Oil prices are expected to drop to the mid-$70s next year amid a surplus on the market, according to Morgan Stanley.
Currently, the oil market is tight and warrants the $80s per barrel price range, but with seasonal demand starting to abate in the fourth quarter, market balances are set to return, the investment bank said in a note carried by Reuters on Monday.
In the fourth quarter of 2024, the market would be balanced “when seasonal demand tailwinds abate and both OPEC and non-OPEC supply return to growth,” Morgan Stanley’s analysts wrote.
Next year, the market will even tip into a surplus amid rising supply from both OPEC+ and non-OPEC+ producers, the bank’s commodity strategists reckon.
According to the bank, global refinery runs will hit their 2024 peak in August and are not expected to reach this level again until July next year.
That’s why Morgan Stanley expects Brent Crude prices to drop from current levels to the mid $70s to high $70s per barrel range in 2025.
Early on Monday, Brent Crude prices were up by 0.52% at $83.07, while the U.S. benchmark, WTI Crude, was trading 0.49% higher at $80.46.
Morgan Stanley reiterated in the note its price forecast of $86 per barrel Brent oil for the third quarter of 2024.
Goldman Sachs has also recently reaffirmed its outlook from June that
Brent crude prices are set to rise to $86 per barrel this summer amid strong consumer demand which will put the market into a sizeable deficit in the third quarter.
The Joint Ministerial Monitoring Committee (JMMC), the OPEC+ panel monitoring the oil market, is not expected to recommend in August any changes to the current production policy plan of the group, OPEC+ delegates told Bloomberg last week.
When the panel meets again on August 1, the meeting is expected to be a routine one, and no recommendations on oil production policy – other than the OPEC+ group has already announced – are expected to be issued, according to Bloomberg‘s anonymous sources among the OPEC+ delegates.
US President Joe Biden stepped down from the presidential race.
Financial markets stand cautious, but unable to find a directional strength.
EUR/USD pressures its recent lows, downward corrective slide losing steam.
The EUR/USD pair trades uneventfully around the 1.0880 level, little changed from Friday’s close. Financial markets showed little reaction to weekend political news, as United States (US) President Joe Biden announced through a letter posted in X that he is stepping down from the presidential race. He also endorsed Vice-President Kamala Harris to lead the Democratic party into victory against Republican Donald Trump.
The US Dollar shed some ground at the weekly opening but ground higher afterwards, heading into the American opening with a firmer tone. Meanwhile, the macroeconomic calendar has little to offer. The US released the June Chicago Fed National Activity Index, which resulted in 0.05, down from the 0.23 posted in the previous month.
Other than that, European stocks trade with a positive tone, although Wall Street is set to open where it left off on Friday.
EUR/USD short-term technical outlook
From a technical point of view, the daily chart for the EUR/USD pair suggests the corrective decline is losing strength. Technical indicators retreated from overbought readings but turning flat well above their midlines. Furthermore, the pair remains well above all its moving averages, with a bullish 20 Simple Moving Average (SMA) heading north above directionless 100 and 200 SMAs.
In the near term, and according to the 4-hour chart, the risk skews to the downside. The 20 SMA gains downward traction above the current level while technical indicators consolidate within negative levels without signs of downward exhaustion. Finally, the 100 SMA maintains its bullish slope below the current level, providing dynamic support in the 1.0820 price zone.
Support levels: 1.0865 1.0820 1.0770
Resistance levels: 1.0910 1.0945 1.0990
EUR/USD Current price: 1.0882
US President Joe Biden stepped down from the presidential race.
Financial markets stand cautious, but unable to find a directional strength.
EUR/USD pressures its recent lows, downward corrective slide losing steam.
The EUR/USD pair trades uneventfully around the 1.0880 level, little changed from Friday’s close. Financial markets showed little reaction to weekend political news, as United States (US) President Joe Biden announced through a letter posted in X that he is stepping down from the presidential race. He also endorsed Vice-President Kamala Harris to lead the Democratic party into victory against Republican Donald Trump.
The US Dollar shed some ground at the weekly opening but ground higher afterwards, heading into the American opening with a firmer tone. Meanwhile, the macroeconomic calendar has little to offer. The US released the June Chicago Fed National Activity Index, which resulted in 0.05, down from the 0.23 posted in the previous month.
