On Monday natural gas showed strength as upward momentum kicked in triggering a bullish breakout of the internal downtrend line. The day ended with a wide range green candlestick pattern and a five-day closing high. This is bullish behavior that indicates there is likely more upside to go. A low volatility day following yesterday’s sharp move should be healthy for developing rally. Last week’s high of 2.285 is the next upside pivot.
First Upside Target is the 20-Day MA
There are a couple of initial higher targets that are well identified. Simplified, the 20-Day MA is at 2.36 and it can also be used as a guide relative to the top downtrend line. If that level is broken to the upside, the 200-Day MA comes into sight at 2.43. There are additional price target levels around the 200-Day line that generate an area of possible resistance. They include the 38.2% Fibonacci retracement at 2.45 and a prior swing low around 2.48.
Since the 38.2% retracement is generally considered a minimum potential retracement in Fibonacci analysis, it seems that the 2.45 level has a good chance of being hit. Certainly, given the relationship to the downtrend line, the 20-Day line should be reached at a minimum. Once there was an upside breakout of the internal downtrend line the higher trendline became a target.
Higher Target Zone up at 2.56
Subsequently, if an upside breakout above the 200-Day line can be maintained, the chance of reaching a higher target zone from around 2.56 to 2.59 improves. That price zone comes from the 50-Day MA and 50% retracement, respectively. Notice that an advance above the 200-Day line puts natural gas above the top downtrend line, one indication further confirming a bullish reversal of the recent bearish correction.
For a look at all of today’s economic events, check out our economic calendar.
At the start of this week’s trading, the GBP/USD exchange rate rebounded above 1.2920 after reaching a one-year high of over 1.30 last week.
The US dollar weakened amid President Joe Biden’s decision to withdraw from the 2024 elections.
Last week’s economic calendar showed that UK retail sales fell by 1.2% in June, more than the expected 0.4% decline, increasing the likelihood of a rate cut in August.
This decline follows slower wage growth and inflation reaching the Bank of England’s (BoE) target of 2%. Investors are now focused on upcoming PMI figures, which are expected to show faster expansion in manufacturing and services for July. Additionally, the CBI factory orders measure is expected to reach its highest level in a year.
In the United States, there are growing expectations that the Federal Reserve will cut interest rates in September.
According to electronic trading platforms, the yield on the British 10-year government bond was little changed at a one-week high. According to trading, the yield on the British 10-year government bond reached its highest level in one week at 4.13%, affected by the expectations of the monetary policy of central banks and the news that US President Joe Biden will not run for re-election, and instead endorses Vice President Kamala Harris.
Last week, British retail sales fell by 1.2% in June, more than the expected 0.4% decline, increasing the chances of an interest rate cut in August. This decline in retail sales comes on the heels of slowing wage growth and inflation reaching the Bank of England’s 2% target. Now, investors are looking forward to the purchasing managers’ indices (PMI), which are expected to show a faster expansion in manufacturing and services for July, and the CBI factory orders gauge is expected to reach a one-year high.
In the United States, there are growing expectations that the Federal Reserve will cut US interest rates in September.
According to Forex trading, the pound reached a high above 1.30 against the US dollar last week, but a pullback in equity markets has halted the rally. This week we will be watching the market’s reaction to US political developments for guidance. According to trading, the GBP/USD exchange rate peaked at the 1.3044 resistance level but has since retreated to 1.2912 and appears to be still under short-term pressure.
In last week’s forecast, we mentioned that the GBP/USD seemed overbought and needed correction. This has occurred, and the exchange rate appears more balanced as of Monday. Despite the recent pullback, the GBP remains expensive against the USD according to average forecasts from over 30 investment banks, trading above their targets for September and year-end.
Technical forecasts for the GBP/USD pair today:
According to the performance on the daily chart attached and according to recent trades, the GBP/USD price is in a neutral position. As we mentioned before, the psychological resistance of 1.3000 will remain the most important for the bulls’ control over the trend. On the other hand, and for the same time period, the support level of 1.2820 will remain a threat to the rebound path to the latter. Technically, the GBP/USD price will remain subject to the policy directions of global central banks and investor sentiment towards risk appetite or not. Finally, we still prefer to sell GBP/USD from every upward level.
