EUR/USD Price Forecast: US PPIs to Bring $1.04 into View

For the EUR, it’s a quiet morning ahead on the Eurozone economic calendar. There are no economic indicators from the Eurozone to provide the EUR with direction. The lack of stats will leave the EUR in the hands of market risk sentiment and any central bank chatter.

Recent economic indicators continue to raise questions over the ECB’s wriggle room to bring inflation to target. The threat of a Eurozone recession continues to pin the EUR back from a more meaningful breakout.

Following Wednesday’s US inflation-fueled gain, US economic indicators will provide the EUR/USD pair with direction later today.

EUR/USD Price Action

At the time of writing, the EUR was up 0.04% to $1.03034.

In a mixed start, the EUR rose to an early high of $1.03047 before falling to a low of $1.02754.

EUR/USD under early pressure
EURUSD 110822 Daily Chart

Technical Indicators

The EUR/USD needs to avoid the $1.0290 pivot to target the Wednesday high of $1.03686 and the First Major Resistance Level (R1) at $1.0378.

Softer US wholesale inflation figures and steady jobless claims would support a bullish session.

An extended rally would likely see the EUR/USD pair test resistance at $1.04 but fall short of the Second Major Resistance Level (R2) at $1.0457.

The Third Major Resistance Level (R3) sits at $1.0624.

A fall through the pivot would bring the First Major Support Level (S1) at $1.0211 into play.

Barring an extended sell-off throughout the day, support at $1.020 should see the EUR/USD steer clear of the second Major Support Level (S2) at $1.0123.

The Third Major Support Level sits at $0.9956.

EUR/USD pivot level key.
EURUSD 110822 Hourly Chart

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bullish signal.

At the time of writing, the EUR sat above the 200-day EMA, currently at $1.02628.

After Wednesday’s bullish cross, the 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, which were positive price signals.

Avoiding a fall through the 200-day EMA would bring R1 ($1.0378) and $1.040 into view.

However, a fall through the 200-day EMA would bring the 50 and 100-day EMAs and S1 ($1.0211) into play. While movement will be US data-dependent, market risk sentiment will provide direction ahead of today’s US economic indicators.

EMAs bullish
EURUSD 110822 4 Hourly Chart

The US Session

Following the impact of US consumer prices on the EUR/USD pair, wholesale inflation numbers will also draw interest. A softening in wholesale inflationary pressures would signal further softness in consumer prices.

However, jobless claims could test sentiment towards US labor market conditions. Another rise would support a downward revision to July’s impressive nonfarm payroll numbers.

GBP/USD Price Forecast: Avoiding Sub-$1.2184 Would Deliver $1.23

It is yet another day ahead on the UK economic calendar. There are no UK economic indicators to provide the Pound with direction.

There are also no scheduled Monetary Policy Committee member speeches to provide direction. The lack of stats and Bank of England commentary will leave the Pound in the hands of market risk sentiment ahead of UK GDP and production figures on Friday.

Following the softer US inflation numbers, the focus will now turn to UK Q2 GDP and manufacturing and industrial production figures. Weak numbers could question whether the BoE can deliver another sizeable rate hike to bring inflation to target.

However, before the Friday stats, the Pound has to navigate the US session. US wholesale inflationary pressures will need to soften to support the Pound at the current levels.

GBP/USD Price Action

At the time of writing, the Pound was down 0.07% to $1.22017.

This morning, the Pound rose to an early high of $1.22210 before falling to a low of 1.21818.

GBP/USD under early pressure
GBPUSD 110822 Daily Chart

Technical Indicators

The Pound will need to avoid the $1.2184 pivot to target the Wednesday high of $1.22766 and the First Major Resistance Level (R1) at $1.2303.

A further pickup in risk appetite would support a breakout from the Wednesday high to target $1.23.

In the event of an extended rally, the GBP/USD pair could test resistance at $1.2350. However, the Pound will likely fall short of the Second Major Resistance Level (R2) at $1.2396

The Third Major Resistance Level (R3) sits at $1.2607.

A fall through the pivot would see the Pound test the First Major Support Level (S1) at $1.2091.

In case of an extended sell-off, the GBP/USD pair could test support at $1.2050, while the Pound should steer clear of the Second Major Support Level (S2) at $1.1972.

The Third Major Support Level (S3) sits at $1.1760.

GBP/USD pivot the key early in the day.
GBPUSD 110822 1 Hour Chart

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bullish signal.

At the time of writing, the Pound sat above the 50-day EMA, currently at $1.21307.

After Wednesday’s bullish cross, the 50-day EMA widened from the 200-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bullish signals.

A 50-day EMA widening from the 200-day EMA would give the Pound a run at R1 ($1.2303). However, a shift in market focus to the GDP and production figures tomorrow could limit the upside.

A GBP fall through the 50 and 200-day EMAs would bring the 100-day EMA (1.21077) and S1 (1.2091) into view.

EMAs bullish
GBPUSD 110822 4-Hourly Chart

The US Session

Following the impact of US consumer prices on the GBP/USD pair, wholesale inflation numbers will also draw interest. A softening in wholesale inflationary pressures would signal further softness in consumer prices.

However, jobless claims could test sentiment towards US labor market conditions. Another rise would support a downward revision to July’s impressive nonfarm payroll numbers.

Daily Forex: U.S. Dollar (DXY) Back In Focus As Traders Wait For PPI Data

Key Insights

  • Today, traders will focus on PPI data from the U.S., which may have a significant impact on currency dynamics. 
  • The tense situation in the European natural gas markets may put more pressure on the euro. 
  • USD/CAD has a good chance to test new lows if oil prices continue to rebound. 

Traders should expect more volatility today as markets will react to the new portion of the U.S. inflation data. Meanwhile, commodity-related currencies may have a chance to gain some ground as oil is trying to rebound from lows after the recent EIA report.

U.S.

The main event of the day for currency traders is the release of Producer Prices data from the U.S. Analysts expect that Producer Prices increased by 0.2% month-over-month in July. On a year-over-year basis, Producer Prices are projected to grow by 10.4%. Core Producer Prices are expected to increase by 0.4% month-over-month.