Other than that, European stocks trade with a positive tone, although Wall Street is set to open where it left off on Friday.
EUR/USD short-term technical outlook
From a technical point of view, the daily chart for the EUR/USD pair suggests the corrective decline is losing strength. Technical indicators retreated from overbought readings but turning flat well above their midlines. Furthermore, the pair remains well above all its moving averages, with a bullish 20 Simple Moving Average (SMA) heading north above directionless 100 and 200 SMAs.
In the near term, and according to the 4-hour chart, the risk skews to the downside. The 20 SMA gains downward traction above the current level while technical indicators consolidate within negative levels without signs of downward exhaustion. Finally, the 100 SMA maintains its bullish slope below the current level, providing dynamic support in the 1.0820 price zone.
The pound continues to retreat from recent highs, supported along the way by UK retail sales data that showed a sharp decline in activity in June.
According to reliable trading platforms, the pound fell below 1.19 against the euro and the pound against the US dollar GBP/USD approached 1.29 after the Office for National Statistics said that UK sales fell by 1.2% on a monthly basis in June, after growing by 2.9% in May.
This was below the consensus forecast of -0.4%. The year-on-year growth rate was -0.2%, down from 1.3% and below estimates that indicated a 0.2% growth. According to the economic calendar, the Office for National Statistics stated that retailers cited election uncertainty, poor weather, and low foot traffic as factors affecting sales. Phil Monckhouse, Country Manager at Ebury UK, noted, “It’s clear that the wet summer we’ve experienced so far has deterred shoppers.”
Maher Drag, Head of Research for the Americas at HSBC, added, “The pound weakens after weak retail sales data.” He explained, “The weak sales data follows labor market data that showed slowing wage growth. Together, these data points present a bearish outlook on the persistent and high services inflation, making the market pricing for the likely outcome of the Bank of England meeting in August finely balanced.”
Meanwhile, July should see an improvement in retail activity as the UK weather settles in, the election is in the rearview mirror and consumer confidence improves. Data released on Friday from GfK already shows that UK consumer confidence has picked up this month. Furthermore, the GfK composite consumer confidence index rose to -13 in July from -14 in June. GfK reported a seven-point rise in the headline purchasing index (a sub-component of its consumer confidence survey), saying this was “likely to be good news for retailers and could translate into improved footfall in the coming months”.
For sterling, the outlook now hinges on the Bank of England’s interest rate decision on August 1. Data this week confirmed no rate cut next month, with services inflation rising by 5.7% year-on-year in June. Such a strong reading suggests that broader inflation will start to pick up again in the coming months, especially as household energy bills are set to start rising again in the autumn.
If the BoE abandons raising rates and continues to urge caution, sterling could remain supported as it benefits from one of the highest interest rates in the G10. Last Thursday’s wages data was more mixed, with some economists saying there was enough of a slack in the labor market underway to allow the Bank to cut rates. The bank says that strong wage growth will keep inflation high, but if it believes that wages are falling, it may believe that it can cut interest rates without stimulating inflation. Also, it will be aware that keeping interest rates high for too long could damage the economy.
The August 1 decision is finely balanced, with many policymakers indicating they were close to voting for a rate hike at the June meeting. Unlikely, a rate cut is to significantly undermine the pound’s rally if accompanied by guidance warning that it is not on a predetermined path for further rate cuts. Ultimately, this could keep the pound supported until the end of the year.
Technical forecasts for the GPB/USD pair today:
As we mentioned before, the 1.3000 psychological resistance will remain the most important for bulls to control the direction of the GBP/USD pair, as it is the most prominent on the daily chart to confirm the strength of the uptrend. Now, bulls are trying to hold on to that as a continuation of the recent sell-off and a move to break the 1.2820 support threatens the recent bullish bounce path.
Last week, the USD/JPY continued its decline, reaching the support level of 155.37, the lowest for the pair in a month and a half, continuing a sell-off from the yen’s weakest level in 38 years.
Since mid-week, the USD/JPY rebounded to reach the resistance level of 157.86, stabilizing around 157.35 at the beginning of this week’s trading.
The USD/JPY rate will continue to be influenced by the future of central bank policies and the extent of Japanese intervention in the forex markets.