I recognize that we have bounced quite significantly from a crucial support level underneath.
Spot natural gas continues to look at the $2.00 level as a major barrier, and we have rallied quite a bit since we got closer to that region.
By doing so, it does suggest that the market is more likely than not going to try to jump into some type of recovery phase, but also, it’s worth noting that this time of year is typically somewhat tougher natural gas, so I think we just got oversold.
Technical Analysis
The technical analysis for this market is rather bullish, and at this point I think it’s worth noting that the $2.00 level is not only previous support and resistance, but it is also an area that has a lot of psychology attached to it. Because of this, it’s not overly surprising to see this market bounce from there. That being said, I don’t necessarily think that we are going to start a huge new bullish market at the moment, but we should be paying attention to the 50-Day EMA above, which is closer to the $2.42 level, and is dropping. I think we can break above there, then it’s obvious that the natural gas market could pick up a little bit of momentum.
There is a lot of heat in the western part of the United States right now, so demand for natural gas probably will pick up, but at the end of the day it’s probably also worth noting that we are typically very soft this time of year, and I think we are in a situation where traders will continue to look at this through the prism of building up a bigger position for the fall. After all, when natural gas really starts to take off is when the heat demands, and the United States start increasing. Right now, we are nowhere near there, but as we get deeper into the year as far as futures markets are concerned, it then makes the idea of buying natural gas much more sensible. In other words, I think you can buy on the dip, but I would not do so with a huge position.
Key earnings reports and upcoming US first-tier events push investors to the sidelines.
Treasury yields shed some ground, weighing on the US Dollar.
XAU/USD bounced back, but additional gains in the near term seem unlikely.
Spot Gold recovered on Tuesday, changing hands at $2,403 a troy ounce. XAU/USD bounced from a weekly low of $2,383.78 posted on Monday as demand for the US Dollar receded ahead of United States (US) first-tier data and key earnings reports. Nevertheless, market participants are increasing their bets that the Federal Reserve (Fed) will deliver a 25 basis point (bps) interest rate cut in September and a similar one in December, also limiting the USD bullish potential.
Finally, easing government bond yields undermines demand for the Greenback. The 10-year Treasury note currently offers 4.23%, while the 2-year note yields 4.49%, down roughly 3 bps each.
A scarce macroeconomic calendar and upcoming US first-tier events further exacerbate the lack of clear directional strength. Investors are waiting for the preliminary estimate of the Q2 Gross Domestic Product (GDP) to be out on Friday, alongside revisions for the Personal Consumption Expenditures (PCE) Price Index in the same period, the Fed’s favourite inflation gauge. Furthermore, the country will release the June PCE inflation data on Friday, which will have a lesser impact than usual but will still affect the USD.
XAU/USD short-term technical outlook
The daily chart for the XAU/USD pair shows it is bouncing from the 50% Fibonacci retracement of the $2,293.54/$2,483.68 rally at $2,389.30. At the same time, a bullish 20 Simple Moving Average (SMA) heads higher just below the mentioned Fibonacci level, while the longer ones also advance below the longer ones, in line with the dominant bullish trend. Finally, the Momentum indicator maintains its downward slope within positive levels, while the Relative Strength Index (RSI) has turned marginally higher at around 54, supporting another leg higher.
In the near term, and according to the 4-hour chart, an upward extension seems limited. XAU/USD topped around the 38.2% retracement of the mentioned rally, providing statict resistance at $2,411.25. Furthermore, a bearish 20 SMA converges with the Fibonacci level, reinforcing it. Meanwhile, the Momentum indicator aims north at around its 100 line, while the RSI indicator remains directionless at 42.
Support levels: 2,389.30 2,377.10 2,364.00
Resistance levels: 2,411.25 2,425.70 2,439.90
XAU/USD Current price: $2,404.79
Key earnings reports and upcoming US first-tier events push investors to the sidelines.
Treasury yields shed some ground, weighing on the US Dollar.
XAU/USD bounced back, but additional gains in the near term seem unlikely.