Yesterday, weaker-than-expected inflation data put significant pressure on the American currency. The FedWatch Tool indicates that there is a 56.5% probability of a 50 bps hike at the next Fed meeting. Before the inflation data was released, markets prepared for a 75 bps hike.

Today’s Producer Prices data will have a material impact on currency market dynamics. In case PPI is weaker than analysts expected, DXY will find itself under more pressure and may settle back below the 105 level.

Europe

EUR/USD has recently made an attempt to settle above the 1.0300 level but failed to gain sufficient upside momentum and pulled back.

There are no important economic reports scheduled to be released in the Euro Area today, so traders will be focused on general market sentiment and developments in the European natural gas market.

European countries have already started to implement energy-saving measures, but natural gas prices managed to gain upside momentum after a period of consolidation.

This is dangerous for the European economy as higher energy prices will force Europe to cut energy consumption, which will have a direct negative impact on GDP and hurt EUR/USD chances to rebound.

Canada

USD/CAD is trading near monthly lows. Traders must monitor the dynamics of oil prices, which may provide additional support to the Canadian currency in case the oil market continues to rebound from the recent lows.

For a look at all of today’s economic events, check out our economic calendar.

CPI Report Reveals Lower Inflation and Yields Extreme Volatility in Gold and the Dollar

Economists polled by various News services predicted a slight decline in inflation from 9.1% in June to 8.8% in July. However, the economist polled overestimated as the actual numbers for July revealed that inflation is running at 8.5% YoY.

Overall inflation details with changes for various goods in July

“The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in July on a seasonally adjusted basis after rising 1.3 percent in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 8.5 percent before seasonal adjustment.

The gasoline index fell 7.7 percent in July and offset increases in the food and shelter indexes, resulting in the all items index being unchanged over the month. The energy index fell 4.6 percent over the month as the indexes for gasoline and natural gas declined, but the index for electricity increased. The food index continued to rise, increasing 1.1 percent over the month as the food at home index rose 1.3 percent.”

Gold and US Dollar today

Gold 5 minute chart

Today’s report created extreme volatility in both the dollar and gold during the first twenty minutes immediately following its release. The knee-jerk reaction moved gold extremely higher. Gold futures opened at $1811.50 in New York, the exact time that the report was released. Fifteen minutes later gold would trade to $1824.60 today’s high.

However, those gains were short-lived and as of 4:37 PM EDT, the December contract is currently down $4.70 and fixed at $1807.60, $3.90 below today’s New York open. The chart above is a five-minute candlestick chart of gold futures that clearly shows the extreme volatility during the first twenty minutes, and the methodical price decline evident during the remainder of the trading session in New York and Globex.

USDX 5 minute chart

The dollar also had an extremely volatile knee-jerk reaction to today’s report. The dollar index opened at 106.22 and traded to today’s daily low of 104.515 by 11:30 AM EDT. As of 4:52 PM EDT, the dollar index is currently at 105.12 after factoring in today’s decline of 1.07%.

Kitco Gold Index

Physical gold is currently fixed at $1792.20 which is a net decline of $1.70. However, selling pressure by market participants was extreme moving gold $19.80 lower in trading today. But because of extreme dollar weakness which resulted in gold gaining $18.10 the net result for spot gold was a fractional decline.

Gold daily chart

Technical analysis

The chart above is a daily candlestick chart of gold futures. Based on our studies we still believe there is possible support for gold at $1800. Major support for gold occurs at $1789.50 based upon gold’s 50-day moving average. The first level of resistance occurs at $1831, with major resistance at $1880.

It is also likely to see the dollar decline further based on the fact that today’s decline of 1% resulted in the dollar index closing below its 50-day moving average which is currently fixed at 105.40. However, The intraday low of the dollar index at 104.515 represents the first level of potential support.

For those who would like more information simply use this link.

Wishing you as always good trading,

Gary S. Wagner

USD/JPY Forex Technical Analysis – Testing Key Retracement Zone Support at 132.876 – 131.338

The U.S. Dollar fell sharply against its Japanese counterpart on Wednesday as data showing the nation’s consumer inflation slowed more than expected in July, raising speculation that the Federal Reserve will be less-aggressive in its future rate hikes, starting with its September move.

On Wednesday, the USD/JPY settled at 132.885, down 2.253 or -1.67%. The Invesco CurrencyShares Japanese Yen Trust ETF (FXY) finished at $70.34, up $1.16 or +1.68%.

US Headline, Core Consumer Inflation Slowed in July

Data from the U.S. Labor Department showed the consumer price index was unchanged in July after leaping by 1.3% a month earlier. Economists had expected prices to edge up by 0.2%.

The data also said core consumer prices, excluding food and energy prices rose by 0.3% in July against expectations for a 0.5% increase. The annual core consumer price growth was unchanged at 5.9%, while economists had expected an acceleration to 6.1%.

Chances of 50 Basis Point Rate Hike Rise, Odds of 75 Basis Point Rate Hike Drops

After the CPI data was released, U.S. Treasury yields fell. The yield on the U.S. 10-year Treasury yield dropped to 2.674% before edging up. More importantly, the CME Group’s FedWatch tool is currently indicating a 58.5% chance of a 50 basis point rate hike and a 41.5% chance of a 75 basis point rate hike.

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 130.412 will signal a resumption of the downtrend.

The minor trend is also down, but the USD/JPY is getting a little support from the August 2 closing price reversal bottom. A trade through 135.568 will change the minor trend to up. This will shift momentum to the upside.

The main range is 126.362 to 139.389. The USD/JPY is currently testing its retracement zone at 132.876. This zone is potential support.

The short-term range is 139.389 to 130.412. Its retracement zone at 134.901 to 135.960 is resistance. This zone stopped the rally at 135.568 on Monday.

Short-Term Outlook

Trader reaction to the main 50% level at 132.876 is likely to determine the direction of the USD/JPY on Thursday.

Bearish Scenario

A sustained move under 132.876 will indicate the presence of sellers. This could trigger a break into the main Fibonacci level at 131.338. If this fails, the selling pressure could extend into the main bottom at 130.412. This is a potential trigger point for an acceleration to the downside.

