There is the potential for today’s advance to strengthen further and lead to higher prices. Nevertheless, natural gas remains in a clear downtrend, below both the downtrend line and the 20-Day MA. Downward pressure continues to dominate following last week’s bearish close. On a weekly basis, it completed a bearish shooting star candlestick pattern on the weekly chart (not shown).
Moreover, last week closed at the low of the week and below the previous week’s low of 2.015. This is bearish behavior in that time frame. What this analysis seems to indicate is that, if natural gas bounces higher it remains likely to encounter resistance that turns prices back down for a retest of trend lows and possibly a drop through last week’s low.
Below 1.99 Targets 1.94
If last week’s low is busted to the downside, then natural gas looks to be heading towards a possible support zone from around 1.94 to 1.91. The first price level is a prior minor swing high, while the second completes a 78.6% Fibonacci retracement. Further down is the filling of the gap from April at 1.85, followed 1.83 and 1.80. The 1.80 price level is the middle of the bottom symmetrical triangle pattern, while 1.83 completes a falling ABCD pattern where the CD leg of the decline is twice the price change in the first AB leg.
Resistance Likely at Trendline or 20-Day Line
Today’s high of 2.10 is nearby resistance. If there is a bullish breakout above the high then resistance may be encountered around the downtrend line or 20-Day MA, currently at 2.23. However, last week’s high of 2.27 is a key resistance level as a rally above it will trigger a bullish reversal as a lower swing high comprising the price structure of the downtrend correction would be violated.
For a look at all of today’s economic events, check out our economic calendar.
EUR/USD put the 1.0800 region to the test on Monday.
The Dollar kicked off the week on a positive note.
The next salient release will be Germany’s flash CPI.
EUR/USD succumbed to the firm start to the week by the Greenback, reversing two daily gains in a row and flirting with three-day lows near the 1.0800 region on Monday.
Conversely, the US Dollar (USD) managed to come roaring and advance to multi-day tops near 104.80, reclaiming at the same time the area beyond the critical 200-day SMA (104.33).
In addition, daily gains in the pair came pari passu with further weakness in US and German yields, at a time when investors expect both the Federal Reserve (Fed) and the European Central Bank (ECB) to cut their rates after the summer break.
In terms of monetary policy, the Fed is largely expected to maintain its rates at its July 31 meeting, while investors anticipate the central bank setting the stage for the start of the easing cycle in September.
An interest rate cut by the ECB in September has also been suggested by recent comments from Vice President Luis de Guindos.
The policy divergence between the Fed and the ECB should remain nearly unchanged, with both central banks forecast to cut rates in the next couple of months. However, the expectation of a soft landing in the US economy contrasts with some loss of momentum in the Eurozone’s economic recovery, potentially leading to further weakness in European currency in the medium-term horizon.
Moving forward, market participants will closely follow the release of the preliminary Q2 GDP Growth Rate in both Germany and the euro bloc, as well as the advanced Inflation Rate in Germany, all due on July 30.
EUR/USD daily chart
EUR/USD short-term technical outlook
The weekly low of 1.0802 (July 29) is next on the downside for EUR/USD ahead of. The provisional 100-day SMA at 1.0796. Down from here comes the June low of 1.0666 (on June 26), ahead of the May low of 1.0649 (May 1).
On the other hand, early resistance is indicated at the July high of 1.0948 (July 17), followed by the March top of 1.0981 (March 8) and the important 1.1000 milestone.
Looking at the big picture, the negative bias should return to the pair if it stays below the crucial 200-day SMA (1.0820).
So far, the four-hour chart indicates some acceleration of the downward bias. Nonetheless, the 55-SMA at 1.0875 serves as early resistance, followed by 1.0948, 1.0981, and ultimately 1.1000. On the other hand, 1.0802 is first, followed by the 200-SMA at 1.0800 and then 1.0709. The relative strength index (RSI) bounced to around 38.
EUR/USD put the 1.0800 region to the test on Monday.
The Dollar kicked off the week on a positive note.
The next salient release will be Germany’s flash CPI.