Spot Gold recovered on Tuesday, changing hands at $2,403 a troy ounce. XAU/USD bounced from a weekly low of $2,383.78 posted on Monday as demand for the US Dollar receded ahead of United States (US) first-tier data and key earnings reports. Nevertheless, market participants are increasing their bets that the Federal Reserve (Fed) will deliver a 25 basis point (bps) interest rate cut in September and a similar one in December, also limiting the USD bullish potential.
Finally, easing government bond yields undermines demand for the Greenback. The 10-year Treasury note currently offers 4.23%, while the 2-year note yields 4.49%, down roughly 3 bps each.
A scarce macroeconomic calendar and upcoming US first-tier events further exacerbate the lack of clear directional strength. Investors are waiting for the preliminary estimate of the Q2 Gross Domestic Product (GDP) to be out on Friday, alongside revisions for the Personal Consumption Expenditures (PCE) Price Index in the same period, the Fed’s favourite inflation gauge. Furthermore, the country will release the June PCE inflation data on Friday, which will have a lesser impact than usual but will still affect the USD.
XAU/USD short-term technical outlook
The daily chart for the XAU/USD pair shows it is bouncing from the 50% Fibonacci retracement of the $2,293.54/$2,483.68 rally at $2,389.30. At the same time, a bullish 20 Simple Moving Average (SMA) heads higher just below the mentioned Fibonacci level, while the longer ones also advance below the longer ones, in line with the dominant bullish trend. Finally, the Momentum indicator maintains its downward slope within positive levels, while the Relative Strength Index (RSI) has turned marginally higher at around 54, supporting another leg higher.
In the near term, and according to the 4-hour chart, an upward extension seems limited. XAU/USD topped around the 38.2% retracement of the mentioned rally, providing statict resistance at $2,411.25. Furthermore, a bearish 20 SMA converges with the Fibonacci level, reinforcing it. Meanwhile, the Momentum indicator aims north at around its 100 line, while the RSI indicator remains directionless at 42.
The US dollar has pulled back just a bit against the Japanese yen during trading on Tuesday in the early hours. However, we still have a significant amount of support underneath and I think that probably is what people will be paying more attention to than anything else. With that being said, as long as the 155 yen level is below current pricing, I do think there are plenty of buyers. Even if we were to break down below there, I still think there’s plenty of support near the 152 yen level, but I don’t foresee us breaking down that much, at least not right away.
If we can recapture the 50-day EMA above, I think that’s a strong sign that we are heading back towards the 160 yen level. The interest rate differential continues to favor the US dollar. And at the end of the day, that’s one of your big drivers here. The Bank of Japan simply cannot tighten monetary policy, at least not in any significant amount, due to the massive debts that the Japanese currently face. So, at this point in time, the best they can do is occasionally intervene and slow the destruction of the Japanese yen. As things stand right now, without some type of massive move by the Federal Reserve, I still think you’re looking at a pair that goes higher over the longer term, but it will be choppy from time to time.
Financial markets are cautiously optimistic ahead of big names earning reports.
United States’ upcoming first-tier data exacerbates the cautious stance.
EUR/USD poised to extend its slide, near-term support at 1.0820.
The US Dollar keeps grinding higher on Tuesday, resulting in EUR/USD falling to a fresh two-week low in the 1.0850 price zone. The Greenback benefits from a cautious mood ahead of earnings reports. Multiple S&P500 big names will report results this week, and investors eagerly await the outcome before compromising with a particular position. Stock markets trade mixed ahead of Wall Street’s opening, yet overall, it seems markets retain a certain dose of optimism after current United States (US) President Joe Biden stepped down from the presidential race. The news boosted the USD amid hopes Donald Trump could win and apply more market-friendly measures.
Meanwhile, European Central Bank (ECB) Vice President Luis de Guindos hit the wires. De Guindos said that while the level of uncertainty is “huge,” inflation is “practically” in line with policymakers’ projections. Furthermore, he added that September would be a much more convenient month for making decisions as officials will have more data.