Bullish Scenario

A sustained move over 132.876 will signal the presence of buyers. If this move generates enough upside momentum then look for a possible surge into the short-term retracement zone at 134.901 to 135.960. Inside this zone is a minor top at 135.568.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Dollar Index (DX) Futures Technical Analysis – Testing Retracement Zone Support at 105.155 to 104.215

The U.S. Dollar tumbled on Wednesday after signs of sharply decelerating U.S. inflation prompted bets that the Federal Reserve would raise interest rates at a slower pace than previously expected.

Treasury yields mostly pulled back from an earlier plunge as investors digested data showing that consumer prices did not rise in July as the cost of gasoline fell, delivering the first notable sign of relief for Americans who have watched inflation soar over the past two years, Reuters wrote.

At the end of the session, traders had priced in a 57.5% chance of a 50 basis point rate hike next month, and a 42.5% chance of a 75 basis point rate hike. Before the inflation report, traders had priced in a 64.5% chance of a super-sized 75 basis point rate hike.

On Wednesday, September U.S. Dollar Index futures settled at 105.080, down 1.1720 or -1.12%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) finished at $28.13, down $0.30 or -1.07%.

Hawkish Fed Officials Stop Price Slide

Following a test of its lowest level since July 1 at 104.515, the dollar index bounced back into the close after a couple of Fed officials spoke of the need to continue to raise interest rates.

Minneapolis Fed Bank President Neel Kashkari said that he continues to believe that the U.S central bank will need to raise its policy rate to 3.9% by year-end to 4.4% by the end of 2023 to fight inflation.

Chicago Fed President Charles Evans remained more hawkish than financial markets, expecting that U.S. rates will top out at 4% next year.

Daily September U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 104.515 will re-establish the downtrend. A move through 106.810 will change the main trend to up.

The main range is 101.170 to 109.140. The market is currently testing its retracement zone at 105.155 to 104.215. This zone may have stopped the selling at 104.515 on Wednesday.

The intermediate range is 103.200 to 109.140. The index is trading below its retracement zone at 105.480 to 106.181, making it resistance.

The short-term range is 109.140 to 104.515. Its 50% level at 106.830 is additional resistance.

Short-Term Outlook

Trader reaction to the main 50% level at 105.155 is likely to determine the direction of the September U.S. Dollar Index early Thursday.

Bullish Scenario

A sustained move over 105.155 will indicate the presence of buyers. The first upside target is 105.480. Overcoming this level could trigger an acceleration into 106.180.

Bearish Scenario

A sustained move under 105.155 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into Wednesday’s low at 104.515, followed by the main Fibonacci level at 104.215. This price is a potential trigger point for an acceleration to the downside.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis – Needs to Hold .6379 Fib Level to Sustain Upside Momentum

The New Zealand Dollar posted an impressive rally on Wednesday after U.S. inflation missed expectations, triggering a rush into risk assets. The Kiwi surged 1.8%, the largest daily gain to date this year.

On Wednesday, the NZD/USD settled at .6403, up 0.0116 or 1.82%.

U.S. inflation data showed that consumer prices did not rise in July due to a sharp drop in the cost of gasoline, with the consumer price index increasing by a slower-than-expected 8.5%, following a 9.1% rise in June.

The softer data sent risk assets sharply higher, as investors turned hopeful that the Federal Reserve would become less aggressive on interest rate hikes.

Meanwhile, the odds of a 75 basis point rate hike dropped as the chances of a 50 basis point Fed rate hike rose.  At the same time, traders are pricing another 50 basis point rate hike by the Reserve Bank of New Zealand (RBNZ) on August 17.

Looking ahead to Thursday, traders are preparing for the release of the Real Estate Institute of New Zealand’s house price report.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The main trend turned up on Wednesday when buyers took out the main top at .6353. It was reaffirmed on a trade through the June 16 main top at .6396. A trade through .6212 will change the main trend to down.

The intermediate range is .6576 to .6061. On Wednesday, the market closed on the bullish side of its retracement zone at .6379 to .6318, making it support.

The major support is the long-term Fibonacci level at .6231.

On the upside, a pair of 50% levels at .6467 and .6547 are potential targets and resistance levels.

Short-Term Outlook

Trader reaction to the intermediate Fibonacci level at .6379 is likely to determine the direction of the NZD/USD early Thursday.

Bullish Scenario

A sustained move over .6379 will indicate the presence of buyers. Taking out Wednesday’s high at .6434 will indicate the buying is getting stronger with .6467 the next target. Sellers could come in on the first test of this level. Overcoming it, however, could trigger an acceleration into the next 50% level at .6548.

Bearish Scenario

A sustained move under .6379 will signal the presence of sellers with a 50% level at .6318 the next target. Since the main trend is up, buyers are likely to come in on a test of this level. If it fails to hold then the long-term Fibonacci level at .6231 will become the next major target. This is the last potential support before the .6212 main bottom.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Forex Technical Analysis – Breakout Over .7053 Fibonacci Level Puts .7283 Main Top on Radar

Australian Dollar traders reacted positively on Wednesday to a highly anticipated report on U.S. inflation. The Aussie surged following the release of a report from the Labor Department showing U.S. consumer prices unexpectedly came in flat in the month of July.

On Wednesday, the AUD/USD settled at .7082, up 0.0119 or +1.68%. The Invesco CurrencyShares Australian Dollar Trust ETF (FXA) finished at $70.10, up $1.21 or +1.76%.

US Consumer Inflation Surprising Flat in July

The Labor Department said its consumer price index was unchanged in July after jumping by 1.3 percent in June. Economists had expected consumer prices to edge up by 0.2 percent.

The report also showed core consumer prices, which exclude food and energy prices, rose by 0.3 percent in July after climbing by 0.7 percent in June. Core prices were expected to increase by 0.5 percent.

The AUD/USD spiked to the upside on the news as the softer than expected inflation data is likely to lead to speculation that the Federal Reserve will slow the pace of interest rate hikes at its September meeting.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Wednesday when buyers took out a pair of main tops at .7047 and .7069. A move through .6870 will change the main trend to down.