EUR/USD succumbed to the firm start to the week by the Greenback, reversing two daily gains in a row and flirting with three-day lows near the 1.0800 region on Monday.
Conversely, the US Dollar (USD) managed to come roaring and advance to multi-day tops near 104.80, reclaiming at the same time the area beyond the critical 200-day SMA (104.33).
In addition, daily gains in the pair came pari passu with further weakness in US and German yields, at a time when investors expect both the Federal Reserve (Fed) and the European Central Bank (ECB) to cut their rates after the summer break.
In terms of monetary policy, the Fed is largely expected to maintain its rates at its July 31 meeting, while investors anticipate the central bank setting the stage for the start of the easing cycle in September.
An interest rate cut by the ECB in September has also been suggested by recent comments from Vice President Luis de Guindos.
The policy divergence between the Fed and the ECB should remain nearly unchanged, with both central banks forecast to cut rates in the next couple of months. However, the expectation of a soft landing in the US economy contrasts with some loss of momentum in the Eurozone’s economic recovery, potentially leading to further weakness in European currency in the medium-term horizon.
Moving forward, market participants will closely follow the release of the preliminary Q2 GDP Growth Rate in both Germany and the euro bloc, as well as the advanced Inflation Rate in Germany, all due on July 30.
EUR/USD daily chart
EUR/USD short-term technical outlook
The weekly low of 1.0802 (July 29) is next on the downside for EUR/USD ahead of. The provisional 100-day SMA at 1.0796. Down from here comes the June low of 1.0666 (on June 26), ahead of the May low of 1.0649 (May 1).
On the other hand, early resistance is indicated at the July high of 1.0948 (July 17), followed by the March top of 1.0981 (March 8) and the important 1.1000 milestone.
Looking at the big picture, the negative bias should return to the pair if it stays below the crucial 200-day SMA (1.0820).
So far, the four-hour chart indicates some acceleration of the downward bias. Nonetheless, the 55-SMA at 1.0875 serves as early resistance, followed by 1.0948, 1.0981, and ultimately 1.1000. On the other hand, 1.0802 is first, followed by the 200-SMA at 1.0800 and then 1.0709. The relative strength index (RSI) bounced to around 38.
Central banks and earnings reports take centre stage this week.
The US Dollar is firmly up despite an optimistic market mood.
EUR/USD gains bearish momentum and aims to pierce the 1.0800 mark.
The US Dollar started the week with a firm footing, posting gains against most major rivals. The EUR/USD pair accelerated its slide ahead of Wall Street’s opening, trading at its lowest in three weeks near the 1.0800 mark.
The pair held rangebound through Asian trading hours despite the market mood being mostly optimistic. Local stock markets rallied following clues from American indexes last week and as investors bet on interest rates’ normalization. The United States (US) Federal Reserve (Fed), the Bank of Japan (BoJ) and the Bank of England (BoE) will announce their decisions on monetary policy in the upcoming days, while multiple tech-related companies will announce quarterly results. Other than that, the US will publish employment-related figures, ending on Friday with the release of the July Nonfarm Payrolls (NFP) report.
Data-wise, the Eurozone did not release relevant figures on Monday, although Germany and the EU will publish the preliminary estimates of the Q2 Gross Domestic Product (GDP) on Tuesday. Growth in the three months to June is expected to have been tepid, not actually a surprise. Meanwhile, the upcoming American session will bring the July Dallas Fed Manufacturing Index.
EUR/USD short-term technical outlook
According to technical readings in the daily chart, the risk of a bearish extension has increased. The EUR/USD pair failed to retain early gains above a bullish 20 Simple Moving Average (SMA) and currently pressures a flat 200 SMA, providing support at 1.0815. The 100 SMA, in the meantime, heads lower below the current level. At the same time, technical indicators have turned lower, suggesting increased selling interest, albeit still within neutral levels.
The 4-hour chart, on the other hand, shows a strong bearish momentum. EUR/USD edged sharply lower, now trading below the 20 and 100 SMAs. Technical indicators, in the meantime, gained downward traction within negative levels, maintaining their bearish slopes and in line with another leg lower.
