IC Markets Asia Fundamental Forecast | 04 August 2022

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What happened in the US session?

Several Federal Reserve members spoke during the US trading session, indicating that the “fight against inflation is not over” and “Fed is committed to getting inflation under control” signaling to the market that further rate increases from the Federal Reserve could be expected, bringing hawkish sentiment back to the US dollar.

What does it mean for the Asia Session?

As the DXY climbed to test higher overnight, look for this trend to continue through the Asia session. 

The Dollar Index (DXY)

Key news events today

No major news events. 

What can we expect from DXY today?

The DXY recovered further with the ISM services PMI releasing at 56.7 (Forecast: 53.5) indicating a positive growth in the US services sector. The DXY reached 106.65 before retracing briefly. With no major news events for the US today, the DXY could consolidate above the 106 price level before another move higher again. However, sustained recovery on the DXY is likely to depend on positive data from the upcoming Non-Farm Payroll (NFP) employment data on Friday.

Central Bank Notes:

  • Hiked rates by 75bps to take Federal Funds Rate to 2.50%
  • Next meeting on 22 September 2022
  • Balance Sheet reduction plan to continue at $60b (treasuries) and $35b (MBS) over a three-month timeframe

 

Next 24 Hours Bias

Weak Bullish

Gold (XAU)

Key news events today

No major news events. 

What can we expect from Gold today?

Gold failed to trade higher overnight, as the DXY continued with its recovery and the 1770 price level provided resistance to the upside move, a deeper correction in Gold price could be anticipated. Look for price action to signal a rejection of the resistance level, which could lead to Gold trading lower towards the interim support level of 1756. 

Next 24 Hours Bias

Weak Bearish

The Australian Dollar (AUD)

Key news events today

No major news events

What can we expect from AUD today?

During the trading session yesterday, the AUDUSD staged a brief correction higher, to test the 0.6960 resistance level. If the DXY continues to climb higher, the AUDUSD could trade lower again following the recent downtrend. Look for the price to close below the 0.6950 level to signal a potential downside move, with the AUDUSD likely to trade towards the interim support level of 0.6895 and the key support level at 0.6850.

Central Bank Notes:

  • Possible 25 to 50bps rate hike
  • Meeting on 6 September 2022

Next 24 Hours Bias

Medium Bearish 

The Kiwi Dollar (NZD)

Key news events today

No major news events

What can we expect from NZD today?

Despite the weaker than expected employment data from the NZ yesterday and a stronger DXY overnight, a further move to the downside on the NZDUSD was limited by the support area at 0.6235. The price has since bounced strongly from the support level to test the resistance price level of 0.6290. Look for possible price action to show a rejection of this level to signal a move lower to retest the support level again. The NZDUSD is likely to remain within the current trading range, in the lead-up to the US Non-Farm Payroll (NFP) employment data release on Friday.

Central Bank Notes:

  • Cash rate stands at 2.50% following a 50bps rate hike in the July meeting
  • Expects near-term inflation to rise with lower economic activity
  • Next meeting on 17 August 2022

Next 24 Hours Bias

Medium Bearish

The Japanese Yen (JPY)

Key news events today

No major news events

What can we expect from JPY today?

The USDJPY continued its climb as the DXY grew stronger overnight, with the price reaching the 134.50 resistance level. With no major news scheduled, look for the USDJPY to retrace briefly before consolidating below the 134.50 price level. If the price is able to trade out from the resistance level, look towards 136.00 as the next resistance level.

Central Bank Notes:

  • Policy settings were unchanged with rates kept at -0.10%
  • Reiterated that rates will stay low for the foreseeable future and won’t hesitate to add stimulus if the economy needs it
  • Next meeting on 22 September 2022

Next 24 Hours Bias

Medium Bearish