinforcing the bearish momentum.

1st support: 1.2803
Supporting reasons: Identified as an overlap support, suggesting a significant area where previous declines have found support and could potentially slow down the bearish move.

1st resistance: 1.2940
Supporting reasons: Identified as an overlap resistance, marking a historical point where previous rallies have faced selling pressure or reversed, adding to the bearish outlook.

GBP/JPY:

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: 190.18
Supporting reasons: Identified as a pullback support, indicating a level where the price might find buyers, supporting the continuation of the bullish trend.

1st support: 185.99
Supporting reasons: Identified as an overlap support, suggesting a significant area where previous declines have found support, potentially providing a strong base for further upward movement.

1st resistance: 195.05
Supporting reasons: Identified as a pullback resistance, supported by the 78.60% Fibonacci Retracement, indicating a level where the price might face selling pressure, but a successful breach could reinforce the bullish momentum.

USD/CHF:

Potential Direction: Bullish
Overall momentum of the chart: Bullish
Factors contributing to the momentum: Price is within a bullish ascending channel

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

Pivot: 0.8692
Supporting reasons: Identified as a pullback support, indicating a level where the price might find buyers, supporting the continuation of the bullish trend within the ascending channel.

1st support: 0.8630
Supporting reasons: Identified as an overlap support, suggesting a significant area where previous declines have found support, providing a strong base for further upward movement.

1st resistance: 0.8795
Supporting reasons: Identified as a pullback resistance, reinforced by the 78.60% Fibonacci Retracement, indicating a level where the price might face selling pressure, but a successful breach could confirm the continuation of the bullish trend.

USD/JPY:

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: 148.54
Supporting reasons: Identified as a pullback support, indicating a level where the price might find buyers, supporting the continuation of the bullish trend.

1st support: 145.54
Supporting reasons: Identified as an overlap support, suggesting a significant area where previous declines have found support, providing a strong base for further upward movement.

1st resistance: 152.06
Supporting reasons: Identified as a pullback resistance, reinforced by the 78.60% Fibonacci Retracement, indicating a level where the price might face selling pressure, but a successful breach could confirm the continuation of the bullish trend.

USD/CAD:

Potential Direction: Bearish
Overall momentum of the chart: Neutral

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

Pivot: 1.3756
Supporting reasons: Identified as a pullback resistance that aligns with a 23.6% Fibonacci retracement level, indicating a potential area where selling pressures could intensify.

1st support: 1.3699
Supporting reasons: Identified as an overlap support, indicating a potential area where price has recently found support.

1st resistance: 1.3792
Supporting reasons: Identified as a pullback resistance that aligns with a 38.2% Fibonacci retracement level, indicating a potential area that could halt any further upward movement. The presence of a bearish Ichimoku Clouds adds further significance to the strength of this resistance zone.

AUD/USD:

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: 0.6643
Supporting reasons: Identified as an overlap resistance, indicating a potential area where selling pressures could intensify.

1st support: 0.6566
Supporting reasons: Identified as an overlap support that aligns close to a 23.6% Fibonacci retracement level, suggesting a significant area where price has recently found support.

1st resistance: 0.6701
Supporting reasons: Identified as an overlap resistance that aligns with a 78.6% Fibonacci retracement level, indicating a significant area that could halt further upward movement.

NZD/USD

Potential Direction: Bullish
Overall momentum of the chart: Neutral

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

Pivot: 0.5974
Supporting reasons: Identified as an overlap support that aligns close to a 50% Fibonacci retracement level, indicating a potential area where buying interests could pick up to stage a rebound. The presence of a bullish Ichimoku Cloud adds further significance to the strength of this support zone.

1st support: 0.5913
Supporting reasons: Identified as a pullback support, suggesting a potential area where price could find strong support.

1st resistance: 0.6090
Supporting reasons: Identified as a pullback resistance that aligns with a 78.6% Fibonacci retracement level, indicating a significant area that could halt further upward movement.

US30 (DJIA):

Potential Direction: Bullish

Overall Momentum of the Chart: Bullish

Price has made a bullish break through the pivot and could potentially rise towards the 1st resistance.

Pivot: 40,479.99

Supporting reasons: Previously identified as an overlap resistance which now has been broken due to the strong bullish momentum.