The intermediate range is .7283 to .6682. The AUD/USD is trading on the weak side of its retracement zone at .7053 to .6982, making it support.

Short-Term Outlook

Trader reaction to the intermediate Fibonacci level at .7053 is likely to determine the direction of the AUD/USD early Thursday.

Bullish Scenario

A sustained move over .7053 will indicate the presence of buyers. Taking out Wednesday’s high at .7109 will indicate the buying is getting stronger.

The daily chart indicates there is plenty of room to the upside with the nearest targets a minor top at .7246, followed by a main top at .7283.

Bearish Scenario

A sustained move under .7053 will signal the presence of sellers. This won’t change the main trend to down, but it could lead to a pullback into the intermediate 50% level at .6982. This is the last support before the .6870 main bottom.

For a look at all of today’s economic events, check out our economic calendar.

August 11th 2022: Technical View Following Lower-Than-Forecast US CPI

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

Broad-based USD weakness emerged on Wednesday following weaker-than-expected inflation out of the US. Fed funds futures traders are consequently pricing in a less aggressive rate hike for 21st September Fed meeting. According to the US Dollar Index—USD value against six international currencies— the buck plunged 1.2 per cent (its largest single-day decline since late 2020) and underpinned Europe’s single currency.

EUR/USD received a much-needed tailwind, placing resistance at $1.0298 on the weekly timeframe under pressure. A decisive close north of the aforementioned resistance may eventually see the currency pair knocking on the door of weekly resistance at $1.0778: a previous Quasimodo support level. This is reinforced by the daily timeframe’s relative strength index (RSI) venturing above its 50.00 centreline, a move informing market participants that average gains are now exceeding average losses (positive momentum on the daily chart).

However, potential headwinds remain by way of a pivotal downtrend (primary bear trend) since 2021, and neighbouring resistance at $1.0377 on the daily timeframe, which happens to intersect with trendline resistance, extended from the high $1.1495.

Against the backdrop of the higher timeframes, price flow on the H4 chart shook hands with Quasimodo support-turned resistance at $1.0354. Support warrants attention at $1.0279, closely shadowed by a trendline support, pencilled in from the low $0.9952. Should the unit cross above current resistance (and take on daily resistance at $1.0377), prime resistance is seen from $1.0535-1.0505.

A closer reading of price action on the H1 timeframe has the currency pair rejecting an area of resistance between $1.0376 and $1.0356, made up of two Fibonacci projection levels (1.272% and 1.618%). Territory below draws attention to $1.03 and a Quasimodo resistance-turned support at $1.0275.

Technical Expectation:

While EUR/USD printed strong performance on Wednesday, considerable resistance remains overhead, and we continue to trade within a downtrend. As such, the near-test of daily resistance at $1.0377, and test of H4 Quasimodo support-turned resistance at $1.0354 as well as H1 resistance ($1.0376-1.0356) could be enough to hinder further buying.

If we test support on the H1 timeframe between $1.0275 and $1.03 (houses H4 support at $1.0279) and hold, this could be a sign that the pair is looking to take things higher. But whether a rebound from the supports would be enough to draw bullish attention is difficult to estimate, knowing where price is on the bigger picture.

Though a break of the said H1 supports implies a move back to $1.02 and opens the door to a bearish scenario.

 

AUD/USD:

AUD/USD bulls entered an offensive phase on Wednesday amid US CPI-inspired softness and a clear risk-on environment that tends to favour the risk-sensitive Australian dollar.

Up nearly 3.0 per cent week to date, the currency pair is on the verge of forging a close above resistance from $0.6996. Assuming a dominant finish to the week, weekly price invites an approach to as far north as prime resistance coming in at $0.7849-0.7599. This follows a rebound from weekly support between $0.6632 and $0.6764.

Although the recent outperformance may incite breakout buying, the daily timeframe is within reach of touching resistance in the form of a 50% retracement at $0.7167 and the 200-day simple moving average, currently circling $0.7152 (note that moving averages can [and often do] deliver dynamic support and resistance as price commonly reverts to its mean).

Addressing the H4 timeframe shows supply-turned demand resides at $0.7062-0.7031, with scope to extend gains until Quasimodo support-turned resistance at $0.7148. There is also a deep 78.6% Fibonacci retracement present here at $0.7154. Lower on the curve, H1 price is in the process of consuming offers around $0.71, action perhaps clearing upside to Quasimodo resistance at $0.7129.

Technical Expectation:

All four timeframes indicate buyers have the upper hand. The question is where will sellers attempt to put in an appearance? Breakout buyers above $0.71 are likely to take aim at H1 Quasimodo resistance at $0.7129, followed by H4 Quasimodo support-turned resistance at $0.7148 and then daily resistance (50% retracement) at $0.7167.

USD/JPY:

Buyers took a back seat on Wednesday as the USD/JPY plunged nearly 2.0 per cent after softer-than-anticipated US inflation data. Overall, though, this does little to affect the underlying trend in this market, dominantly higher since 2021.

With that being said, the rejection from weekly resistance at ¥137.23 in mid-July may concern current longs given it is the largest correction since the uptrend started. Until the weekly decision point at ¥126.40-131.30 is overthrown, however, I do not expect to see much call for USD/JPY shorts, technically speaking.

Examining price action on the daily timeframe has the unit within a stone’s throw of supply-turned demand at ¥131.93-131.10. This is an area that has delivered a floor of support since 16th June, and a break would likely be a talking point for technical analysts as limited support is observed until reaching support at ¥125.54 (a weekly support level positioned just south of the current weekly decision point). Therefore, ¥131.93-131.10 is likely to be monitored closely.

Since 5th August, the currency pair had echoed a tentative tone around the 50% retracement at ¥134.90 until yesterday. A one-sided decline unfolded from the level and bearish forces appears to have prepared the ground for a run at Quasimodo resistance-turned support at ¥146.79. From the H1 timeframe, buyers stepped in ahead of ¥132 and now appear poised to reconnect with ¥133 and the neighbouring Quasimodo support-turned resistance level at ¥133.11. Above, ¥134 is visible as is the ¥134.88-134.33 prime resistance.

