IC Markets Europe Fundamental Forecast | 04 August 2022

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What happened across the Asia session?

With no major news release, most currencies traded in a tight consolidation throught through the Asia session.

What does it mean for Europe and US Sessions?

Focus will be on the BoE rate decision, with a 50bps rate hike expected. Look out for significant volatility in the GBPUSD as a result of this news release.

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 Euro (EUR)

Key news events today

No major news events. 

What can we expect from EUR today?

The slide in the EURUSD slows down as price rebounds to test the support turned resistance level of 1.019. As the DXY is likely to retrace briefly, look for the EURUSD to break above the 1.019 resistance level. However a sustained move to either side is unlikely until the release of the US Non-Farm Payroll (NFP) employment data release on Friday. 

Central Bank Notes:

  • Raised rate by 50bps 
  • Next meeting on 8 September 2022

 

Next 24 Hours Bias

Weak Bearish

The Swiss Franc (CHF)

Key news events today

No Major News Events 

What can we expect from CHF today?

Yesterday, the CPI data was released at 0% which indicates that inflation did not increase month on month for the Swiss. The USDCHF currently trades at the 0.96 level with a brief retrace expected, due to the volatility in the DXY. Look for the USDCHF to test the 0.9650 level before possibly rebounding to test the 0.97 resistance level.

Central Bank Notes:

  • Surprise rate hike by 50bps to -0.25%
  • Next meeting on 22 September 2022

Next 24 Hours Bias

Weak Bearish

The Pound (GBP)

Key news events today

GBP Official Bank Rate

GBP Monetary Policy Summary

GBP BOE Monetary Policy Report

What can we expect from GBP today?

Overnight, the Pound traded lower against the USD with price sliding down to the 1.2120 level. In the lead up to the interest rate decision from the BoE, the GBPUSD traded in a tight consolidation at the 1.2150 price level, through the asia session. As markets anticipate a 50bps increase to come from the BoE, look for upside potential towards 1.23, if price breaks above the 1.22 resistance level. However, be aware of the likelihood of a priced in scenario, where markets sell the GBPUSD if the news is released as expected, with downside potential towards the 1.2050, the next key support level. 

Central Bank Notes:

  • Interest rate currently at 1.25% with possibility for 50bps rate hike to come
  • Peak inflation revised to more than 10%, adding to the stagflation fears; possible GDP contraction in 2023. 
  • Quantitative tightening plans to be updated at the August meeting
  • Next meeting on 4 August 2022

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?

USDCAD remained in consolidation during yesterday’s trading session, as price kept between the 1.2830 and 1.2880 price range. With no major news events for the CAD and the US, if the DXY continues to strengthen, look for the price to restest the 1.29 resistance level. 

Central Bank Notes:

  • Increased rates by 100bps, taking interest rates to 2.50% 
  • Indicated further rate increases likely.
  • Next meeting on 7 September 2022

Next 24 Hours Bias

Weak Bearish

Oil

Key news events today

No Major News Events 

What can we expect from Oil today?

Energy prices continued sliding as the OPEC meeting concluded with the announcement of a possible small increase in production level. With a possible increase in supply and expected decline in demand arising from an impending recession, the negative sentiment was reflected throught Brent and WTI, as prices traded significantly lower. 

Brent broke below below the 102.50 support level to reach below 100. Look for Brent to continue trading lower towards the interim price level of 98.00 and key support level of 95.00. WTI traded in a similar fashion to Brent as it declined to the 91.75 price level. Look for price to break below 90 to reach the 85.00 key support level. 

Next 24 Hours Bias

Medium Bearish