IC Markets Europe Fundamental Forecast | 05 August 2022

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What happened across the Asia session?

The major currencies traded in consolidation and were generally unchanged through the Asia session, as the DXY shows some rebound from the support level.

What does it mean for Europe and US Sessions?

The key focus during the US session will be the Non-Farm Payroll (NFP) data release, which is likely to drive significant volatility through the major currencies.

The Dollar Index (DXY)

Key news events today

USD Average Hourly Earnings m/m

USD Non-Farm Employment Change

USD Unemployment Rate

What can we expect from DXY today?

Overnight, the DXY retraced from the 106.40 level to retest the near-term support of 105.55. The weakness in the DXY was despite comments from Federal Reserve member Mester, indicating that the US was not in a recession now and that it was “not unreasonable to think Fed might hike by 75bps in Sept”. Look for the DXY to find support at this 105.55 level, with upside potential dependent on the Non-Farm employment change (Forecast: 250K  Previous: 372K) data to be released today.  

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?

On the back of the DXY weakness overnight, Gold climbed steadily higher to break above the 1770 resistance level to reach 1790. Look for some short-term retracement to the 1780 price area before a resumption of the uptrend towards the next key resistance area, the 1807 price level. 

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

No major news events. 

What can we expect from EUR today?

The EURUSD climbed to the 1.025 price level overnight, as the DXY retraced to the near-term support level. A resumption of the downside is expected for the EURUSD, as price moves lower from the 1.0225 level. If the US NFP data is released positive and the DXY strengthens, the EURUSD could trade significantly lower towards the support level of 1.010.

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?

Overnight the USDCHF traded lower to reach the 0.9540 price level. However, as the price failed to break the support level, look for some upward correction from the current downtrend. If the price is able to trade above the 0.9550 price level, it could climb towards the near-term resistance level of 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

No Major News Events

What can we expect from GBP today?

As the BoE released its decision to increase rates by 50bps, the Pound lost significant ground against the USD, with the GBPUSD dropping to reach 1.2070. However, this move lower was sharply recovered with the GBPUSD currently trading at 1.2145. Look for the GBPUSD to trade lower, but with confirmation of sustained downside only if the price breaks below 1.0255. 

Central Bank Notes:

  • Interest rate currently at 1.75%
  • Peak inflation revised to more than 15% in 2023. 
  • Next meeting on 15 September 2022

Next 24 Hours Bias

Medium Bullish

The Canadian Dollar (CAD)

Key news events today

CAD Employment Change

CAD Unemployment Rate 

What can we expect from CAD today?

The price volatility of the USDCAD has been within the range of 1.2830 and 1.29 for this week. However, the price could break out of the range, with high-impact employment data to be released from Canada and the US. The Canadian unemployment rate could show a slight increase (Forecast: 5.0% Previous 4.9%), which could result in some weakness for the Canadian dollar. Look for the price to break upwards of the 1.29 resistance level to trade higher towards the 1.30 level. Alternatively, if price action shows a rejection of the resistance level, the USDCAD could continue in the range and trade lower towards the 1.28 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

Medium Bearish

Oil

Key news events today

No Major News Events 

What can we expect from Oil today?

Energy price continues its strong decline as Brent and WTI broke their support levels of 100 and 92 respectively. With the price currently retracing to the upside, look for a possible reversal and resumption of the downtrend, with the next key support level for Brent and WTI at 90 and 85.00 respectively.

Next 24 Hours Bias

Medium Bearish