According to reliable trading platforms, the performance of the US dollar was mixed at the opening of the first trading session of last week, as the assassination attempt on US presidential candidate Donald Trump sparked volatile trading conditions in the United States. As markets continue to price in a September rate cut by the Federal Reserve, the US dollar struggled to find support.
Meanwhile, Tepid comments from Fed Chairman Jerome Powell on Monday evening left the greenback rudderless, before a stronger-than-expected batch of US retail sales data lifted the greenback on Tuesday afternoon. While growth stalled in June, an upward revision to the May release provided modest support to the US dollar. Recently, the US dollar has been continued to slide on Wednesday as bets on a Fed rate cut held back any significant movement. However, in the latter part of the session, the dollar attracted some investor support after the release of US industrial production data.
The release showed higher-than-expected output in June, while May’s figures were also revised higher. The latest US initial jobless claims data was released on Thursday. Also, the data showed a higher-than-expected number of newly unemployed Americans filing for benefits, suggesting continued stagnation in the US Labor market. However, the US dollar managed to resist losses after recovering from a brief period of oversold trading throughout the week, driven by overbought bets on a Fed rate cut.
Overall, rising US Treasury yields and cautious market sentiment have supported the US dollar as a safe haven as the week draws to a close.
USD/JPY Technical analysis and Expectations Today
USD/JPY has now risen to trade near the 100-hour moving average line. As a result, the pair is trading near overbought levels on the 14-hour Relative Strength Index (RSI). In the near term, based on the hourly chart, USD/JPY is trading within an ascending channel. Also, the 14-hour RSI has risen to trade near overbought levels. Therefore, bulls will target extended gains around 158.00 or higher at 158.60. On the other hand, the bears will look to pounce on pullbacks around 156.80 or lower at 156.00.
In the long term, based on the daily chart, the USD/JPY pair is trading within an ascending channel. However, the 14-day RSI has recently declined to trade near the oversold levels of the indicator. Therefore, the bears will target extended pullbacks around 154.81 or lower at the 152.53 support. On the other hand, the bulls will look to pounce on pullbacks around 159.72 or higher at the 162.00 resistance.
Gold price bounces off $2,400 amid a positive start to a Big week.
Despite risk aversion, the US Dollar stays softer with US Treasury bond yields.
Gold price looks to $2,425, as the daily RSI turns north above 50.
Gold price is attempting a bounce from $2,400, having snapped a three-day corrective decline from record highs of $2,484. Gold price capitalizes on a broad-based US Dollar softness alongside sluggish US Treasury bond yields even as markets stay risk averse.
Gold price keenly awaits top-tier US economic data
As investors digest the recent US political developments, the US Dollar maintains a weaker undertone so far this Monday. On Sunday, US President Biden dropped out of the election race and endorsed Vice President Kamala Harris for the Democratic ticket. Online betting site PredictIT showed pricing for a victory by Donald Trump had fallen 4 cents to 60 cents, while Harris climbed 12 cents to 39 cents, per Reuters.
A Democratic win would imply higher taxes and the need for lower borrowing costs, suggesting that policy easing for the US Federal Reserve (Fed). This, in turn, would be bearish for the US Dollar in the long term. Therefore, the Greenback is unable to take advantage of the market’s anxiety amid renewed China growth worries while gearing up for key US event risks later this week.
The US equity and Treasury futures rise, exerting negative pressure on the US Treasury bond yields across the curve, lending additional support to the non-yielding Gold price. Markets also seem to ignore the People’s Bank of China’s (PBOC) interest-rate cuts to its one-year and five-year mortgage lending rates, as it raises concerns that the government recognizes the downward pressure on China’s economy.
Markets also stay unnerved as a packed week of corporate earnings unfolds, with Tesla and Google-parent Alphabet due on the cards. Additionally, traders resort to repositioning ahead of Thursday’s advance US second-quarter Gross Domestic Product (GDP) and the Fed favored inflation gauge out on Friday.
Markets are currently pricing in a September rate cut, as futures show a 97% chance, according to the CME Group’s FedWatch Tool.
Ahead of these key events, Gold price could maintain a buoyant tone amid dovish Fed expectations and the US political uncertainty. However, the fading Asian physical demand for Gold price could act as a headwind for the bright metal. Asian customers, especially the Indians, refrained from making new purchases despite deep discounts, as they preferred to book profits on record-high bullion prices.