Support levels: 1.0815 1.0770 1.0725
Resistance levels: 1.0870 1.0910 1.0945
EUR/USD Current price: 1.0817
Central banks and earnings reports take centre stage this week.
The US Dollar is firmly up despite an optimistic market mood.
EUR/USD gains bearish momentum and aims to pierce the 1.0800 mark.
The US Dollar started the week with a firm footing, posting gains against most major rivals. The EUR/USD pair accelerated its slide ahead of Wall Street’s opening, trading at its lowest in three weeks near the 1.0800 mark.
The pair held rangebound through Asian trading hours despite the market mood being mostly optimistic. Local stock markets rallied following clues from American indexes last week and as investors bet on interest rates’ normalization. The United States (US) Federal Reserve (Fed), the Bank of Japan (BoJ) and the Bank of England (BoE) will announce their decisions on monetary policy in the upcoming days, while multiple tech-related companies will announce quarterly results. Other than that, the US will publish employment-related figures, ending on Friday with the release of the July Nonfarm Payrolls (NFP) report.
Data-wise, the Eurozone did not release relevant figures on Monday, although Germany and the EU will publish the preliminary estimates of the Q2 Gross Domestic Product (GDP) on Tuesday. Growth in the three months to June is expected to have been tepid, not actually a surprise. Meanwhile, the upcoming American session will bring the July Dallas Fed Manufacturing Index.
EUR/USD short-term technical outlook
According to technical readings in the daily chart, the risk of a bearish extension has increased. The EUR/USD pair failed to retain early gains above a bullish 20 Simple Moving Average (SMA) and currently pressures a flat 200 SMA, providing support at 1.0815. The 100 SMA, in the meantime, heads lower below the current level. At the same time, technical indicators have turned lower, suggesting increased selling interest, albeit still within neutral levels.
The 4-hour chart, on the other hand, shows a strong bearish momentum. EUR/USD edged sharply lower, now trading below the 20 and 100 SMAs. Technical indicators, in the meantime, gained downward traction within negative levels, maintaining their bearish slopes and in line with another leg lower.
At the end of last week’s trading, the GBP/USD price tried to rebound higher, but its gains did not exceed the 1.2877 level and closed the week’s trading stable around the 1.2863 level.
Moreover, its losses extended in the same week to the 1.2847 support level, its lowest in two weeks.
Amid this performance, financial markets have set a 45% probability for the Bank of England’s first interest rate cut in more than four years, as inflation has returned to the Bank of England’s 2% target.
Other important economic data to watch include the Eurozone business survey and unemployment rate, German unemployment data, and the Bank of England monetary indicators in the United Kingdom.
Also, this week in the US, the Federal Reserve is expected to keep the federal funds rate steady at 5.25%-5.50% for the eighth consecutive meeting, but all eyes will be on any indication of the US central bank’s plans for September, with a rate cut fully in mind. The US economy is likely to have added 185,000 jobs this month, down from 206,000 in June, while the unemployment rate is likely to remain at a 2021 high of 4.1% and wage growth at 0.3%.
According to Forex trading, Credit Agricole commented; “The pound is starting to look expensive against both the euro and the US dollar when compared to short-term fair value estimates based on the relative attractiveness of the pound among other drivers. Accordingly, the pound also remains one of the largest long positions in the G10 forex market. In turn, this justifies some caution regarding the near-term outlook for the currency.”
HSBC added, “With markets currently holding a very large net long position in sterling (IMM data), the risks are skewed to the downside.”
This week, markets will focus on the Bank of England’s policy meeting.
Bank of America commented; “We are sticking with our August call for now, largely because we have the impression that the Bank of England really wants to cut. Furthermore, this may mean that they will emphasize the (slow) decline in wage growth and the volatile services accommodation component in the services inflation surprise.” However, the bank’s conviction is waning. From a medium-term perspective, the bank commented; “If the central bank moves early when the data is not yet there, this also creates a risk not only of a shallower cutting cycle, but also shorter than we assume.”