The macroeconomic calendar remains scarce, with first-tier US figures scheduled for later in the week, exacerbating the quietness. The country will release the first estimate of the Q2 Gross Domestic Product (GDP) and fresh Personal Consumption Expenditures (PCE) Price Index data.
After the US opening, the Eurozone will publish the preliminary estimate of July Consumer Confidence, while the US will release June Existing Home Sales and the Richmond Fed Manufacturing Index for July.
EUR/USD short-term technical outlook
From a technical point of view, the EUR/USD pair is at risk of extending its slide. The pair keeps trading above all its moving averages, but technical indicators maintain their firmly downward slopes, approaching their midlines from above. Regarding moving averages, the 20 Simple Moving Average (SMA) advances above directionless 100 and 200 SMAs, but with its bullish strength moderating, suggesting buyers are not sure of adding on dips.
In the near term, and according to the 4-hour chart, the risk skews to the downside. Technical indicators resumed their slides after failing to regain positive levels, heading sharply lower below their midlines. At the same time, a bearish 20 SMA provides intraday resistance in the 1.0870 price zone, while EUR/USD approaches a bullish 100 SMA, acting as dynamic support at around 1.0820. Once below the latter, the bearish case will likely gain strength.
Support levels: 1.0820 1.0770 1.0725
Resistance levels: 1.0870 1.0910 1.0945
EUR/USD Current price: 1.0858
Financial markets are cautiously optimistic ahead of big names earning reports.
United States’ upcoming first-tier data exacerbates the cautious stance.
EUR/USD poised to extend its slide, near-term support at 1.0820.
The US Dollar keeps grinding higher on Tuesday, resulting in EUR/USD falling to a fresh two-week low in the 1.0850 price zone. The Greenback benefits from a cautious mood ahead of earnings reports. Multiple S&P500 big names will report results this week, and investors eagerly await the outcome before compromising with a particular position. Stock markets trade mixed ahead of Wall Street’s opening, yet overall, it seems markets retain a certain dose of optimism after current United States (US) President Joe Biden stepped down from the presidential race. The news boosted the USD amid hopes Donald Trump could win and apply more market-friendly measures.
Meanwhile, European Central Bank (ECB) Vice President Luis de Guindos hit the wires. De Guindos said that while the level of uncertainty is “huge,” inflation is “practically” in line with policymakers’ projections. Furthermore, he added that September would be a much more convenient month for making decisions as officials will have more data.
The macroeconomic calendar remains scarce, with first-tier US figures scheduled for later in the week, exacerbating the quietness. The country will release the first estimate of the Q2 Gross Domestic Product (GDP) and fresh Personal Consumption Expenditures (PCE) Price Index data.
After the US opening, the Eurozone will publish the preliminary estimate of July Consumer Confidence, while the US will release June Existing Home Sales and the Richmond Fed Manufacturing Index for July.
EUR/USD short-term technical outlook
From a technical point of view, the EUR/USD pair is at risk of extending its slide. The pair keeps trading above all its moving averages, but technical indicators maintain their firmly downward slopes, approaching their midlines from above. Regarding moving averages, the 20 Simple Moving Average (SMA) advances above directionless 100 and 200 SMAs, but with its bullish strength moderating, suggesting buyers are not sure of adding on dips.
In the near term, and according to the 4-hour chart, the risk skews to the downside. Technical indicators resumed their slides after failing to regain positive levels, heading sharply lower below their midlines. At the same time, a bearish 20 SMA provides intraday resistance in the 1.0870 price zone, while EUR/USD approaches a bullish 100 SMA, acting as dynamic support at around 1.0820. Once below the latter, the bearish case will likely gain strength.
Gauge market dynamics by examining sentiment indicators, position ratios, price fluctuations, and technical signals to determine prevailing bullish or bearish trends.
Recent market data indicates notable performance variations among key currencies, with the Japanese yen showing relative strength while the Australian dollar underperforms. The following analysis examines current retail trader positioning and its potential implications for future price movements, utilizing a contrarian approach.