Technical Expectation:

Given the pair has yet to test either the daily timeframe’s supply-turned demand area at ¥131.93-131.10, H4 Quasimodo resistance-turned support at ¥130.58, or ¥132 on the H1 timeframe, short-term sellers will likely be watching ¥133 to form resistance, bolstered by H1 Quasimodo support-turned resistance at ¥133.11.

GBP/USD:

It was a good day for sterling, rallying 1.2 percent against its US counterpart following lower-than-forecast US inflation data.

Kicking things off from the weekly timeframe, Wednesday’s performance may instil some confidence in bids from long-term weekly support at $1.1958. This is a level that has had a question mark on it as its positioned in a market trending lower since 2021. Continued interest to the upside casts light on weekly resistance at $1.2719.

The recent bid is further reinforced on the daily timeframe after daily price retested (and held) trendline resistance-turned support, taken from the high $1.3639, with the chart also demonstrating space to rally until reaching a decision point at $1.2605-1.2465.

Right now, therefore, higher timeframe structure is in favour of buyers.

Thanks to recent buying, we have also seen the currency pair rebound from the H4 inverted head and shoulder’s pattern ($1.1876; $1.1760; $1.1890) neckline (from the high $1.2056). This locates the pattern’s take-profit level from $1.2335 back in the frame.

In terms of where I stand on the H1 chart at the moment, you will note the candles manoeuvred above $1.22 and swiftly retested the level as support. I do not see much in the way of resistance on this timeframe until the $1.23 region.

Technical Expectation:

According to the four charts analysed, buyers are likely to remain in command.

Another retest of $1.22 on the H1 timeframe, therefore, could offer buyers a platform to work with, targeting $1.23, and then the H4 timeframe’s pattern (inverted H&S) profit objective at $1.2335.

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DXY Hits One-month Lows Under 105.00 After Soft US CPI; NZD/USD Surges 1.9%

Key Points 

  • The US dollar index slumped 1.0% on Wednesday after US CPI surprised to the downside.  
  • The headline YoY rate fell to 8.5% from 9.1% in June, larger than the expected drop to 8.7%. 
  • Markets aggressively pared Fed tightening bets.  

US Dollar Battered as Markets Pare Fed Tightening Bets Following Soft CPI Figures 

The US dollar index slumped 1.0% on Wednesday and, ahead of the close of US trade, was on course for its worst day since mid-June after printing fresh one-month lows under 105.00. US Consumer Price Index data for July surprised to the downside, hitting the buck as traders pared back on aggressive Fed tightening bets. The MoM rate of headline inflation was 0.0% in July, below expectations for a drop to 0.2% from 1.3% in June.  

The headline YoY rate fell to 8.5% from 9.1% in June, larger than the expected drop to 8.7%. Much of the decline in headline prices owed itself to a 20% decline in average gasoline prices in the US in July versus June. But core measures of inflation also contained promising signs. The core index rose at a pace of 0.3% MoM and 5.9% YoY, below expectations for 0.5% and 6.1%, with the former a deceleration on June’s 0.5% MoM increase and the latter remaining unchanged.  

Markets interpreted the data as reducing the need for the Fed to implement a third successive 75 bps rate hike in September. According to the CME’s FedWatch Tool, money markets were last pricing a 62.5% chance that the Fed instead goes with a smaller 50 bps rate hike in September versus 32% one day ago.  

Analysts were keen to point out that these expectations could easily shift, given that August jobs and CPI data will both be released prior to the Fed’s September confab. Fed policymakers speaking on Wednesday in wake of the data continued to talk tough about the need to prioritize the fight against inflation. Neel Kashkari, who has typically been viewed as the Fed’s most dovish member, lambasted the idea of rate cuts in early 2023 as “unrealistic”. None overtly commented on whether a 50 or 75 bps rate hike next month would be appropriate. 

For now, as markets price in a more benign economic outlook (of stronger growth but peaking/falling inflation), the ongoing risk asset rally could well weigh further on the US dollar. Technicians say the DXY has broken key technical support in the form of a long-term uptrend, which also bodes poorly. But given the relative strength of the US economy in comparison to the likes of the Eurozone, UK and Japan, and the still comparatively hawkish outlook for Fed policy versus the likes of the ECB, BoE and BOJ, the outlook for a rapid, sustained dollar drop still doesn’t look good.  

EUR/USD Hits One-Month Highs, GBP/USD Recovers Into 1.22s 

In terms of the G10 forex majors; EUR/USD printed fresh more than one-month highs in the 1.0360s, though has since pulled back to the 1.0300 area after hitting significant resistance. GBP/USD rallied 1.2% back into the 1.22s, with comments from BoE’s Huw Pill who warned about hot wage inflation flying under the radar in the US CPI aftermath. 

USD/JPY was at one point on course for its largest one-day drop since March 2020, with it trading 2.2% lower on the day when at earlier session lows just above 132.00. The pair, which was weighed by a significant post-downside US CPI surprise drop in US bond yields across the curve, was last trading a more modest 1.5% lower on the day. The Aussie and kiwi, meanwhile, gained 1.7% and 1.9% respectively versus the buck, with both flying amid the positive tone to risk appetite.  

USD/JPY Price Forecast – US Dollar Bounces From a Support Level

US Dollar vs Japanese Yen Technical Analysis

The US dollar has fallen hard during the trading session on Wednesday after the CPI number came out much cooler than anticipated. This had traders hoping for the Federal Reserve to come out and start bailing people out again, but that seems to be very unlikely at this point. What is worth noting is that the ¥132.50 level has offered support, which is an area that has been important more than once. With that being the case, it’s very likely that we will continue to see traders jump into this market and push it to the upside. In fact, it’s not until we break down below the ¥130 level that I become worried about the overall trend.

The initial reaction to the CPI number was very negative for this pair but given enough time it’s likely that we will see the market turn right back around. After all, the Federal Reserve has to tighten monetary policy quite aggressively regardless. We are still looking at least 50 basis points being the next rate hike, and there’s still a really good shot at 75.

