IC Markets Europe Fundamental Forecast | 23 June 2022

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What happened across the Asia session?

The DXY sat in consolidation at the 104 price level as markets held positions following a dovish testimony from Federal Reserve Chair Powell. Prices across all currency pairs sat in a tight consolidation, with no clear directional bias.

What does it mean for Europe and US Sessions?

The DXY could break lower in the US Session if Fed Chair Powell continues with the dovish stance in his testimonial.

The Dollar Index (DXY) Update

Key news events today

USD Manufacturing PMI

USD Services Pmi

Fed Chair Powell Testifies

What can we expect from DXY today?

The DXY broke below 104 due to dovish Federal Reserve testimony. Look for the DXY to retrace and test the 104 resistance before heading lower. US Manufacturing and Services Purchasing Managers Index (PMI) data is set to be released today with forecasted data indicating that significant changes in the PMI data is not expected. Into the US session, look for further volatility as Fed Chair Powell continues his Monetary Policy Report testimony.

Central Bank Notes:

  • Next meeting on 26 July 2022
  • The committee hiked rates by 75bps, targeting inflation risk.
  • Balance Sheet reduction plan to continue at $60b (treasuries) and $35b (MBS) over a three-month timeframe

 

Next 24 Hours Bias

Weak-to-Medium Bearish

Gold (XAU) Update

Key news events today

No major news events. 

What can we expect from Gold today?

As the DXY took a turn towards the downside, Gold rose towards the 1845 level. Currently retracing from that upward move, look for Gold to continue being an attractive alternative to investors, and for prices to rebound back and above 1850.

Next 24 Hours Bias

Weak-to-Medium Bullish

 

The Euro (EUR)

Key news events today

EUR Manufacturing PMI

EUR Services PMI

What can we expect from EUR today?

Look for the Euro zone PMI data release to provide some volatility to the EURUSD. Forecasted PMI data suggest that manufacturing and services industries in the Euro zone is still within the expansionary phase. Given positive PMI data release, look for the EUR to strengthen, with upside potential capped at 1.0620.

Central Bank Notes:

  • Plans to phase out the APP into Q3 remained intact by reducing purchases from 40bln to 30bln in May and then down to 20bln in June. 
  • Highlighted risks for the economic outlook are tilted to the downside and have recently intensified with geopolitical and virus-related challenges. 
  • Expected to raise rates by 25bps after APP ends in July and 50bps in September
  • Next meeting on 21 July 2022

 

Next 24 Hours Bias

Mixed-to-Weak Bearish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

The USDCHF was pushed lower from a weaker USD overnight. Currently trading in a tight range at 0.96, look for this to continue into the US Session. If Chair Powell maintains the dovish stance, we could see further dollar weakness push the USDCHF lower again. 

Central Bank Notes:

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

Next 24 Hours Bias

Mixed-to-Weak Bearish

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

Yesterday, the UK Core CPI y/y was released at 5.9% (Expected 6%) and CPI at 9.1%. This resulted in a gradual strengthening of the GBP, helped with a weaker USD. 

Look for potentially good PMI data on Manufacturing and Services to provide an upside push to the GBP, especially if price stays above 1.22.

Central Bank Notes:

  • Rate hike by 25bps to 1.25%
  • 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

Weak Bullish

The Canadian Dollar (CAD)

Key news events today

CAD CPI m/m

What can we expect from CAD today?

Canadian CPI m/m data was released at 1.4% (Expected 1.0%) and median CPI y/y at 4.9%, reinforcing the likelihood for the BoC to increase rates by 75bps at the next meeting.

Look for the CAD to strengthen into the US session, with market anticipating BoC action and also a weaker US Dollar.

Central Bank Notes:

  • Next meeting on 13 July 2022

Next 24 Hours Bias

Weak-to-Medium Bullish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Production for US crude oil rose for the first time in four weeks, to 12 million bpd. This brought oil prices lower (WTI -3.93% and Brent -3.39%). Look for prices to continue lower as the US producers attempt to alleviate supply constraints. 

Next 24 Hours Bias

Medium Bearish