1st Support: 39,945.51

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

1st Resistance: 41,042.19

Supporting Reasons: Identified as a pullback resistance, indicating a significant area that could halt further upward movement.

DE40 (DAX):

Potential Direction: Bullish

Overall Momentum of the Chart: Bullish

Price is trading close to the pivot and could potentially make a bullish break through this level to rise towards the 1st resistance.

Pivot: 18,244.50
Supporting reasons: Identified as a potential breakout level, indicating a scenario where the strong bullish momentum could drive price higher.

1st Support: 17,989.90

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

1st Resistance: 18,595.70

Supporting Reasons: Identified as a pullback resistance, indicating a significant area that could halt further upward movement.

US500 (S&P 500): 

Potential Direction: Bullish

Overall Momentum of the Chart: Bullish

Price is trading close to the pivot and could potentially make a bullish break through this level to rise towards the 1st resistance.

Pivot: 5,561.63
Supporting reasons: Identified as a potential breakout level, indicating a scenario where the strong bullish momentum could drive price higher.

1st support: 5,402.66

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

1st resistance: 5,669.89

Supporting reasons: Identified as a pullback resistance that aligns close to the all-time high, 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: 56,946.95

Supporting reasons: Identified as an overlap support, indicating a significant area where price has recently found support. The presence of a bullish Ichimoku Cloud adds further significance to the strength of this support zone.

1st resistance: 65,515.58

Supporting reasons: Identified as an overlap resistance that aligns with a 78.6% Fibonacci retracement level, indicating a potential barrier that could halt further upward movement.

ETH/USD (Ethereum):

Potential Direction: Bullish

Overall momentum of the chart: Neutral

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

Pivot: 2,523.64

Supporting reasons: Identified as an overlap support that aligns close to a 38.2% Fibonacci retracement level, indicating a potential area where buying interests could pick up to stage a rebound. The presence of a bullish Ichimoku Cloud adds further significance to the strength of this support zone.

1st Support: 2,341.67

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 support.

1st Resistance: 2,878.94

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

WTI/USD (Oil):

Potential Direction: Bearish

Overall Momentum of the Chart: Neutral

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

Pivot: 80.29

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

1st Support: 77.32

Supporting Reasons: Identified as a pullback support that aligns with a 38.2% Fibonacci retracement level, indicating a significant area where price has recently found support. The presence of a bullish Ichimoku Cloud adds further significance to the strength of this support zone.

1st Resistance: 82.10

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

XAU/USD (GOLD):

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: 2459.92
Supporting reasons: Identified as pullback resistance, suggesting a potential area where price could face selling pressure and reverse downward.

1st support: 2431.86
Supporting reasons: Identified as pullback support, reinforced by the 50% Fibonacci retracement, indicating a potential area where price might find support on a decline.

1st resistance: 2483.54
Supporting reasons: Identified as swing high resistance, indicating a significant level where price could encounter selling pressure or reverse.

The accuracy, completeness and timeliness of the information contained on this site cannot be guaranteed. IC Markets does not warranty, guarantee or make any representations, or assume any liability regarding financial results based on the use of the information in the site.

News, views, opinions, recommendations and other information obtained from sources outside of www.icmarkets.com, used in this site are believed to be reliable, but we cannot guarantee their accuracy or completeness. All such information is subject to change at any time without notice. IC Markets assumes no responsibility for the content of any linked site.

The fact that such links may exist does not indicate approval or endorsement of any material contained on any linked site. IC Markets is not liable for any harm caused by the transmission, through accessing the services or information on this site, of a computer virus, or other computer code or programming device that might be used to access, delete, damage, disable, disrupt or otherwise impede in any manner, the operation of the site or of any user’s software, hardware, data or property. 

The post Friday 16th August 2024: Technical Outlook and Review first appeared on IC Markets | Official Blog.

IC Markets Asia Fundamental Forecast | 16 August 2024

What happened in the U.S. session?

After declining 0.2% in the previous month, retail sales jumped 1% MoM in July to hit $709.7B as it beat its forecast of 0.4% by a wide margin. This marked the biggest increase in consumer spending since January 2023 as categories such as motor vehicle and part dealers, electronics and appliance stores, and grocery stores led the gains. 

