IC Markets Asia Fundamental Forecast | 05 July 2022

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What happened in the US session?

As the US celebrated Independence Day, markets were muted with the DXY rebounding from the 104.50 support area towards resistance level of 105. 

What does it mean for the Asia Session?

With renewed market activity following the US bank holiday, look for a possible resumption of trend across the major currencies. 

 

The Dollar Index (DXY)

Key news events today

No major news events.  

What can we expect from DXY today?

As the DXY holds just below the 105 resistance, and with no major US news events scheduled for today, the DXY could test lower briefly before resuming its move higher. Look for the DXY to retrace to 104.80 before a move back towards 105.30. 

 

Central Bank Notes:

  • Forecasting 75bps hike at next meeting 
  • Next meeting on 26 July 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 sat in consolidation in the 1800 area through yesterday’s trading session. Further upside on the DXY could take gold prices lower from this price level, but significant moves could be limited. Alternatively, look for a stronger rebound upwards from this level, if markets continue to worry about global recession.  

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

RBA Cash Rate

RBA Rate Statement

What can we expect from AUD today?

The RBA rate decision is due today, with markets expecting a 50bps rate hike, taking interest rates from 0.85% to 1.35%. Confirmation of a 50bps rate hike is likely to strengthen the AUDUSD towards the 0.70 level, currently trading just below 0.69. However, significant upside might be unlikely as markets could have already priced in this hike and the RBA policy path could still be considered to be conservative compared to the Federal Reserve. Look at details in the RBA Rate Statement for hints on the path of further rate increases and signals on the overall expected strength of the AUD.

Central Bank Notes:

  • Possible 50bps rate hike
  • Meeting on 5 July 2022

Next 24 Hours Bias

Medium Bullish 

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

The NZD had been muted over yesterday’s trading session, keeping within a 50pip trading range. Some upside on the NZDUSD can be expected, as the AUDUSD is anticipated to climb with the upcoming RBA rate hike. Look for price reaction above 0.6235 to signal any further move towards the upside, with the 0.63 resistance level a possible target.

Central Bank Notes:

  • Next meeting on 13 July 2022

Next 24 Hours Bias

Weak Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

Yen was the most active compared to the other currencies through yesterday’s trading session. Breaking above the 136 level, the USDJPY looks to be on a path towards recent highs of 137 and beyond.

Recent data release indicated that with the historically weak yen, Japan’s inflation outlook has been revised to top 2% by this year before a drop back to 1% in 2023 and 2024 could be likely. However, this revised inflation outlook is unlikely to shift the current path of the BoJ, with an ultra easing policy in place.

Central Bank Notes:

  • Kept all policy settings unchanged at their June meeting
  • 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 21 July 2022

Next 24 Hours Bias

Medium Bearish