Recommended by Richard Snow
Improve your trading with IG Client Sentiment Data
USD/JPY Retail Trader Data: Bullish Bias
Current retail trader data reveals a short-to-long ratio of 2.07 to 1, with 32.57% of traders holding net-long positions. Net-long traders have increased by 0.70% since yesterday but decreased by 3.68% over the past week. Conversely, net-short traders have risen by 6.94% since yesterday and 3.96% over the week. This positioning suggests a USD/JPY bullish contrarian bias.
AUD/JPY Retail Trader Bias: Bearish Continuation
Retail trader data shows a short-to-long ratio of 1.39 to 1, with 41.91% of traders in net-long positions. Net-long traders have increased by 8.23% since yesterday and 47.41% over the week, while net-short traders have marginally increased by 0.42% since yesterday but decreased by 24.76% over the week. While the net-short position typically indicates potential price increases, recent shifts in sentiment suggest the AUD/JPY trend may continue lower despite the fact traders remain net-short.
EUR/JPY Retail Trader Data: Bearish Bias
Current data indicates a short-to-long ratio of 2.44 to 1, with 29.09% of traders holding net-long positions. Net-long traders have increased by 9.24% since yesterday and 13.56% over the week, while net-short traders have risen by 2.30% since yesterday but decreased by 8.41% over the week. Despite the overall net-short position suggesting potential price increases, recent sentiment changes may indicate a bearish continuation.
This analysis provides valuable insights for market participants to consider when formulating trading strategies. However, it is crucial to combine this information with other analytical tools and market factors for comprehensive decision-making.
GBP/USD continues to trade in a narrow channel above 1.2900.
The near-term technical outlook points to a slightly bearish bias.
Changes in risk perception could drive the pair’s action later in the day.
Following the sharp drop seen in the second half of the previous week, GBP/USD registered small gains on Monday. The pair struggles to attract bulls early Tuesday but manages to hold above 1.2900.
British Pound PRICE Last 7 days
The table below shows the percentage change of British Pound (GBP) against listed major currencies last 7 days. British Pound was the weakest against the Japanese Yen.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.19%
0.36%
-1.31%
0.60%
2.03%
1.86%
-0.60%
EUR
-0.19%
0.16%
-1.49%
0.43%
1.82%
1.65%
-0.80%
GBP
-0.36%
-0.16%
-1.67%
0.24%
1.66%
1.49%
-0.95%
JPY
1.31%
1.49%
1.67%
1.93%
3.43%
3.22%
0.76%
CAD
-0.60%
-0.43%
-0.24%
-1.93%
1.43%
1.24%
-1.19%
AUD
-2.03%
-1.82%
-1.66%
-3.43%
-1.43%
-0.19%
-2.60%
NZD
-1.86%
-1.65%
-1.49%
-3.22%
-1.24%
0.19%
-2.41%
CHF
0.60%
0.80%
0.95%
-0.76%
1.19%
2.60%
2.41%
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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The improving risk mood caused the US Dollar (USD) to lose interest in the American session on Monday, helping GBP/USD hold its ground. In the European session on Tuesday, the UK’s FTSE 100 Index trades marginally lower on the day and US stock index futures lose between 0.1% and 0.4%, reflecting a cautious market stance.
After Wall Street’s closing bell on Tuesday, Google (Alphabet), Visa and Tesla will be among the top companies that will release second-quarter earnings reports. Investors could opt to stay on the sidelines and make it difficult for major US equity indexes to build on Monday’s gains. In this scenario, the USD could stabilize and limit GBP/USD recovery attempts.
Existing Home Sales for June will be the only data featured in the US economic docket on Tuesday, which is unlikely to receive a noticeable market reaction. On Wednesday, preliminary July Manufacturing and Services PMI data from the UK and the US could trigger the next big action in GBP/USD.
GBP/USD Technical Analysis
GBP/USD stays below the 20-period Simple Moving Average (SMA) and the 50-period SMA on the four-char, which made a bearish cross on Monday. Additionally, the Relative Strength Index moves sideways near 40, suggesting that the bearish bias remains intact but lacks momentum.
1.2900 (psychological level, static level) aligns as first support before 1.2875 (Fibonacci 38.2% retracement of the latest uptrend) and 1.2850 (100-period SMA).