Meanwhile, unemployment claims printed lower than its estimate for the second consecutive week coming in at 227K. Not only were the latest figures lower than the previous week’s reading of 234K, but they were also lower than the 4-week average of 240k. Claims remain somewhat elevated but combined with robust retail sales, it buoyed investors’ confidence that the U.S. economy and labour market remains relatively sound for now. The dollar index (DXY) surged from 102.56 to as high as 103.22 in the immediate aftermath of the above data release but it retreated away from this high to dip under the 103-level by the end of this session.

What does it mean for the Asia Session?

RBA Governor Michele Bullock will be testifying before the House of Representatives Standing Committee on Economics in Canberra along with Deputy Governor Andrew Hauser, Assistant Governor Sarah Hunter, and Assistant Governor Christopher Kent. The Aussie received a strong boost following yesterday’s robust job gains and further volatility for this currency can be expected during the respective testimonies by Governor Bullock and her fellow deputies.

RBNZ Governor Adrian Orr will be speaking about monetary policy at an event hosted by the Wellington Chamber of Commerce where audience questions are expected. Following Wednesday’s surprise rate cut, Governor Orr could provide further insight into the outlook for future monetary policy action which could inject higher volatility for the Kiwi this morning.

The Dollar Index (DXY)

Key news events today

Building Permits (12:30 pm GMT)

UoM Consumer Sentiment (2:00 pm GMT)

What can we expect from DXY today?

Building permits – a leading indicator for the residential construction sector – rebounded in June rising 3.9% MoM to register 1.45M new permits. The residential construction sector was beginning to look ‘soft’ as permits declined for three consecutive months from March through May, dropping as low as 1.4M in May which was the lowest level since December 2022. Permits are expected to rise 1.43M in July to signal some stabilization for this sector.

Meanwhile, the preliminary findings from the University of Michigan’s (UoM) Consumer Sentiment survey are expected to show sentiment remaining relatively unchanged in August with a reading of 66.7. Consumer confidence has moderated lower after its high of79.4 in March as Americans remain guarded about their outlook. Should markets receive an overall positive outcome from the above macroeconomic data, it could provide some much-needed support for the dollar later today.

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 Bearish

Gold (XAU)

Key news events today

Building Permits (12:30 pm GMT)

UoM Consumer Sentiment (2:00 pm GMT)

What can we expect from Gold today?

Building permits – a leading indicator for the residential construction sector – rebounded in June rising 3.9% MoM to register 1.45M new permits. The residential construction sector was beginning to look ‘soft’ as permits declined for three consecutive months from March through May, dropping as low as 1.4M in May which was the lowest level since December 2022. Permits are expected to rise 1.43M in July to signal some stabilization for this sector.

Meanwhile, the preliminary findings from the University of Michigan’s (UoM) Consumer Sentiment survey are expected to show sentiment remaining relatively unchanged in August with a reading of 66.7. Consumer confidence has moderated lower after its high of79.4 in March as Americans remain guarded about their outlook. Should markets receive an overall positive outcome from the above macroeconomic data, it could provide some much-needed support for the dollar and potentially cap the recent gains in gold later today.

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

RBA Gov Bullock Speaks (11:30 pm GMT 15th August)

What can we expect from AUD today?

RBA Governor Michele Bullock will be testifying before the House of Representatives Standing Committee on Economics in Canberra along with Deputy Governor Andrew Hauser, Assistant Governor Sarah Hunter, and Assistant Governor Christopher Kent. The Aussie received a strong boost following yesterday’s robust job gains and further volatility for this currency can be expected during the respective testimonies by Governor Bullock and her fellow deputies.

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

RBNZ Gov Orr Speaks (2:30 am GMT)

What can we expect from NZD today?

RBNZ Governor Adrian Orr will be speaking about monetary policy at an event hosted by the Wellington Chamber of Commerce where audience questions are expected. Following Wednesday’s surprise rate cut, Governor Orr could provide further insight into the outlook for future monetary policy action which could inject higher volatility for the Kiwi this morning.

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?

Better-than-expected macroeconomic data out of the U.S. lifted USD/JPY overnight as it broke above the 149-level. However, this currency pair pulled back and was trading around 148.90 as Asian markets came online – these are the support and resistance levels for today.