China, dealers were offering discounts of up to $6 an ounce on international spot prices, the lowest in more than two years as per Reuters records.
Gold price technical analysis: Daily chart
Gold price has found fresh buyers, as the 14-day Relative Strength Index (RSI) stalls its descent and turns north again while holding above the 50 level. The indicator is currently at 55.
The 21-day and 50-day Simple Moving Averages (SMA) Bull Cross also remains in play, adding credence to the renewed upside in Gold price.
if Gold price rebound picks up strength, the $2,425 static resistance will be tested. The next topside barrier is seen at the previous lifetime high of $2,450, above which buyers will target the new all-time high of $2,484 reached last week.
Conversely, should sellers fight back control, Gold price could challenge the $2,400 threshold once again. Acceptance below that level could accentuate the downside toward the 21-day SMA at $2,376.
Additional weakness could expose the 50-day SMA support at $2,360.
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 bounces off $2,400 amid a positive start to a Big week.
Despite risk aversion, the US Dollar stays softer with US Treasury bond yields.
Gold price looks to $2,425, as the daily RSI turns north above 50.
Gold price is attempting a bounce from $2,400, having snapped a three-day corrective decline from record highs of $2,484. Gold price capitalizes on a broad-based US Dollar softness alongside sluggish US Treasury bond yields even as markets stay risk averse.
Gold price keenly awaits top-tier US economic data
As investors digest the recent US political developments, the US Dollar maintains a weaker undertone so far this Monday. On Sunday, US President Biden dropped out of the election race and endorsed Vice President Kamala Harris for the Democratic ticket. Online betting site PredictIT showed pricing for a victory by Donald Trump had fallen 4 cents to 60 cents, while Harris climbed 12 cents to 39 cents, per Reuters.
A Democratic win would imply higher taxes and the need for lower borrowing costs, suggesting that policy easing for the US Federal Reserve (Fed). This, in turn, would be bearish for the US Dollar in the long term. Therefore, the Greenback is unable to take advantage of the market’s anxiety amid renewed China growth worries while gearing up for key US event risks later this week.
The US equity and Treasury futures rise, exerting negative pressure on the US Treasury bond yields across the curve, lending additional support to the non-yielding Gold price. Markets also seem to ignore the People’s Bank of China’s (PBOC) interest-rate cuts to its one-year and five-year mortgage lending rates, as it raises concerns that the government recognizes the downward pressure on China’s economy.
Markets also stay unnerved as a packed week of corporate earnings unfolds, with Tesla and Google-parent Alphabet due on the cards. Additionally, traders resort to repositioning ahead of Thursday’s advance US second-quarter Gross Domestic Product (GDP) and the Fed favored inflation gauge out on Friday.
Markets are currently pricing in a September rate cut, as futures show a 97% chance, according to the CME Group’s FedWatch Tool.
Ahead of these key events, Gold price could maintain a buoyant tone amid dovish Fed expectations and the US political uncertainty. However, the fading Asian physical demand for Gold price could act as a headwind for the bright metal. Asian customers, especially the Indians, refrained from making new purchases despite deep discounts, as they preferred to book profits on record-high bullion prices.
China, dealers were offering discounts of up to $6 an ounce on international spot prices, the lowest in more than two years as per Reuters records.
Gold price technical analysis: Daily chart
Gold price has found fresh buyers, as the 14-day Relative Strength Index (RSI) stalls its descent and turns north again while holding above the 50 level. The indicator is currently at 55.
The 21-day and 50-day Simple Moving Averages (SMA) Bull Cross also remains in play, adding credence to the renewed upside in Gold price.
if Gold price rebound picks up strength, the $2,425 static resistance will be tested. The next topside barrier is seen at the previous lifetime high of $2,450, above which buyers will target the new all-time high of $2,484 reached last week.
Conversely, should sellers fight back control, Gold price could challenge the $2,400 threshold once again. Acceptance below that level could accentuate the downside toward the 21-day SMA at $2,376.
Additional weakness could expose the 50-day SMA support at $2,360.
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.
EUR/USD trades in a tight range slightly below 1.0900 early Monday.
Market reaction to US politics remain subdued at the beginning of the week.
The pair could stretch lower if 1.0880 support fails.
After closing the last two days of the previous week in negative territory, EUR/USD seems to have entered into a consolidation phase slightly below 1.0900 early Monday. The pair’s technical outlook points to a lack of buyer interest in the near term.