According to the performance on the daily chart below, the GBP/USD price is moving within a downward channel that will increase in strength with the break of the support levels 1.2800 and 1.2720 respectively. On the other hand, and for the same time period, the psychological resistance 1.3000 will remain the most important for the bulls’ control over the trend. In general, the trend this week will be determined by the policy path of both the Bank of England and the US Federal Reserve, then the announcement of the US jobs numbers.
Major events this week include the Fed policy meeting and NFP.
The likelihood of a Fed cut this week is below 5%.
ECB’s Schnabel said Eurozone service price growth remains a significant problem.
The EUR/USD outlook points south, with the dollar firming ahead of Wednesday’s Federal Reserve policy meeting. Meanwhile, ECB policymakers have created a mixed picture of the outlook for European Central Bank rate cuts.
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Markets are preparing for several major events this week, including the Fed policy meeting and US nonfarm payrolls. Meanwhile, the Eurozone will release key inflation data shaping the outlook for ECB rate cuts. On Friday, data revealed that US inflation increased slightly, aligning with expectations. As a result, markets are still expecting the first cut in September. Meanwhile, the likelihood of a cut this week is below 5%.
At the Fed policy meeting, officials might highlight the progress in inflation towards the 2% target. However, there might be caution regarding the US economy’s resilience. The continued strength gives the Fed more room to wait for inflation to drop. Still, investors are confident policymakers will call for a rate cut in September.
Meanwhile, inflation is at 2.5% in the Eurozone, nearing the ECB’s 2% target. However, the central bank held rates in July due to high service inflation. On Friday, ECB’s Isabel Schnabel noted that the central bank has a challenging task ahead to lower inflation. According to her, service price growth remains a significant problem.
However, other policymakers are ready to cut in September. Meanwhile, ECB President Christine Lagarde said that September remains wide open, meaning anything could happen, depending on incoming data.
EUR/USD key events today
Neither the US nor the Eurozone will report high-impact economic data today. Therefore, the pair might consolidate.
EUR/USD technical outlook: Solid support at 1.0825
EUR/USD 4-hour chart
On the technical side, the EUR/USD decline has paused at the 1.0825 support level. Recently, the price was in a corrective move that retested the 30-SMA resistance. Since the SMA held firm, the price bounced lower with an impulsive candle. However, bears must break below 1.0825 to make a lower low and confirm a downtrend.
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Notably, the RSI is showing weaker bearish momentum near 1.0825. If bears fail to break below, the trend might reverse, with the price breaking above the SMA. However, if bearish momentum increases, the downtrend will continue with the target of 1.0750.
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EUR/USD fluctuates at around 1.0850 to begin the week.
1.0800 aligns as key support area for the pair.
Investors could refrain from taking large positions ahead of this week’s critical events.
EUR/USD moves sideways near 1.0850 in the European morning on Monday after closing the previous week in negative territory. Ahead of this week’s key macroeconomic events, which include the Federal Reserve’s (Fed) monetary policy decisions, Eurozone inflation data and US labor market report, the pair could stay in a consolidation phase.
Euro PRICE Last 7 days
The table below shows the percentage change of Euro (EUR) against listed major currencies last 7 days. Euro was the weakest against the Japanese Yen.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.25%
0.48%
-2.41%
0.86%
2.10%
2.22%
-0.37%
EUR
-0.25%
0.23%
-2.68%
0.57%
1.89%
1.91%
-0.68%
GBP
-0.48%
-0.23%
-3.00%
0.33%
1.66%
1.67%
-0.92%
JPY
2.41%
2.68%
3.00%
3.38%
4.70%
4.71%
2.03%
CAD
-0.86%
-0.57%
-0.33%
-3.38%
1.33%
1.35%
-1.23%
AUD
-2.10%
-1.89%
-1.66%
-4.70%
-1.33%
0.02%
-2.53%
NZD
-2.22%
-1.91%
-1.67%
-4.71%
-1.35%
-0.02%
-2.51%
CHF
0.37%
0.68%
0.92%
-2.03%
1.23%
2.53%
2.51%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
The risk-averse market atmosphere made it difficult for EUR/USD to gather bullish momentum last week, even though mixed macroeconomic data releases from the US limited the US Dollar’s (USD) gains.