Support: 145.55

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 Bearish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

Better-than-expected macroeconomic data out of the U.S. sent the Euro tumbling under 1.0950 overnight. This currency pair retraced higher and was trading around 1.0980 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 1.0940

Resistance: 1.1020

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

Medium Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Following the release of better-than-anticipated macroeconomic data out of the U.S., USD/CHF broke above the 0.8700-level to hit an overnight high of 0.8748. However, this currency pair retreated away from this level and was trading around 0.8710 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.8630

Resistance: 0.8800

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 Bearish

The Pound (GBP)

Key news events today

Retail Sales (6:00 am GMT)

What can we expect from GBP today?

Retail sales in the UK have been pretty weak over the past seven months as consumer spending declined 1.2% MoM in June. However, July’s estimate of 0.6% points to a decent rebound in sales. Should the final print beat market expectations, it could function as a potential bullish catalyst for the Pound.

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 was mixed as USD/CAD swung widely between 1.3740 and 1.3695 overnight. This currency pair was trading around 1.3725 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 1.3700

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

Weak Bearish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Following yesterday’s better-than-anticipated macroeconomic data out of China, prices for crude oil stabilized and proceeded to climb higher. WTI oil reversed off its lows of $77 per barrel and climbed above $78.50 overnight. This benchmark was trading around $78 per barrel as Asian markets came online.

Next 24 Hours Bias

Weak Bullish

The post IC Markets Asia Fundamental Forecast | 16 August 2024 first appeared on IC Markets | Official Blog.

• Nikkei and Hang Seng the stars in regional equities today
• RBA Governor Bullock’s comment that its ‘premature’ to think about rate cuts helping AUD
• JP Morgan still tipping 100bp of Federal Open Market Committee (FOMC) rate cuts in 2024
• China to toughen rules monitoring movement of people and goods from regions with monkeypox
• Reserve Bank New Zealand Governor Orr: Strong confidence inflation is back in 1 – 3% range
• PBOC sets USD/ CNY reference rate for today at 7.1464 (vs. estimate at 7.1739)
• One month to go (until the Federal Open Market Committee (FOMC) rate cut)
• Singapore Non-oil Domestic Exports (NODX) July 2024: +12.2% m/m vs. +2.2% expected
• Concerns of an escalation in the Middle East remain overblown re elevated crude oil prices
• RBNZ’s Silk says the Bank is taking a measured approach to rate cuts
• Taiwan Magnitude 6.1 earthquake rocks capital Taipei
• RBA’s Bullock says underlying inflation remains too high
• Venezuelan President Maduro rejects US, Brazil criticism
• New Zealand Q2 PPI Output +1.1% q/q (expected 0.6%) and inputs +1.4% q/q (expected 0.5%)
• New Zealand July Manufacturing PMI 44.0 (prior 41.1)
• China has built the world’s largest offshore oil platform
• Bank of America on Powell speaking at Jackson Hole – to keep aggressive easing option open
• Harris plans tax breaks for builders constructing houses for 1st time buyers, 3m new homes
• The People’s Bank of China has switched up its main policy rate to watch
• Forexlive Americas FX news wrap: US dollar soars after stronger retail sales
• Federal Reserve Chair Powell to speak at 10am US Eastern time on August 23
• Trade ideas thread – Friday, 16 August, insightful charts, technical analysis, ideas

There
was no news nor data from Japan today of relevance for the yen. JPY
has been volatile enough not to need much to move, and today was no
different. USD/JPY fell from highs above 149.25 to around 148.80.

The
USD was weaker pretty much across the major’s board. Ranges were not
large.

Data
from New Zealand was notable. Q2 PPIs both rose from Q1, and above
expectations. NZD/USD rallied back above 0.6000.

From
Australia we had parliamentary testimony from Reserve Bank of
Australia Governor Bullock and a group of her senior officials.
Bullock
reiterated that
while the RBA judges that
monetary
policy is sufficiently restrictive, inflation
remains too high and its too early to be thinking about rate
cuts.
AUD/USD ticked higher to just over 0.6625.

EUR,
GBP, CAD, and CHF all gained against the US dollar (again,
ranges were small only).

Regional
equities rose following a strong Wall Street performance. The Nikkei
also liked the drop lower for the yen on Thursday.

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