On the upside, 1.2940-1.2950 (Fibonacci 23.6% retracement, 50-period SMA) forms resistance area ahead of 1.3000 (psychological level, static level).
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling 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, its currency will benefit 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.
GBP/USD continues to trade in a narrow channel above 1.2900.
The near-term technical outlook points to a slightly bearish bias.
Changes in risk perception could drive the pair’s action later in the day.
Following the sharp drop seen in the second half of the previous week, GBP/USD registered small gains on Monday. The pair struggles to attract bulls early Tuesday but manages to hold above 1.2900.
British Pound PRICE Last 7 days
The table below shows the percentage change of British Pound (GBP) against listed major currencies last 7 days. British Pound was the weakest against the Japanese Yen.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.19%
0.36%
-1.31%
0.60%
2.03%
1.86%
-0.60%
EUR
-0.19%
0.16%
-1.49%
0.43%
1.82%
1.65%
-0.80%
GBP
-0.36%
-0.16%
-1.67%
0.24%
1.66%
1.49%
-0.95%
JPY
1.31%
1.49%
1.67%
1.93%
3.43%
3.22%
0.76%
CAD
-0.60%
-0.43%
-0.24%
-1.93%
1.43%
1.24%
-1.19%
AUD
-2.03%
-1.82%
-1.66%
-3.43%
-1.43%
-0.19%
-2.60%
NZD
-1.86%
-1.65%
-1.49%
-3.22%
-1.24%
0.19%
-2.41%
CHF
0.60%
0.80%
0.95%
-0.76%
1.19%
2.60%
2.41%
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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The improving risk mood caused the US Dollar (USD) to lose interest in the American session on Monday, helping GBP/USD hold its ground. In the European session on Tuesday, the UK’s FTSE 100 Index trades marginally lower on the day and US stock index futures lose between 0.1% and 0.4%, reflecting a cautious market stance.
After Wall Street’s closing bell on Tuesday, Google (Alphabet), Visa and Tesla will be among the top companies that will release second-quarter earnings reports. Investors could opt to stay on the sidelines and make it difficult for major US equity indexes to build on Monday’s gains. In this scenario, the USD could stabilize and limit GBP/USD recovery attempts.
Existing Home Sales for June will be the only data featured in the US economic docket on Tuesday, which is unlikely to receive a noticeable market reaction. On Wednesday, preliminary July Manufacturing and Services PMI data from the UK and the US could trigger the next big action in GBP/USD.
GBP/USD Technical Analysis
GBP/USD stays below the 20-period Simple Moving Average (SMA) and the 50-period SMA on the four-char, which made a bearish cross on Monday. Additionally, the Relative Strength Index moves sideways near 40, suggesting that the bearish bias remains intact but lacks momentum.
1.2900 (psychological level, static level) aligns as first support before 1.2875 (Fibonacci 38.2% retracement of the latest uptrend) and 1.2850 (100-period SMA).
On the upside, 1.2940-1.2950 (Fibonacci 23.6% retracement, 50-period SMA) forms resistance area ahead of 1.3000 (psychological level, static level).
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling 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, its currency will benefit 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.
Gold price clings to $2,400, snapping a four-day downtrend early Tuesday.
The US Dollar turns south with US Treasury bond yields, despite risk-off returning.
China’s economic worries could act as a headwind for Gold price.
The daily technical setup continues to favor Gold buyers but $2,425 holds the key.
Gold price is making another attempt to reclaim $2,400 on a sustained basis, replicating the moves seen during Monday’s Asian trading. Gold price appears to be benefiting from a typical market caution and renewed China’s economic worries and ahead of key US earnings reports.
Gold price awaits fresh catalysts for a clear direction
Despite the return of risk-off flows, the US Dollar (USD) turns defensive, tracking the retreat in the US Treasury bond yields from two-week highs. Reports that US Vice President Kamala Harris secured 1976 delegates to become the Democratic Party’s presumptive nominee for November’s presidential election exert downward pressure on the Greenback.
