IC Markets Europe Fundamental Forecast | 18 August 2022

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What happened across the Asia session?

Most major currencies traded with lower volatility as the price continued in a consolidation. The AUDUSD and NZDUSD traded lower briefly on the release of Australian employment data.

What does it mean for Europe and US Sessions?

As the DXY approaches the key resistance level, volatility is likely to be lower. However, if the DXY breaks above the near-term resistance, look for the EURUSD and GBPUSD to form a directional bias.

The Dollar Index (DXY)

Key news events today

USD FOMC Meeting Minutes

What can we expect from DXY today?

The FOMC meeting minutes indicated members’ concern over further rate increases and its impact on the economy. But also highlighted that the Federal Reserve saw continual interest rate hikes until substantial easing in inflation is seen. The DXY climbed to the 106.70 resistance level before retracing to consolidate at the 106.50 price level. Look for further upside on the DXY with the 107.30 resistance a possible target 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 continued its slide overnight with price breaking below the 1770 support level on the back of the DXY’s climb towards the 106.50 price level. For a continuation of the downward move, look for Gold price to close below the 1760 price level. The next key support levels are at 1750 and 1731.  

Next 24 Hours Bias

Weak Bearish

The Euro (EUR)

Key news events today

No Major News Events

What can we expect from EUR today?

Throughout yesterday’s trading session, the EURUSD traded below the 1.019 resistance level. Watch for a potential wider correction to the downside as the price had resisted further climbs beyond the resistance level. Further decline towards the next support level of 1.010 could be anticipated if the EURUSD closes below 1.016.

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?

On the overnight strength of the DXY, the USDCHF climbed to retest the resistance level of 0.9540. Barring surprises from the DXY, the USDCHF is likely to maintain its recent upward trend. To confirm a continuation towards the next resistance level of 0.9650, watch for the price to close above the 0.9550 price level.

 

Central Bank Notes:

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

Next 24 Hours Bias

Medium Bearish

The Pound (GBP)

Key news events today

No Major News Events 

What can we expect from GBP today?

The overnight rise in the GBPUSD’s price was only momentary because yesterday’s CPI y/y statistics showed that inflation is still rising. The UK economy runs the risk of entering a stagflationary phase, which is defined by excessive inflation and sluggish economic activity, with the CPI at 10.1%. Although the BoE is predicted to keep raising rates by 50 basis points at its upcoming meeting, watch for additional declines in the GBPUSD. The GBPUSD might trade considerably lower into the support level of 1.19 if the price closes below the 1.20 level of support.

Central Bank Notes:

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

Next 24 Hours Bias

Medium Bearish 

The Canadian Dollar (CAD)

Key news events today

No Major News Events

What can we expect from CAD today?

Overnight, the USDCAD price increased above the 1.29 resistance level, with the price currently trading at 1.2935. The DXY may continue to climb above 106.70 as the USDCAD may trade higher. To signal continued upward movement into the 1.3030 resistance level, watch for the price to close above the 1.2950 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?

The 93 price level served as support for Brent’s overnight decline. Look for more negative for Brent as long as the downtrend persists and there is no significant change in the fundamentals that would cause a significant reversal to the upside.  Brent might retest the 93 support level and possibly go further if the price falls below the 95.00 price level. WTI traded more erratically, with the price shooting up past the 89 price level. But like Brent, more decline in WTI is anticipated, and it is anticipated that it will once more challenge the 86.50 support level.

Next 24 Hours Bias
Medium Bearish