The economic calendar will not feature any high-tier data releases on Monday. Meanwhile, US stock index futures gain between 0.25% and 0.5% in the European session, pointing to an improving risk mood.
In case risk flows dominate the financial markets in the second half of the day, the USD could stay on the back foot and allow EUR/USD to hold its ground. Nevertheless, the pair’s action is likely to remain subdued in the near term.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator continues to move sideways at around 50, highlighting a lack of directional momentum.
On the downside, EUR/USD faces immediate support at 1.0840, where the Fibonacci 38.2% retracement of the latest uptrend is located. Below this level, the 100-day and the 200-day SMAs form strong support area at 1.0800-1.0790 ahead of 1.0740 (Fibonacci 78.6% retracement of the latest uptrend).
Resistances align at 1.0860 (100-period SMA),1.0880 (Fibonacci 23.6% retracement) and 1.0900 (psychological level, static level).
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
EUR/USD fluctuates at around 1.0850 to begin the week.
1.0800 aligns as key support area for the pair.
Investors could refrain from taking large positions ahead of this week’s critical events.
EUR/USD moves sideways near 1.0850 in the European morning on Monday after closing the previous week in negative territory. Ahead of this week’s key macroeconomic events, which include the Federal Reserve’s (Fed) monetary policy decisions, Eurozone inflation data and US labor market report, the pair could stay in a consolidation phase.
Euro PRICE Last 7 days
The table below shows the percentage change of Euro (EUR) against listed major currencies last 7 days. Euro was the weakest against the Japanese Yen.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.25%
0.48%
-2.41%
0.86%
2.10%
2.22%
-0.37%
EUR
-0.25%
0.23%
-2.68%
0.57%
1.89%
1.91%
-0.68%
GBP
-0.48%
-0.23%
-3.00%
0.33%
1.66%
1.67%
-0.92%
JPY
2.41%
2.68%
3.00%
3.38%
4.70%
4.71%
2.03%
CAD
-0.86%
-0.57%
-0.33%
-3.38%
1.33%
1.35%
-1.23%
AUD
-2.10%
-1.89%
-1.66%
-4.70%
-1.33%
0.02%
-2.53%
NZD
-2.22%
-1.91%
-1.67%
-4.71%
-1.35%
-0.02%
-2.51%
CHF
0.37%
0.68%
0.92%
-2.03%
1.23%
2.53%
2.51%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
The risk-averse market atmosphere made it difficult for EUR/USD to gather bullish momentum last week, even though mixed macroeconomic data releases from the US limited the US Dollar’s (USD) gains.
The economic calendar will not feature any high-tier data releases on Monday. Meanwhile, US stock index futures gain between 0.25% and 0.5% in the European session, pointing to an improving risk mood.
In case risk flows dominate the financial markets in the second half of the day, the USD could stay on the back foot and allow EUR/USD to hold its ground. Nevertheless, the pair’s action is likely to remain subdued in the near term.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator continues to move sideways at around 50, highlighting a lack of directional momentum.
On the downside, EUR/USD faces immediate support at 1.0840, where the Fibonacci 38.2% retracement of the latest uptrend is located. Below this level, the 100-day and the 200-day SMAs form strong support area at 1.0800-1.0790 ahead of 1.0740 (Fibonacci 78.6% retracement of the latest uptrend).
Resistances align at 1.0860 (100-period SMA),1.0880 (Fibonacci 23.6% retracement) and 1.0900 (psychological level, static level).
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
The British pound has rallied a bit during the early hours on Friday as it looks like the 1.2850 level is going to continue to offer market memory.
After all, this is an area that previously had been resistance and the fact that we bounced directly from that level tells me there is a lot of interest here.
Whether or not we can take out the top of the candlestick during the Thursday session is going to be the question.