It’s worth noting that Donald Trump’s chances of winning the election have narrowed after Joe Biden stepped down to allow Harris to run for the White House. A Democratic win in the US presidency would imply higher taxes and the need for lower borrowing costs, suggesting that the US Federal Reserve (Fed) would have to keep the policy accommodative. This, in turn, would be bearish for the US Dollar in the long term.
Traders turn risk-averse, as worries over China’s economic slowdown mount while nervousness sets in before earnings at Tesla and Alphabet are due after Tuesday’s New York close. Investors scurry for safety in the traditional safe-haven Gold during such times. However, China is the world’s top yellow metal consumer and the slowing growth raises concerns over its physical demand for Gold.
According to Goldman Sachs, “Chinese gold demand is now cyclically soft due to recent price surges, but central banks in emerging markets including China are likely to continue to buy gold frequently, whether disclosed or not,” per Reuters.
Traders also eagerly await the US Gross Domestic Product (GDP) report for the second quarter on Thursday and Personal Consumption Expenditures (PCE) inflation data for June on Friday before placing any directional bets on the Gold price.
In the meantime, the mid-tier US housing data, the political developments and the corporate earnings will drive risk trends, eventually impacting the USD-denominated Gold price.
From a broader perspective, Gold price remains supported by the Fed interest-rate cut expectations, with a September easing almost a done deal. Markets are currently pricing in a September rate cut, as futures show a 97% chance, according to the CME Group’s FedWatch Tool.
Gold price technical analysis: Daily chart
Gold price stays supported so long as the 14-day Relative Strength Index (RSI) holds above the 50 level. The indicator is currently at 53.50.
The 21-day and 50-day Simple Moving Averages (SMA) Bull Cross also remains in play, justifying the constructive outlook for Gold price.
if the Gold price rebound gathers strength, the $2,425 static resistance will be tested. The next topside barrier is seen at the previous lifetime high at $2,450, above which buyers will target the new all-time high of $2,484 reached last week.
On the other side, should sellers return, Gold price could test the 21-day SMA at $2,379 before falling further to the 50-day SMA support at $2,361.
The last line of defense for Gold optimists is seen at the $2,350 psychological level.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Gold price clings to $2,400, snapping a four-day downtrend early Tuesday.
The US Dollar turns south with US Treasury bond yields, despite risk-off returning.
China’s economic worries could act as a headwind for Gold price.
The daily technical setup continues to favor Gold buyers but $2,425 holds the key.
Gold price is making another attempt to reclaim $2,400 on a sustained basis, replicating the moves seen during Monday’s Asian trading. Gold price appears to be benefiting from a typical market caution and renewed China’s economic worries and ahead of key US earnings reports.
Gold price awaits fresh catalysts for a clear direction
Despite the return of risk-off flows, the US Dollar (USD) turns defensive, tracking the retreat in the US Treasury bond yields from two-week highs. Reports that US Vice President Kamala Harris secured 1976 delegates to become the Democratic Party’s presumptive nominee for November’s presidential election exert downward pressure on the Greenback.
It’s worth noting that Donald Trump’s chances of winning the election have narrowed after Joe Biden stepped down to allow Harris to run for the White House. A Democratic win in the US presidency would imply higher taxes and the need for lower borrowing costs, suggesting that the US Federal Reserve (Fed) would have to keep the policy accommodative. This, in turn, would be bearish for the US Dollar in the long term.
Traders turn risk-averse, as worries over China’s economic slowdown mount while nervousness sets in before earnings at Tesla and Alphabet are due after Tuesday’s New York close. Investors scurry for safety in the traditional safe-haven Gold during such times. However, China is the world’s top yellow metal consumer and the slowing growth raises concerns over its physical demand for Gold.
According to Goldman Sachs, “Chinese gold demand is now cyclically soft due to recent price surges, but central banks in emerging markets including China are likely to continue to buy gold frequently, whether disclosed or not,” per Reuters.
Traders also eagerly await the US Gross Domestic Product (GDP) report for the second quarter on Thursday and Personal Consumption Expenditures (PCE) inflation data for June on Friday before placing any directional bets on the Gold price.
