IC Markets Asia Fundamental Forecast | 10 August 2022

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What happened in the US session?

Overall, markets were trading with lower volatility, in the leadup to the US inflation data on Wednesday. Most currencies traded relatively unchanged.

What does it mean for the Asia Session?

Prices are likely to consolidate for the second day running, as the lack of major news events keeps market volatility lower. 

The Dollar Index (DXY)

Key news events today

USD CPI m/m

USD Core CPI m/m

What can we expect from DXY today?

Overnight, the DXY traded lower to test the 105.90 level but the move was quickly reversed, with the price ending the session above the 106 level. The US Core CPI is due to be released today, forecasted at 0.5% (previous: 0.7%), the expectation is for the data to indicate a slight slowdown in inflation growth. This would mean that the interest rate hikes from the Federal Reserve are starting to have an impact on inflation growth. 

In the lead-up to the release of the inflation data, the DXY is likely to continue trading along the 106 price level with some brief downside. However, look for the DXY to strengthen into the US session, climbing higher towards the 107 resistance level.

Central Bank Notes:

  • Federal Reserve hiked rates by 75bps taking interest rates 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 lower from the 1790 resistance level, as the DXY slid to test the 105.90 price level overnight. Currently trading at the 1792 level, look for Gold price to drop briefly, to test the interim support level of 1785 before another climb towards the 1800 price level. However, if the DXY does recover strongly on the release of the US inflation data, the Gold price could break below 1785 and trade lower towards the 1769 support level. 

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The AUDUSD retraced from the resistance area of 0.70 to trade slightly lower at the 0.6960 price level. Anticipating DXY strength, look for the AUDUSD to test and reject this resistance area. If the AUDUSD can close below 0.6950, look for the price to trade significantly lower towards the 0.6890 interim support level.

Central Bank Notes:

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

Next 24 Hours Bias

Weak Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

Price movement on the NZDUSD shows limited upside potential as price struggles to close strongly above the 0.63 resistance area. The NZDUSD could test the resistance level again before forming a stronger move to the downside. If price is able to close below 0.6275, this could signal a stronger move lower towards the 0.6230 support level. 

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 has been trading in a tight consolidation over the last couple of days, between the price range of 134.45 and 135.30. In the medium term, further upside is still anticipated for the USDJPY. Look for price to test the 134.45 support level again before a possible bounce towards the upside. The price of the USDJPY would need to close above the 135.50 level to signal a more sustained move higher, towards the next resistance level of 137.00.

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