If we could break above there, then it’s likely that we could go looking to the 1.30 level. This is a market that has been extraordinarily bullish for some time. And now that we’ve had this little bit of a pullback, I do think that a lot of people are willing to jump in and try to take advantage of cheap pounds.
Where We Could Go…
From the latest swing high, we dropped down to almost the 50% Fibonacci retracement level or from the even bigger swing, we dropped down to the 23.6% Fibonacci retracement level. Perhaps traders are looking at that, but ultimately, I think what we are seeing here is that they believe the Federal Reserve is going to cut rates. And as long as that’s going to be the case, it does work against the value of the greenback in general. With this, I think taking out the Thursday candlestick is the clue that you’re looking for that the momentum has clearly returned. For what it’s worth, there has been more of a risk on attitude in the markets over the last 24 hours. So that of course helps the British pound against the greenback GBP/USD which is the world’s safety currency.
With this being said, a lot of people will be paying close attention to the Bank of England over the next week or two, as it has to make several decisions. The Federal Reserve is expected to cut rates once or twice between now and the end of the year, so that of course will be priced on the market already.
Gold price sees a positive start to the week early Monday, $2,400 tested.
US Dollar drops with US Treasury bond yields on dovish Fed bets and risk-on mood.
Renewed Middle East concerns underpin the safe-haven Gold price.
Gold buyers eye a daily close above 21-day SMA for a sustained recovery.
Gold price is building on its previous recovery early Monday, having defended the key support at $2,360 on a weekly closing basis. Gold buyers fight back control heading into the critical central banks’ bonanza week, with the US Federal Reserve (Fed) – the main event risk for the bright metal.
Gold price kicks off the Fed week on strong footing
The renewed upside in Gold price could be attributed to the extension of Friday’s risk-recovery into Asia, as Asian stocks track the Wall Street rebound amid a bout of profit-taking ahead of a key week.
Risk-flows diminish the appeal of the safe-haven US Dollar while the US Treasury bond yields bear the brunt of increased expectations of a dovish Fed hold this week. Markets are fully pricing in a Fed rate cut in September, according to the CME Group’s FedWatch Tool. Another cut remains on the table for December.
Additionally, over the weekend, fresh tensions in the Middle East spark a flight to safety in the traditional safety net, Gold price, reinforcing the buying interest in the yellow metal.
On Saturday, 12 children and young adults were killed in a rocket strike while playing football in the Israeli-occupied Golan Heights. The Israel Defense Forces (IDF) blamed the Iran-backed militant group, Hezbollah for the attack, saying that it conducted air strikes against seven Hezbollah targets “deep inside Lebanese territory”.
The rising tensions have the potential to trigger an all-out war between Israel and Hezbollah, which has prompted investors to scurry for safety in Gold price.
On Friday, Gold price staged an impressive rebound from near two-week lows of $2,353 after the Greenback turned south after the core PCE price index data, the Fed’s preferred inflation gauge, steadied at an annual pace of 2.6% in June, driving up optimism that the central bank will begin cutting rates in September.
Gold markets remain expectant of the potential dovish policy outlook from the Fed and the Bank of England (BoE) later in the week while the developments surrounding the Middle-East geopolitical tensions will remain in focus.
Gold price technical analysis: Daily chart
Gold buyers jumped back into the game after the bright metal yielded a weekly closing above the key 50-day Simple Moving Average (SMA) at $2,360. At that level, the month-long rising trendline support coincides, making it a strong support.
The 14-day Relative Strength Index (RSI) also reclaimed the 50 level, currently near 52.50, turning the tide back in favor of Gold optimists.
Acceptance above the previous support of the 21-day SMA at $2,392 is needed on a daily closing basis to extend the recovery toward the $2,400 mark.
The next upside targets are seen at the $2,412 area and the $2,425 static resistance.
On the flip side, Gold price needs a daily close below the abovementioned key confluence support at $2,360 to initiate a fresh downtrend toward the 100-day SMA support at $2,327.
Buyers, however, could find some comfort at the $2,350 psychological level.