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 strongest against the New Zealand Dollar.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.17%
0.48%
-0.82%
0.71%
1.81%
1.84%
-0.75%
EUR
-0.17%
0.34%
-0.80%
0.72%
1.68%
1.85%
-0.73%
GBP
-0.48%
-0.34%
-1.05%
0.37%
1.33%
1.46%
-1.08%
JPY
0.82%
0.80%
1.05%
1.53%
2.42%
2.63%
-0.13%
CAD
-0.71%
-0.72%
-0.37%
-1.53%
1.03%
1.13%
-1.46%
AUD
-1.81%
-1.68%
-1.33%
-2.42%
-1.03%
0.18%
-2.37%
NZD
-1.84%
-1.85%
-1.46%
-2.63%
-1.13%
-0.18%
-2.55%
CHF
0.75%
0.73%
1.08%
0.13%
1.46%
2.37%
2.55%
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 US Dollar (USD) benefited from the souring risk mood in the second half of last week and caused EUR/USD to turn south. Additionally, several European Central Bank (ECB) officials hinted at another rate reduction in September on Friday, making it difficult for the Euro to gather strength.
Over the weekend, US President Joe Biden announced that he will no longer run for President at the upcoming election and endorsed Vice President Kamala Harris to be the new nominee. Nevertheless, markets showed little to no reaction to this development.
In the European morning, US stock index futures trade modestly higher on the day. Investors, however, could refrain from taking large positions ahead of Tesla and Google’s second-quarter earnings figures, which will be released after the closing bell on Tuesday.
The US economic docket will not feature any high-tier data releases on Monday. Later in the week, S&P Global PMI data from Germany, the Eurozone and the US will be watched closely by market participants. On Thursday, the US Bureau of Economic Analysis will release its first estimate of the second-quarter Gross Domestic Product (GDP) growth ahead of Friday’s Personal Consumption Expenditures (PCE) Price Index.
EUR/USD Technical Analysis
EUR/USD failed to return within the ascending regression channel coming from late June after testing the lower limit at the beginning of the week. Additionally, the Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50, reflecting a lack of buyer interest.
On the downside, 1.0880 (Fibonacci 23.6% retracement of the latest uptrend) aligns as immediate support. If EUR/USD falls below that level and starts using it as resistance, 1.0840-1.0835 (Fibonacci 38.2% retracement, 100-period Simple Moving Average) could be seen as next support before 1.0810-1.0800 (Fibonacci 50% retracement, static level).
In case EUR/USD manages to rise above 1.0900-1.0910 (lower limit of the ascending channel, 20-period Simple Moving Average) and stabilize there, technical buyers could take action. In this scenario, 1.0940 (mid-point of the channel, static level) could act as strong resistance before 1.1000 (static level, psychological level) could be set as the next bullish target.
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 trades in a tight range slightly below 1.0900 early Monday.
Market reaction to US politics remain subdued at the beginning of the week.
The pair could stretch lower if 1.0880 support fails.
After closing the last two days of the previous week in negative territory, EUR/USD seems to have entered into a consolidation phase slightly below 1.0900 early Monday. The pair’s technical outlook points to a lack of buyer interest in the near term.
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 strongest against the New Zealand Dollar.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.17%
0.48%
-0.82%
0.71%
1.81%
1.84%
-0.75%
EUR
-0.17%
0.34%
-0.80%
0.72%
1.68%
1.85%
-0.73%
GBP
-0.48%
-0.34%
-1.05%
0.37%
1.33%
1.46%
-1.08%
JPY
0.82%
0.80%
1.05%
1.53%
2.42%
2.63%
-0.13%
CAD
-0.71%
-0.72%
-0.37%
-1.53%
1.03%
1.13%
-1.46%
AUD
-1.81%
-1.68%
-1.33%
-2.42%
-1.03%
0.18%
-2.37%
NZD
-1.84%
-1.85%
-1.46%
-2.63%
-1.13%
-0.18%
-2.55%
CHF
0.75%
0.73%
1.08%
0.13%
1.46%
2.37%
2.55%
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 US Dollar (USD) benefited from the souring risk mood in the second half of last week and caused EUR/USD to turn south. Additionally, several European Central Bank (ECB) officials hinted at another rate reduction in September on Friday, making it difficult for the Euro to gather strength.