Keep in mind that the Bank of Japan still has to fight rising interest rates, so that’s essentially the same thing as quantitative easing. With this, I think it makes quite a bit of sense that we would see this pair continue to go higher over the longer term. Sure, the rate of change will probably slow a bit, but the directionality is still very much the same. With this being the case, a little bit of patience and money management will probably go a long way in this pair.

USD/JPY Price Forecast Video for 11.08.22

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Price Forecast – The British Pound Surges After Cool CPI

British Pound vs US Dollar Technical Analysis

The British pound rallied rather significantly during the trading session on Wednesday after the CPI number in the United States came out a little bit cooler than anticipated. Now that we’ve got this out of the way, the British pound has shot quite a bit higher, but it also looks as if it is running into a significant amount of resistance. The 1.2250 level has been important a couple of times, and that’s exactly what we slammed into on the way higher.

Ultimately, this is a market that is still very much in a downtrend, and although the candlestick is very large, that is not assuming things have changed yet. If we do break above the 1.23 level, then we have to take a significant move to the upside in order to truly break out of the trend. I have the trend changing at the 1.26 level, so as long as we are below that level, I have no interest in shorting this market. If we did break above there, that would make this more of a “buy-and-hold” type of market. I don’t see that happening, and quite frankly we would need to see rates get slaughtered for that to happen.

It’s also worth noting that the Bank of England has admitted that a recession is coming to the United Kingdom, and therefore it’s difficult to imagine that the British pound will rally in the long term. That doesn’t mean that we can have a little bit of a bounce, but it does mean that I will be looking to fade rallies at the first signs of exhaustion.

GBP/USD Price Forecast Video for 11.08.22

For a look at all of today’s economic events, check out our economic calendar.

GBP/JPY Price Forecast – The British Pound Has Gone Back and Forth Against Yen

British Pound vs Japanese Yen Technical Analysis

The British pound has been noisy during the trading session on Wednesday as we continue to see a lot of noise in general. The ¥162.50 level continues to be an area that attracts a lot of attention, and therefore it’s worth noting that the area is being threatened as I record this video. That being said, the 50 Day EMA sits just above and offers a significant amount of resistance. If we can break above all of that noise, then the British pound goes looking to the ¥165 level.

Underneath, the ¥160 level is a major support level, is also a large, round, psychologically significant figure, and basically where we see the 200 Day EMA hanging about. In other words, this remains a “buy on the dip” type of market, and therefore I think it is probably only a matter of time before we see buyers come back into this market and get aggressive. In fact, it’s not until we break down below the 160 and level on a daily close that we see this market falling, at least for any significant amount of time.

Keep in mind that there is a lot of noise just above the ¥165 level, so I think by the time it’s all said and done, the market will probably see more of a range-bound type of situation just as we have for a while. In other words, I’m afraid that the choppiness is going to continue to be a major problem, and therefore you need to be cautious with your position size and recognize that we are going back and forth.

GBP/JPY Price Forecast Video for 11.08.22

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Price Forecast – Euro Slams Into the 50-Day EMA

Euro vs US Dollar Technical Analysis

The Euro has rallied significantly during the trading session on Wednesday as CPI numbers came out cooler than anticipated in the United States. That being said, we are now above the 1.03 level, and likely to start focusing on the 1.04 level where there’s even more resistance. That being said, it does look like in the short term the 50-Day EMA is at least trying to offer resistance to this pair, so if we get a pullback from there, that’s even more bearish.

Keep in mind that the market is obviously in a negative trend overall, and that is something that you cannot forget. Yes, we may get a little bit of a pop from here, but the longer-term outlook for the European Union is dismal at best, and of course, there is slowing growth around the world. The short-term pop probably comes down from the macro tourists that believe the Federal Reserve will have to become less aggressive with rates. Regardless, inflation is still over 3 ½ times what they target, meaning that they will still be very tight.

I look at a rally now as a potential selling opportunity and the way to pick up “cheap US dollars.” It doesn’t mean that it will be easy, and you should probably step out of the way of the short-term traders to let them push things to a much more attractive level for short selling. Because of this, I will probably be out of this pair for the next 24 hours. By the end of the week though, it’s very likely that I will start shorting again, as there is a proclivity for this market to go down to the parity level.

EUR/USD Price Forecast Video for 11.08.22

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Price Forecast – Australian Dollar Shoots Higher After CPI

Australian Dollar vs US Dollar Technical Analysis

The Australian dollar has rallied a bit during the trading session on Wednesday as the CPI numbers in America came out cooler than anticipated. Because of this, people started betting against the greenback almost immediately, but it’s worth noting that we still face a lot of resistance above and therefore we cannot give the “all clear” for some type of major turnaround. Because of this, it’s very likely that we will run into some type of exhaustion sooner or later, and the trend is most certainly still negative.

There is a lot of noise out there as I listen to pundits suggest that the Federal Reserve may only raise 50 basis points instead of 75, but there are a lot of confusing crosswinds at the moment. It is a bit of good news in the sense that inflation is not accelerating, so that does help. That being said, it’s likely that the Australian dollar will go looking to reach the 200 Day EMA. Whether or not it can change the trend is a completely different situation, because regardless of what happens, the Federal Reserve is still going to be much more aggressive than the Reserve Bank of Australia.

On the downside, if we were to turn around and take out the 50 Day EMA, then it opens up a move down to the 0.69 handle. That’s an area that I think will continue to be supported, so breaking through that would of course be a very negative turn of events. In that scenario, I think the 0.67 level gets tested for holding the entire market up. That gives up, look out below.

AUD/USD Price Forecast Video for 11.08.22

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Forex Technical Analysis – 1.0363 to 1.0460 on Radar after Drop in US Rate Hike Expectations

The Euro is trading at its highest level since July 5 on Wednesday after U.S. consumer inflation came in softer than expected. The news drove down Treasury yields, weakening the U.S. Dollar and driving up demand for riskier assets. Financial futures market traders also lowered the chances of a 75 basis point rate hike in September from 70% to 38%. The chances of a 50 basis point rate hike jumped to 62%.