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates). Read more.
Gold price sees a positive start to the week early Monday, $2,400 tested.
US Dollar drops with US Treasury bond yields on dovish Fed bets and risk-on mood.
Renewed Middle East concerns underpin the safe-haven Gold price.
Gold buyers eye a daily close above 21-day SMA for a sustained recovery.
Gold price is building on its previous recovery early Monday, having defended the key support at $2,360 on a weekly closing basis. Gold buyers fight back control heading into the critical central banks’ bonanza week, with the US Federal Reserve (Fed) – the main event risk for the bright metal.
Gold price kicks off the Fed week on strong footing
The renewed upside in Gold price could be attributed to the extension of Friday’s risk-recovery into Asia, as Asian stocks track the Wall Street rebound amid a bout of profit-taking ahead of a key week.
Risk-flows diminish the appeal of the safe-haven US Dollar while the US Treasury bond yields bear the brunt of increased expectations of a dovish Fed hold this week. Markets are fully pricing in a Fed rate cut in September, according to the CME Group’s FedWatch Tool. Another cut remains on the table for December.
Additionally, over the weekend, fresh tensions in the Middle East spark a flight to safety in the traditional safety net, Gold price, reinforcing the buying interest in the yellow metal.
On Saturday, 12 children and young adults were killed in a rocket strike while playing football in the Israeli-occupied Golan Heights. The Israel Defense Forces (IDF) blamed the Iran-backed militant group, Hezbollah for the attack, saying that it conducted air strikes against seven Hezbollah targets “deep inside Lebanese territory”.
The rising tensions have the potential to trigger an all-out war between Israel and Hezbollah, which has prompted investors to scurry for safety in Gold price.
On Friday, Gold price staged an impressive rebound from near two-week lows of $2,353 after the Greenback turned south after the core PCE price index data, the Fed’s preferred inflation gauge, steadied at an annual pace of 2.6% in June, driving up optimism that the central bank will begin cutting rates in September.
Gold markets remain expectant of the potential dovish policy outlook from the Fed and the Bank of England (BoE) later in the week while the developments surrounding the Middle-East geopolitical tensions will remain in focus.
Gold price technical analysis: Daily chart
Gold buyers jumped back into the game after the bright metal yielded a weekly closing above the key 50-day Simple Moving Average (SMA) at $2,360. At that level, the month-long rising trendline support coincides, making it a strong support.
The 14-day Relative Strength Index (RSI) also reclaimed the 50 level, currently near 52.50, turning the tide back in favor of Gold optimists.
Acceptance above the previous support of the 21-day SMA at $2,392 is needed on a daily closing basis to extend the recovery toward the $2,400 mark.
The next upside targets are seen at the $2,412 area and the $2,425 static resistance.
On the flip side, Gold price needs a daily close below the abovementioned key confluence support at $2,360 to initiate a fresh downtrend toward the 100-day SMA support at $2,327.
Buyers, however, could find some comfort at the $2,350 psychological level.
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates). Read more.
Gold price sees a positive start to the week early Monday, $2,400 tested.
US Dollar drops with US Treasury bond yields on dovish Fed bets and risk-on mood.
Renewed Middle East concerns underpin the safe-haven Gold price.
Gold buyers eye a daily close above 21-day SMA for a sustained recovery.
Gold price is building on its previous recovery early Monday, having defended the key support at $2,360 on a weekly closing basis. Gold buyers fight back control heading into the critical central banks’ bonanza week, with the US Federal Reserve (Fed) – the main event risk for the bright metal.
Gold price kicks off the Fed week on strong footing
The renewed upside in Gold price could be attributed to the extension of Friday’s risk-recovery into Asia, as Asian stocks track the Wall Street rebound amid a bout of profit-taking ahead of a key week.
Risk-flows diminish the appeal of the safe-haven US Dollar while the US Treasury bond yields bear the brunt of increased expectations of a dovish Fed hold this week. Markets are fully pricing in a Fed rate cut in September, according to the CME Group’s FedWatch Tool. Another cut remains on the table for December.
