Fri, Jul 19, 2024

XAUUSD Analysis

XAUUSD Gold price is moving in the Descending triangle pattern and the market has fallen from the lower high area of the pattern

BRIC (Brazil, Russia, India, and China) meetings reportedly included talks about replacing the US dollar with gold. Yet, the Bretton Woods gold exchange scheme has shown that this system is ineffective. In relation to the US dollar, the price of gold is still higher.

As we approach Tuesday’s trading session, the price of gold remains stable around US$ 1,940, with geopolitical factors potentially offsetting market headwinds that have caused the precious metal’s volatility to decline. For the majority of 2023, US real yields have been rising, and they most recently reached a 14-year high at the 10-year portion of the curve, trading above 1.90%. The market-priced inflation rate reduced by the nominal yield obtained from Treasury inflation-protected securities (TIPS) for the same tenor is the real yield. When spot gold was less than $1,000 USD in 2009, real yields were last this high. In 2018, at a time when the real yield was almost 1.0%, the spot price of gold was less than $1,300 per ounce. Of course, a lot has happened since then, and demand trends have shifted as countries in the BRIC (Brazil, Russia, India, and China) region look for a reserve currency other than the US dollar.

XAGUSD Analysis

XAGUSD Silver price is moving in the Descending triangle pattern and the market has fallen from the lower high area of the pattern

XAGUSD Silver price is moving in the Descending triangle pattern and the market has fallen from the lower high area of the pattern

The possibility that these nations could be able to trade internationally without using the US dollar if they had a currency backed by gold has received a lot of attention lately. For a variety of reasons that are outside the purview of this article, such a system has previously shown itself to be ineffective. For context, see the gold exchange at Bretton Woods. During a recent visit to Western Australia, a region known for producing the most gold in the world, several contacts pointed out that nearly all of the gold that is currently extracted from the earth is being transported to China via ship. These kinds of stories about other BRIC countries acting in a comparable manner have been published elsewhere. Given that the top three producers of gold are also Australia, China, and Russia, it is possible that recent price action has included gold hoarding.

USDCHF Analysis

USDCHF is moving in the Descending channel and the market has reached the lower high area of the channel

USDCHF is moving in the Descending channel and the market has reached the lower high area of the channel

The Swiss Franc is disappointed compared to counter pairs with its GDP data from the second quarter of 0.0%. Notable was the last quarter’s 0.30% print.

During Tuesday’s early Asian session, the USDCHF pair stays sideways in a narrow trading range between 0.8700 and 0.88450. In the meantime, the US Dollar Index DXY, which compares the value of the US dollar to six other major currencies, maintains its rise above the 104.00 level and is getting close to a monthly high. The USDCHF is up 0.06% on the day as of this writing, trading at 0.8848. The second quarter of the Swiss economy showed no signs of recovery. The Gross Domestic Product GDP of the country fell to 0.0% QoQ in Q2 of this year, below the 0.1% market consensus and the 0.3% reading from the previous quarter, according to data released by the Swiss Statistics on Monday. As anticipated, the growth rate on an annual basis stayed at 0.5%.

Risk appetite makes the US Dollar USD less strong relative to its competitors. The Chinese government intends to bolster the country’s flagging economy on Monday by enacting additional measures, such as loosening restrictions on home purchases. On the other hand, some information regarding the Chinese economy might be revealed later on Tuesday when the Chinese Caixin Services PMI is released. The less-than-expected data may increase concerns about an economic slowdown in the second-largest economies in the world and could help the Swiss franc CHF, which has historically served as a safe haven. The US economy released mixed data last week. Nonfarm Payrolls NFP for August were reported at 187K, which was higher than the prior reading of 157K and the market estimate of 170K. However, in contrast to the market estimate and the prior rate of 3.5%, the unemployment rate significantly decreased to 3.8%. The US Manufacturing PMI beat forecasts of 47.0, coming in at 47.6 from 46.4 earlier.

Nevertheless, Fed Chairman Jerome Powell said at the Jackson Hole Symposium that new data would determine whether to raise interest rates further. A less assertive Federal Reserve Fed posture, however, is speculated by market participants in light of the inconsistent economic data findings. The CME FedWatch Tool indicates that there is still a 93% chance of holding an interest rate at the September meeting. This could therefore limit the Greenback’s future gains and put pressure on the USDCHF pair.It is anticipated that later in the day will be the US Factory Orders MoM for July. On Wednesday, market participants will turn their attention to the US ISM Services PMI for August. On Thursday, the Swiss monthly unemployment rate will also be disclosed. These numbers may provide a clear path for the USDCHF exchange rate.