At 13:11 GMT, the EUR/USD is trading 1.0329, up 0.0116 or +1.13%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $94.29, up $0.13 or +0.14%. It is expected to open higher.

Prices that consumers pay for a variety of goods and services rose 8.5% in July from a year ago, a slowing pace from the previous month due largely to a drop in gasoline prices.

On a monthly basis, price were flat as energy prices broadly declined 4.6% and gasoline fell 7.7%. That offset a 1.1% monthly gain in food prices and a 0.5% increase in shelter costs, the government reported.

Ahead of the report, traders were looking for headline CPI to increase 8.7% on an annual basis and 0.2% monthly.

Excluding volatile food and energy prices, so-called core CPI rose 5.9% annually and 0.3% monthly, compared to respective estimates of 6.1% and 0.5%.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. Today’s trade through 1.0294 reaffirmed the uptrend. A move through 1.0123 will change the main trend to down.

The intermediate range is 1.0774 to .9952. Its retracement zone at 1.0363 to 1.0460 is the next upside target.

On the downside, support is a 50% level at 1.0284 and a retracement zone at 1.0149 to 1.0103.

Daily Swing Chart Technical Forecast

Trader reaction to the 50% level at 1.0284 is likely to determine the direction of the EUR/USD into the close on Wednesday.

Bullish Scenario

A sustained move over 1.0284 will indicate the presence of buyers. The first upside target is a 50% level at 1.0363. Look for sellers on the first test of this level. Overcoming it, however, could trigger a surge into the Fibonacci level at 1.0460.

Bearish Scenario

A sustained move under 1.0284 will be a sign of weakness. This could trigger a pullback into a minor pivot at 1.0234.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Dollar Forecast: DXY Retreats As Inflation Rate Drops To 8.5%

Key Insights

  • Traders rushed to sell the American currency as Inflation Rate declined to the 8.5% level. 
  • Riskier assets like stocks and cryptos enjoyed strong support. 
  • DXY has a good chance to settle below the 105 level, which will be bullish for riskier assets.

Traders Sell U.S. Dollar After Inflation Reports

U.S. dollar found itself under strong pressure after the U.S. released inflation reports. Inflation Rate declined from 9.1% in June to 8.5% in July, compared to analyst consensus of 8.7%. Core Inflation Rate remained unchanged at 5.9%, while analysts expected that it would grow to 6.1%.

While the American currency has been moving lower since the start of the week, markets were not prepared to see a strong decline in inflation. As a result, traders rushed to sell the U.S. dollar.

Currently, the U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, is down by more than 1%. Not surprisingly, Treasury yields have also moved lower.

Riskier Assets And Gold Benefit From Weaker Dollar

Weak dollar and lower Treasury yields provided material support to gold, which managed to get back above the $1800 level. Silver is also moving higher.

The rally in the U.S. stock market is set to continue as S&P 500 futures are up by about 1.5% in premarket trading. Stock traders bet that the Fed will not raise the rate by 75 bps at the next meeting and will limit itself with a 50 bps hike.

Tech stocks, who have delivered strong earnings reports, like Trade Desk, are moving higher in premarket trading. Big tech names like Apple and Microsoft are also gaining ground. The risk-sensitive cryptocurrencies like Bitcoin or Ethereum enjoy strong support.

Stocks, cryptos, and gold may get even more support in the upcoming hours in case the U.S. Dollar Index manages to settle below the 105 level. The first reaction to U.S. inflation reports indicates that many traders were unprepared for softer inflation numbers, so the current sell-off has a decent chance to continue.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD Price Forecast: A Return to $1.0250 Hinged on Softer US CPIs

For the EUR, it’s a quiet morning ahead on the Eurozone economic calendar. Ahead of the European open, finalized July inflation figures for Germany drew interest.

In line with prelim figures, Germany’s annual rate of inflation softened from 7.6% to 7.5%. Month-on-month, German consumer prices rose by 0.9% versus 0.1% in June.

According to Destatis,

  • Relief measures had a modest downward effect on inflation driven by the war and crisis.
  • Fuel discounts supported softer motor fuel prices, with the introduction of the 9-euro ticket having a downward impact on public regional and short-distance passenger transport.
  • Year-on-year, transport prices were up 5.4% in July, down from +8.3% in June and +16.3% in May.
  • Energy prices were 35.5% higher than in the same month a year earlier, following a 38% increase in June 2022.
  • As a result of the fuel discount, motor fuel prices were up 23.0% in July, softer than +33.2% in June and +41.0% in May,

Early in the European session, finalized Italian inflation figures are also due.

EUR/USD Price Action

At the time of writing, the EUR was down 0.04% to $1.02087.

In a mixed start, the EUR fell to an early low of $1.02027 before rising to a high of $1.021092.

EUR/USD in the hands of US CPI numbers
EURUSD 100822 Daily Chart

Technical Indicators

The EUR/USD needs to move through the $1.0216 pivot to target the First Major Resistance Level (R1) at $1.0244 and the Tuesday high of $1.02475.

Any breakout from $1.022 levels will hinge on market risk sentiment and US CPI numbers due later today.

An extended rally would likely see the EUR/USD pair test the Second Major Resistance Level (R2) at $1.0275.

The Third Major Resistance Level (R3) sits at $1.0334.

Failure to move through the pivot would bring the First Major Support Level (S1) at $1.0185 into play.

An extended sell-off throughout the day could see the EUR/USD test the second Major Support Level (S2) at $1.0157 and support at $1.0100. US CPI numbers will need to spike to sink the EUR.

The Third Major Support Level sits at $1.0098.

EUR/USD on the backfoot going into the European session.
EURUSD 100822 Hourly Chart

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal.

At the time of writing, the EUR sat above the 100-day EMA, currently at $1.02050.

The 50-day EMA narrowed to the 100-day EMA, while the 100-day EMA held steady against the 200-day EMA, which were positive price signals.

Avoiding a fall through the 100-day EMA (1.02050) would bring R1 ($1.0244) and the 200-day EMA ($1.02601) into view.

However, a fall through the 100 and the 50-day EMAs would leave support levels in play.