Over the weekend, US President Joe Biden announced that he will no longer run for President at the upcoming election and endorsed Vice President Kamala Harris to be the new nominee. Nevertheless, markets showed little to no reaction to this development.
In the European morning, US stock index futures trade modestly higher on the day. Investors, however, could refrain from taking large positions ahead of Tesla and Google’s second-quarter earnings figures, which will be released after the closing bell on Tuesday.
The US economic docket will not feature any high-tier data releases on Monday. Later in the week, S&P Global PMI data from Germany, the Eurozone and the US will be watched closely by market participants. On Thursday, the US Bureau of Economic Analysis will release its first estimate of the second-quarter Gross Domestic Product (GDP) growth ahead of Friday’s Personal Consumption Expenditures (PCE) Price Index.
EUR/USD Technical Analysis
EUR/USD failed to return within the ascending regression channel coming from late June after testing the lower limit at the beginning of the week. Additionally, the Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50, reflecting a lack of buyer interest.
On the downside, 1.0880 (Fibonacci 23.6% retracement of the latest uptrend) aligns as immediate support. If EUR/USD falls below that level and starts using it as resistance, 1.0840-1.0835 (Fibonacci 38.2% retracement, 100-period Simple Moving Average) could be seen as next support before 1.0810-1.0800 (Fibonacci 50% retracement, static level).
In case EUR/USD manages to rise above 1.0900-1.0910 (lower limit of the ascending channel, 20-period Simple Moving Average) and stabilize there, technical buyers could take action. In this scenario, 1.0940 (mid-point of the channel, static level) could act as strong resistance before 1.1000 (static level, psychological level) could be set as the next bullish target.
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 EUR/GBP pair looks as if it is trying to continue its overall trajectory to the upside.
Ultimately, the market has fallen rather significantly only to turn around and show signs of life. The 0.84 level has been conquered again, so we can stay above your that would obviously be a very bullish sign.
If we can continue to go higher, then we could challenge the 50-Day EMA, which of course is a technical indicator that a lot of people would pay close attention to.
If we can break above that, then it’s likely that the market could go looking to the 0.85 level.
Volatility of course is going to continue to be a major issue, and we have of course seen a lot of negativity overall. The market is most certainly in a very negative trend, and therefore I think we’ve got a situation where a lot of people will be looking at this as a potential issue, but it certainly is worth noting that the 0.84 level is a massive support level on the monthly chart, so we are most certainly in an area where you are going to see a lot of decisions asked.
Euro, and the European Central Bank
The euro of course is moving based upon the recent statements coming out of the European Central Bank, and the fact that perhaps the central bank did not cut rates like a lot of people thought they with this past week. However, the question then becomes whether or not the euro is going to continue to strengthen. That of course is a completely different question, but I do believe that if the market were to rally from here and break above the 0.85 level, that would be a huge boon for the euro itself.
If we were to see the market breaks significantly lower, then we could see this pair trade all the way down to the 0.80 level. Because of this, I think you’ve got a scenario where buyers are trying to come in and pick up a bit of value, but even if we do turn things around here, it’s going to be more or less a grind to the upside.
The British Pound has been all over the place against the Japanese Yen as we initially tried to rally, only to turn around and show signs of negativity.
The previous session on Thursday formed a massive hammer, which of course is something worth paying attention to.
The 203 Yen level of course is an area that is a large round psychologically significant figure, and the fact that we have turned around to show signs of life and then break above the top of it suggests that we are more likely than not going to go looking to the 205 yen level if we can get any type of momentum jumping back into the market. It’s probably worth noting that the bottom of the hammer is sitting just above the 50 day EMA. So that of course is crucial.
The Importance of the 50-Day EMA
The 50 day EMA is an area that I think a lot of systematic traders will pay close attention to. If we were to break down below there, then the 200 yen level is a major area of interest as well. And obviously has a lot of psychology attached to it. If we turn around and break to the upside, then not only will we go looking to the 205 yen level, but possibly after that, even go looking towards the 208 yen level. Keep in mind that the market is highly sensitive to the interest rate differential between the British pound and the Japanese yen, and I think that will continue to be a major reason why this market goes higher. I don’t have any interest in shorting this market. I certainly don’t want to pay interest just to hold the Japanese yen as the Bank of Japan is essentially stuck with its loose monetary policy.