In the meantime, the mid-tier US housing data, the political developments and the corporate earnings will drive risk trends, eventually impacting the USD-denominated Gold price.
From a broader perspective, Gold price remains supported by the Fed interest-rate cut expectations, with a September easing almost a done deal. Markets are currently pricing in a September rate cut, as futures show a 97% chance, according to the CME Group’s FedWatch Tool.
Gold price technical analysis: Daily chart
Gold price stays supported so long as the 14-day Relative Strength Index (RSI) holds above the 50 level. The indicator is currently at 53.50.
The 21-day and 50-day Simple Moving Averages (SMA) Bull Cross also remains in play, justifying the constructive outlook for Gold price.
if the Gold price rebound gathers strength, the $2,425 static resistance will be tested. The next topside barrier is seen at the previous lifetime high at $2,450, above which buyers will target the new all-time high of $2,484 reached last week.
On the other side, should sellers return, Gold price could test the 21-day SMA at $2,379 before falling further to the 50-day SMA support at $2,361.
The last line of defense for Gold optimists is seen at the $2,350 psychological level.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Despite the weaker growth forecasts, investor bets on a July Bank of Japan rate hike linger. Economic indicators on Wednesday and Friday could dictate the BoJ’s policy maneuvers on July 31.
Japan’s Services PMI
On Wednesday, July 24, economists expect the Jibun Bank Services PMI to increase from 49.4 in June to 49.9 in July.
A higher-than-expected PMI could raise investor bets on a July BoJ rate hike. The BoJ needs the services sector to fuel demand-driven inflation. A sector returning to expansion could justify a rate hike to bolster the Japanese Yen.
However, investors should consider the sub-components, including prices. Higher wages would support a pickup in private consumption if a stronger Yen eases import price pressures.
Tokyo Inflation in Focus
On Friday, economists forecast Tokyo’s core inflation rate to rise from 2.1% in June to 2.2% in July.
A higher-than-expected core inflation rate could cement bets on a July BoJ rate hike.
Upward consumer price trends in Tokyo would align with national inflation trends. Japan’s inflation rate accelerated for the second month in June, supporting expectations of a July BoJ rate hike.
Bank of Japan Plans to Cut Japanese Government Bond Purchases
Beyond the possibility of an interest rate hike, the BoJ announced it would disclose its plans to reduce Japanese Government Bond (JGB) purchases in July.
A marked reduction in JGB purchases would likely narrow interest rate differentials between the US dollar and the Yen more significantly than rate hikes.
With US interest rates at 5.5%, a 0.1 to 0.5% increase by the BoJ would leave interest rate differentials firmly tilted toward the US dollar.
A BoJ rate hike and a convincing cut to JGB purchases could support a USD/JPY drop below 150.
What the Experts Say
Economists hold mixed views about the July BoJ monetary policy decision.
Unlimited Chief Investment Officer Bob Elliot commented on the national inflation numbers for June, stating,
“Japan continues to experience weak inflation, wage growth, demand, and GDP in contrast to much of the DW, with little urgency to tighten. While there are plenty of headlines trying to make a case for tightening, a more careful look at the data suggests little urgency.”
Bob Elliot attributed higher inflation to the roll-off of energy and travel subsidies. He also said there are expectations that the government will reintroduce subsidies in the summer, a downward drag on inflation.
Considering the likely effects of rate cuts and reductions in JGB purchases, the BoJ could cut JGB purchases more aggressively.
Nataxis Asia Pacific Chief Economist Alicia Garcia Herrero recently commented on JGB purchases, stating,
“Bank of Japan to start quantitative tightening, which could support the Yen more than intervention.”
US Economic Indicators
On Wednesday, the US housing sector will be in focus.
Economists predict existing home sales will increase by 3% in June after falling by 0.7% in May. Better-than-expected numbers could boost US dollar demand.
High demand for existing homes could tighten housing inventories and raise house prices. Higher house prices and tighter inventories may also push rental prices up. Higher rents can fuel housing services and headline inflation, which may reduce expectations of multiple 2024 Fed rate cuts.
However, investors should consider trends, as tight inventories can create volatile monthly existing home sales.