EMAs bearish
EURUSD 100822 4 Hourly Chart

The US Session

It is a big day ahead, with the all-important US CPI numbers due later today. We can expect market sensitivity to the numbers that could define the Fed’s next policy move.

However, investors will also need to consider the fact that another round of private sector PMI, NFP, and inflation figures will be out before the next FOMC meeting. Oil prices have fallen sharply since levels seen at March and June’s recent peaks, which could temper market bets of a Fed response to the July numbers alone.

However, it may be of little consolation for the EUR, with the Eurozone facing the threat of a recession.

FX Empire Senior Editorial Team Member James Hyerczyk had this to say,

“I don’t think this CPI report will be that big of a deal unless there is a big upside miss. There is another one in September before the Fed meeting. 2. Labor costs are still elevated. So if consumer prices dip but wages are high, consumers will feel comfortable paying the high price and the rate of decline of inflation will slow. 3. Fed has to keep going big to weaken job market, knock down wages. Too many people are working.”

GBP/USD Price Forecast: Weak US CPIs to Give the Pound a Look at $1.22

It is another quiet day ahead on the UK economic calendar. There are no UK economic indicators to provide the Pound with direction.

There are also no scheduled Monetary Policy Committee member speeches to provide direction. The lack of stats and Bank of England commentary will leave the Pound in the hands of market risk sentiment ahead of the key UK economic indicators due on Friday.

While the focus remains on UK Q2 GDP and manufacturing and industrial production figures, which could define the next BoE policy move, US CPI numbers will have a material impact on the GBP/USD pair.

Recent US economic indicators placed monetary policy divergence in favor of the dollar. However, weak CPI numbers could ease pressure on the FED and shift divergence in favor of the Pound. Such an eventuality would likely see the Pound target the August high of $1.22932.

GBP/USD Price Action

At the time of writing, the Pound was up 0.07% to $1.20824.

This morning, the Pound fell to an early low of $1.20648 before moving into positive territory.

GBP/USD finds early support
GBPUSD 100822 Daily Chart

Technical Indicators

The Pound will need to move through the $1.2089 pivot to target the First Major Resistance Level (R1) at $1.2115 and the Tuesday high of $1.21298.

Movement in the GBP/USD pair will ultimately hinge on today’s US CPI numbers.

In the event of an extended rally, the GBP/USD pair could test the Second Major Resistance Level (R2) at $1.2156 and resistance at $1.22. Weak CPI numbers would bring $1.22 into play.

The Third Major Resistance Level (R3) sits at $1.2223.

Failure to move through the pivot would likely see the Pound test the First Major Support Level (S1) at $1.2048.

In case of an extended sell-off, the GBP/USD pair could test the Second Major Support Level (S2) at $1.2022 and support at $1.20. A spike in US inflation would pressure the GBP/USD pair.

The Third Major Support Level (S3) sits at $1.1955.

GBP/USD pivot the key early in the sesssion.
GBPUSD 100822 1 Hour Chart

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal.

At the time of writing, the Pound sat below the 100-day EMA, currently at $1.20940.

After Monday’s bearish cross, the 50-day EMA narrowed to the 100-day EMA, while the 100-day EMA held steady against the 200-day EMA, delivering bearish signals.

A 50-day EMA narrowing to the 100-day EMA would leave support levels in play.

However, a GBP move through the 100-day EMA would bring the 50-day EMA (1.21080) and R1 (1.2115) into view.

EMAs bearish
GBPUSD 100822 4-Hourly Chart

The US Session

It is a big day ahead, with the all-important US CPI numbers due later today. We can expect market sensitivity to the numbers that could define the Fed’s next policy move.

However, investors will also need to consider the fact that another round of private sector PMI, NFP, and inflation figures will be out before the next FOMC meeting. Oil prices have fallen sharply since levels seen at March and June’s recent peaks, which could temper market bets of a Fed response to the July numbers alone.

Forex: All Eyes On U.S. Inflation Data

Key Insights:

  • China’s inflation reports show that prices have started to cool down due to weaker economic activity. 
  • In Europe, traders will focus on inflation numbers from Germany, but it remains to be seen whether they will have a material impact on currency dynamics. 
  • The main event of the day is the release of the inflation data from the U.S. 

It will be a volatile day in currency markets as traders prepare for the release of the inflation reports from the U.S. However, the action is not limited to U.S. numbers, and traders have already had a chance to see inflation data from China.

China

China’s Inflation Rate grew by 0.5% month-over-month in July, in line with the analyst consensus. On a year-over-year basis, Inflation Rate was 2.7%, compared to the analyst consensus of 2.9%. Producer Prices increased by 4.2%.

USD/CNY was mostly unchanged after the release of the report. At this point, geopolitical issues and Covid news have more impact on the Chinese currency.  Inflation data from China is interesting for all currency traders as it shows that inflation may start to cool down due to reduced economic activity.

Europe

In Germany, traders will have a chance to take a look at the final reading of the inflation data for July. Inflation Rate is expected to increase by 0.9% month-over-month. On a year-over-year basis, Inflation Rate is projected to grow by 7.5%.

Typically, the final readings of inflation reports in the Euro Area meet analyst consensus, so the report may not have a material impact on EUR/USD dynamics. However, traders should note that the energy crisis in Europe develops at a robust pace, and it may put additional upward pressure on prices.

U.S.

The main event of the day is the release of inflation data from the U.S. Inflation Rate is expected to decline from 9.1% in June to 8.7% in July due to lower energy prices. Core Inflation Rate is expected to increase from 5.9% to 6.1%.

The report will have a major impact on currency markets. The FedWatch Tool indicates that there is a 69.5% probability of a 75 bps rate hike at the next meeting.

As we have seen in recent trading sessions, expectations of an aggressive rate hike failed to provide enough support to the American currency. However, any surprise in inflation numbers may quickly change the situation.

If prices are rising faster than expected, a major 100 bps rate hike may be on the table. At the same time, lower-than-expected inflation will likely put material pressure on the U.S. dollar. In this case, EUR/USD and GBP/USD, which have been recently consolidating, may rally to new highs.

For a look at all of today’s economic events, check out our economic calendar.