With all of this being said, I think you need to still look for buying opportunities but recognize that we have a lot of noise at the moment, so position sizing will be crucial at this point. The market is likely to see choppiness.
During the week, the Pound drew support from a shift in yield spreads in favour of the UK currency.
Expectations of a Bank of England August rate cut faded again while markets are now much more confident over a Fed move in September.
The Pound to Dollar (GBP/USD) exchange rate hit a 12-month high above 1.30 before a correction to 1.2920.
Bank of America considers that a sustained GBP/USD move above 1.29, could lead to a medium-term advance to 1.40.
Danske Bank has revised its Pound forecasts higher, but still forecasts a GBP/USD decline to 1.21 on a 12-month view.
Headline UK inflation held at 2.0% for June compared with expectations for a marginal decline to 1.9% while the core rate held at 3.5%.
Importantly, the services-sector remained at 5.7%, well above the Bank of England’s comfort zone.
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Overall, markets are now pricing in less than a 50% chance that the Bank of England will cut rates at the August policy meeting. HSBC commented; “If the central bank decides to keep rates unchanged in August, it should be GBP positive. However, over the medium term we believe the relatively poor growth-inflation mix in the UK compared to the US, should work in the USD’s favor.”
US data releases did not have a major impact.
Overall yield spreads hampered the dollar, but political considerations were a key influence.
Markets considered that the chances of a Trump election victory in November had increased sharply after surviving an assassination attempt.
There was also further pressure for President Biden to withdraw from the Democrat nomination.
Trump called on the Fed not to cut interest rates in September.
Commerzbank looked on the potential ramifications of political pressure on monetary policy; “If the Fed lowers the key interest rate in September, this may be seen as an immediate USD-negative signal. But it would also signal that the Fed is resisting political pressure. And that in turn would be USD-positive, especially in the long term of four upcoming Trump years.”
Credit Agricole notes the possibility of a dollar rebound if expectations are disappointed; “Any potential reality check could in turn lend the USD a hand at some point, while the seasonality also turns more favourable for the USD in August.”
Citigroup expects that A trump victory in November would be positive for the dollar due to the impact trade policy and tariffs together with a more expansionary fiscal policy with stronger growth and higher yields.
It added; “we do not expect markets will actively trade the election until August/September. A “red wave” scenario should be worth +5% for the DXY, and we expect markets will have this fully priced as a likely outcome going into the election itself. Therefore, the USD rally may actually peak into the election, with limited upside follow-through even in the event a “red wave” materializes.”
As this post was updated, Joe Biden announced his withdrawal:
There will also be important implications if the US slides into recession.
According to Citigroup; “recessions tend to start as USD negative events (as softening growth leads to markets pricing a more dovish Fed) but then becomes USD positive events as acute recession concerns start impacting risk markets and increasing volatility.
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In my daily analysis of the British pound against the Japanese yen, it’s easy to see that we have seen a massive turnaround.
At this point in time, it looks like the market is going to continue to see more of a buy on the dip behavior and buying on the dip, of course, has been the way to play this market for quite some time.
With that being the case, you should also keep in mind that the market has an interest rate differential that a lot of people will pay attention to. After all you get paid quite nicely for, um, holding on to the pound against the yen. The Bank of England does have an interest rate decision in the next week or so. So that could come into play, but quite frankly it’s a situation where the bank of Japan just can’t do anything, although they may have been instrumental in part of the falling, if you will, of yen related pairs due to the fact that there has been a lot of negativity out there and then the Bank of Japan tends to pounce on that when they get the opportunity.Top Forex Brokers
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In the end… Either way, I think as long as we can stay above the 50-day EMA underneath and the 200 level, this remains a market that is still very much in an uptrend. And although it has been somewhat vicious on the way down, the reality is that it is still very much in an uptrend. So, with this, I am looking for momentum to the upside to jump on until then, I’m just going to be sitting on the sidelines and waiting for the value play to present itself yet again. Don’t feel rushed to get into the market, but I do think that if we can break above the 204 yen level, it’s likely that this pair will continue to climb higher.Ready to trade our daily Forex analysis ? We’ve made this forex brokers list for you to check out.MENAFN21072024000131011023ID1108464309
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