USDCAD Analysis

USDCAD is moving in the Descending triangle pattern and the market has reached the lower high area of the pattern

USDCAD is moving in the Descending triangle pattern and the market has reached the lower high area of the pattern

Tomorrow is the scheduled Bank of Canada interest rate meeting; no rate hike is anticipated from this gathering, which will weaken the CAD pair relative to counter pairs.

In early Asian trading on Tuesday, the USDCAD pair consolidates its losses below the 1.3600 barrier. The main pair is up 0.03% on the day and is presently trading close to 1.3595. After the Labour Day holiday in the US and Canada, the pair’s movement is restricted. Markets predict that the Bank of Canada BoC will maintain its current course of action when it announces its interest rate decision. US economic data from last week showed conflicting results. Nonfarm Payrolls NFP for August were $187K, higher than the previous reading of $157K and above expectations of $170K. However, in contrast to the market estimate and the prior rate of 3.5%, the unemployment rate significantly decreased to 3.8%. The US Manufacturing PMI beat market expectations of 47.0, coming in at 47.6 from 46.4 earlier. At the Jackson Hole Symposium, Fed Chairman Jerome Powell said that future rate increases would depend on new data. Market participants, however, anticipated a less assertive Federal Reserve Fed posture in the wake of the conflicting economic data points. The CME FedWatch Tool indicates that there is still a 93% chance of holding an interest rate at the September meeting. Consequently, this could limit the USD’s upward movement and exert pressure on the USDCAD exchange rate.

According to data released last week, the real Gross Domestic Product GDP in Canada shrank by 0.2% year over year in the second quarter, compared to a 2.6% reading in the previous quarter. The growth figure, which was 1.2% expansion, was lower than anticipated. The Canadian dollar CAD saw some selling pressure as a result of the negative Canadian data. The BoC’s interest rate decision on Wednesday will command more attention from the markets. A Reuters poll indicates that the Bank of Canada BoC will likely keep its key interest rate at 5.00% on Wednesday and keep it there until at least the end of March 2024. Since Canada is the biggest crude exporter to the US, an increase in oil prices strengthens the Canadian dollar relative to its competitors. In the near future, attention will be focused on the BoC’s interest rate decision. The US ISM Services PMI for August is scheduled to be released on Wednesday later this week, and it is anticipated to increase to 52.6. The Canadian unemployment rate and Governor Tiff Macklem’s speech on Friday could provide some clues about the BoC’s future monetary policy for the full year, and the data could provide a clear path for the USDCAD pair.

EURUSD Analysis

EURUSD is moving in an Ascending channel and the market has reached the higher low area of the channel

EURUSD is moving in an Ascending channel and the market has reached the higher low area of the channel

The direction of the euro relative to the dollar will be determined by this week’s Euro Area PPI data and ECB President Lagarde’s speech. There is now less faith in more rate increases in the Eurozone as a result of the ECB President’s speech last week.

When the entire markets reopen on Tuesday morning, the EURUSD pulls back from the day’s strong recovery from a key support line, refreshing the intraday low at 1.0790. Nevertheless, following a long weekend, the US Dollar’s recovery and a correction in US Treasury bond yields could be connected to the most recent decline in the Euro pair. A further factor affecting the main currency pair might be the market’s rejection of the hawkish remarks made recently by European Central Bank ECB officials. Above all, the duo appears to be prodded lately by the cautious attitude ahead of the crucial Eurozone and US data as well as the uncertainty surrounding the ECB vs. Fed play. On Monday, the Expectations Index dropped to -21.0 points from -17.3 in the prior month, while the Eurozone Sentix Investor Confidence Index dropped to -21.5 in September from -18.9 in August. In addition, the Current Situation Index fell to -22.0 points, its lowest point since November 2022. Following the release of the data, Christine Lagarde, President of the European Central Bank ECB, stressed the importance of central banks maintaining firmly anchored inflation expectations during her speech at the European Economics & Financial Center’s Distinguished Speakers Seminar. In keeping with this theme, Pierre Wunsch, a member of the ECB Governing Council, stated in a radio interview that Bloomberg obtained on Saturday that he leans towards the opinion that they should take some additional action. Furthermore, the day before, Joachim Nagel, a member of the European Central Bank Council and President of the Deutsche Bundesbank, argued in favour of price stability but refrained from providing specifics.