Additionally, over the weekend, fresh tensions in the Middle East spark a flight to safety in the traditional safety net, Gold price, reinforcing the buying interest in the yellow metal.
On Saturday, 12 children and young adults were killed in a rocket strike while playing football in the Israeli-occupied Golan Heights. The Israel Defense Forces (IDF) blamed the Iran-backed militant group, Hezbollah for the attack, saying that it conducted air strikes against seven Hezbollah targets “deep inside Lebanese territory”.
The rising tensions have the potential to trigger an all-out war between Israel and Hezbollah, which has prompted investors to scurry for safety in Gold price.
On Friday, Gold price staged an impressive rebound from near two-week lows of $2,353 after the Greenback turned south after the core PCE price index data, the Fed’s preferred inflation gauge, steadied at an annual pace of 2.6% in June, driving up optimism that the central bank will begin cutting rates in September.
Gold markets remain expectant of the potential dovish policy outlook from the Fed and the Bank of England (BoE) later in the week while the developments surrounding the Middle-East geopolitical tensions will remain in focus.
Gold price technical analysis: Daily chart
Gold buyers jumped back into the game after the bright metal yielded a weekly closing above the key 50-day Simple Moving Average (SMA) at $2,360. At that level, the month-long rising trendline support coincides, making it a strong support.
The 14-day Relative Strength Index (RSI) also reclaimed the 50 level, currently near 52.50, turning the tide back in favor of Gold optimists.
Acceptance above the previous support of the 21-day SMA at $2,392 is needed on a daily closing basis to extend the recovery toward the $2,400 mark.
The next upside targets are seen at the $2,412 area and the $2,425 static resistance.
On the flip side, Gold price needs a daily close below the abovementioned key confluence support at $2,360 to initiate a fresh downtrend toward the 100-day SMA support at $2,327.
Buyers, however, could find some comfort at the $2,350 psychological level.
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Quantitative Tightening and Interest Rate Differentials
Some economists believe quantitative tightening (QT) could strengthen the Yen more sustainably. The BoJ plans to announce cuts to JGB purchases (QT) in July.
Aggressively cutting JGB purchases would narrow interest rate differentials with the US dollar, bolstering the Yen.
Conversely, a modest rate hike would have a limited impact on rate differentials.
Natixis Asia Pacific Chief Economist Alicia Garcia Herrero commented on JGB purchases, stating,
“Bank of Japan to start quantitative tightening, which could support the Yen more than intervention.”
Aggressive cuts to JGB purchases could drop the USD/JPY below 150. BoJ support for multiple rate hikes and aggressive cuts to JGB purchases could send the USD/JPY toward 140 through Q4 2024.
Key Economic Indicators to Watch
On Tuesday, labor market data from Japan will require consideration. Tighter labor market conditions may support wage growth and increase disposable income. Higher disposable income could fuel consumer spending and demand-driven inflation.
Economists forecast Japan’s unemployment rate (Tues) to remain at 2.6% in June. An unexpected rise could allow the BoJ to leave interest rates at 0.1%.
However, retail sales numbers may also draw the BoJ’s interest on Wednesday, July 31. A marked increase in retail sales could allow the BoJ to signal rate hikes over the remainder of 2024.
Economists forecast retail sales to increase by 0.4% in June after rising by 1.7% in May.
US Economic Indicators: Dallas Fed Manufacturing Index
On Monday, July 29, the Dallas Fed Manufacturing Index will be in focus.
Economists expect the Dallas Fed Manufacturing Index to increase from -15.1 in June to -12.0 in July.
Higher-than-expected figures could support expectations of a soft US landing and the USD/JPY at current levels. However, recent US inflation data suggest the numbers will unlikely influence the Fed interest rate trajectory. Prices for goods declined in June.
Charles Schwab Senior Investment Strategist Kevin Gordon commented on the June Report, stating,
“Dallas Fed Manufacturing Index 6-month outlook for new orders rose in June to highest since March 2022 … employment outlook went the other way and fell to lowest since December 2023.”