However, in her speech on Friday, President Loretta J. Mester of the Federal Reserve Bank of Cleveland disregarded the bias towards rate cuts and supported the hawkish action of the US central bank. Nevertheless, the market’s September bets on the Federal Reserve’s Fed status quo stand in stark contrast to the odds that have recently improved, favouring a rate hike in late 2023, which appears to be encouraging buyers of EURUSD. The pair experienced a significant decline on Friday subsequent to the US Nonfarm Payrolls NFP reviving hawkish sentiment regarding the Fed; however, the policy pivot concerns persisted subsequently due to the Unemployment Rate and Average Hourly Earnings. The US Gross Domestic Product GDP forecast for 2023 was then updated by the global rating agency Moody’s, going from 1.1% to 1.9% in May.

In other news, there appears to be a recovery in US Treasury bond yields, which supports the US Dollar and depresses the EURUSD, along with an improvement in German Bund coupons. Nevertheless, as of the time of publication, the benchmark US 10-year Treasury bond yield increased by two basis points to 4.20%. Additionally, the market’s uncertainty about China’s capacity to maintain the economic recovery appears to be weighing on the Euro pair lately, as evidenced by the inaction of the S&P 500 Futures. For guidance ahead of the US Factory Orders for that month, traders of EURUSD should closely monitor ECB President Lagarde’s speech and the Eurozone Producer Price Index PPI data for July.

EURNZD Analysis

EURNZD is moving in the Descending channel and the market has reached the lower high area of the channel

EURNZD is moving in the Descending channel and the market has reached the lower high area of the channel

According to NZ Finance Minister Grant Robertson, the RBNZ’s dual mandate has no effect on inflation or economic contraction.

New Zealand Finance Minister Grant Robertson expressed support for the Reserve Bank of New Zealand’s RBNZ dual mandate on Tuesday at a function in Wellington. The dual mandate of the central bank is normal and has not contributed to inflation or unnecessarily high interest rates. Adrian has made it very clear that having the dual mandate has not influenced any of the decisions he is made since we changed the mandate, especially in the last few years. With or without the dual mandate, he would have reached the same conclusion.

Compared to July’s 54.1 reading, the China Caixin PMI reading of 51.8 indicates that the NZD is weaker than the counter pairs today.

The business activity in China’s services sector grew for the eighth consecutive month in August. The CaixinS&P Global Services PMI fell to 51.8 this month, its lowest level since December 2022, from 54.1 in July. Concerns regarding the second-largest economy in the world’s deteriorating state are rekindled by the report, and this is thought to be negatively impacting antipodean currencies like the New Zealand Dollar NZD. And optimism regarding additional stimulus measures from China, which continues to support an overall positive tone around the equity markets. The fact that S&P Global Ratings downplayed the likelihood of a credit rating downgrade for New Zealand despite certain issues with the fiscal deficit and the current account deficit could provide additional support for the NZD exchange rate. Consequently, traders who are aggressively bearish should exercise caution.

GBPUSD Analysis

GBPUSD is moving in the Descending channel and the market has fallen from the lower high area of the channel

GBPUSD is moving in the Descending channel and the market has fallen from the lower high area of the channel

Due today are the UK Composite and Services PMI, and it is more likely that the Bank of England will raise interest rates by 25 basis points at this month’s meeting. More tightening, according to UK Chief Economist Huw Pill, causes concerns about the economy.

The GBPUSD pair is trading early on Monday in the Asian session, moving in a narrow range above the 1.2600 mark. With a daily gain of 0.01%, the major pair is presently trading close to 1.2628. In the next meeting, traders expect the Bank of England BoE to hike interest rates by 25 basis points bps. Last week, Chief Economist Huw Pill of the BoE pointed out that numerous measures were put in place, but that UK inflation remained excessively high. Because investors are worried about the impact on the UK economy, the British Pound GBP may face some pressure as a result of the BoE’s aggressive tightening of monetary policy. August was the worst month for British factories since the start of the COVID-19 crisis, according to data released last week. In August, the S&P Global-CIPS Manufacturing PMI increased from 45.3 in July to 43.0. The number represented the six months in a row that were below the 50-point mark.

In response to last week’s mixed economic data, market participants on the other side of the pond wagered on the Federal Reserve’s Fed less hawkish posture. The CME FedWatch Tool indicates that there is a 93% chance that the interest rate will stay the same at the September meeting, and a 38% chance that it will rise at the November meeting. Regarding US data from last week, August’s Nonfarm Payrolls NFP were better than the previous reading of 157K and the market’s projection of 170K. However, in contrast to the market estimate and the prior rate of 3.5%, the unemployment rate significantly decreased to 3.8%. The US Manufacturing PMI beat forecasts of 47.0, coming in at 47.6 from 46.4 earlier. Due to today’s Labour Day closure of Wall Street, the upside potential of the Greenback appears to be limited. Next, ahead of the US Factory Orders in the North American session, market players will be watching the UK S&P Global-CIPS Composite PMI and Services PMI for August, which are both expected later on Tuesday. On Wednesday, the focus will be on the US ISM Services PMI. A rise to 52.6 is anticipated for the number. Traders can find opportunities to trade around the GBPUSD pair.

CHFJPY Analysis

CHFJPY is moving in an Ascending channel and the market has rebounded from the higher low area of the channel

CHFJPY is moving in an Ascending channel and the market has rebounded from the higher low area of the channel

Japan’s retail sales data for July fell to -5.0% from the market’s projected -2.5%. Against counter pairs, JPY remains a vulnerability.

The recent increase in Treasury bond yields is reflected in Japanese spending. In July, Japanese household spending fell by 5.0% compared to a market estimate of 2.5%, marking the largest monthly decline since February 2021 and the fifth consecutive month of declines. Notably, the final Jibun Bank Services PMI readings for August in Japan supported the initial projections of 54.3.

AUDCHF Analysis

AUDCHF has broken the Ascending channel in downside

AUDCHF has broken the Ascending channel in downside

The Australian dollar fell following the decision, and the Reserve Bank of Australia kept its interest rate at 4.10% today.

According to RBA Governor Lowe, the Australian economy is doing well and further hikes will reduce inflation, but the economy will contract more than anticipated.

After the RBA maintained its cash rate at 4.10% on Tuesday, as was widely expected by the interest rate market and analysts, the Australian dollar found it difficult to gain momentum. The Aussie had been struggling ahead of the decision due to a mild case of risk aversion as well as a weak day for equity markets. Following the RBA’s announcement, the ASX S&P 200 saw a minor decline at opening but steadied during the afternoon session and barely moved. Governor Philip Lowe’s statement on the monetary policy decision included a number of noteworthy risks, including household consumption, the potential for services inflation, the uncertainty surrounding the laggard effects of tighter policy, and China’s economic outlook in light of its real estate sector issues. The statement said, The data and the evolving assessment of risks will continue to determine whether further tightening of monetary policy is necessary to ensure that inflation returns to target in a reasonable timeframe.

AUDCAD Analysis

AUDCAD has broken the Ascending channel in downside

AUDCAD has broken the Ascending channel in downside

This was Mr. Lowe’s final decision as governor; in two weeks, Michele Bullock will take over. Ms. Bullock joined the organisation in 1985 and has served as the Deputy Governor of the bank since April 2022. She is known for being a preeminent economist in her own right. The appointment is primarily seen as a gradual change in leadership at the RBA at a pivotal moment for monetary policy, and her recent comments suggest that she will follow in the footsteps of her predecessors. The headline current account figures earlier today missed estimates, potentially undermining the Australian economy. However, considering the upward revisions to the previous reading, a closer look could reveal that the statistics are actually neutral. Furthermore, through the second quarter, net exports as a percentage of GDP remained strong. All of this suggests that Thursday’s trade surplus report will be even better than the last one. The Caixin services PMI missed estimates today, underscoring the RBA’s concerns. Elsewhere in Asia, China’s attempts to reignite its economy are still struggling to gain traction. In June, it was 51.8, compared to 53.5 predicted and 54.1 the previous month. The PMI composite was 51.7, down from 51.9 earlier. Australia’s 2Q GDP is expected to grow by 0.3% on Wednesday, up from 0.2% previously. As the base effect takes hold, the annual GDP to the end of July is predicted to be 1.8%, down from the previous read of 2.3%.


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