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Daily Pivots: (S1) 1.2719; (P) 1.2769; (R1) 1.2829; More...

Intraday bias in GBP/USD stays neutral as range trading continues. Further decline is in favor with 1.2863 resistance intact. On the downside, below 1.2706 will target 1.2612 support first. Decisive break there should confirm that rise from 1.2298 has completed. However, break of 1.2863 will turn bias back to the upside for retesting 1.3043 resistance instead.

In the bigger picture, current development suggests that corrective pattern from 1.3141 is extending with fall from 1.3043 as another leg. Break of 1.2612 support would strengthen this case. But still, downside should be contained by 1.2036/2298 support zone even in case of deep decline. Rise from 1.0351 (2022 low) remains in favor to resume at a later stage.

Daily Pivots: (S1) 0.8437; (P) 0.8520; (R1) 0.8606; More…

USD/CHF recovered after dipping to 0.8431 and intraday bias is turned neutral first. Some consolidations would be seen but upside should be limited by 0.8711 resistance. Below 0.8431 will resume the fall from 0.9223 to retest 0.8332 low.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with fall from 0.9223 as the second leg. Strong support could be seen from 0.8332 to bring rebound. Yet, overall outlook will continue to stay bearish as long as 0.9243 resistance holds. Firm break of 0.8332, however, will resume larger down trend from 1.0146 (2022 high).

Daily Pivots: (S1) 0.6390; (P) 0.6455; (R1) 0.6562; More...

AUD?USD rebounded strongly after diving to 0.6348 but upside is capped below 0.6567 resistance so far. Intraday bias is turned neutral first, and further fall is in favor. Below 0.6434 minor support will bring retest of 0.6348 low. Firm break there will resume the decline from 0.6798 to 0.6269 support next.

In the bigger picture, overall, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern, with fall from 0.6798 as another falling leg. Deeper fall could be seen to the lower side of the range between 0.6169/6361. But strong support should be seen there to contain downside. For now, risk will stay on the downside as long as 55 D EMA (now at 0.6619) holds, in case of rebound.

Daily Pivots: (S1) 1.3775; (P) 1.3861; (R1) 1.3913; More...

Intraday bias in USD/CAD turned neutral with the current retreat. But further rise is expected as long as 1.3786 support holds. Break of 1.3946 will target 61.8% projection of 1.3176 to 1.3845 from 1.3588 at 1.4025 next. Nevertheless, firm break of 1.3786 will turn bias back to the downside for deeper pullback instead.

In the bigger picture, price actions from 1.3976 (2022 high) are viewed as a corrective pattern, that might have completed at 1.3176 (2023 low) already. Firm break of 1.3976 will confirm resumption of whole up trend from 1.2005 (2021 low). Next target is 61.8% projection of 1.2401 to 1.3976 from 1.3176 at 1.4149. This will be the favored case as long as 1.3588 support holds, in case of pullback.

Daily Pivots: (S1) 180.22; (P) 184.11; (R1) 188.11; More...

GBP/JPY recovered after diving to 180.00 and intraday bias is turned neutral first. Some consolidations would be seen but upside should be limited by 193.23 resistance to bring another fall. Break of 180.00 will resume the decline from 208.09 to 178.32 support next.

In the bigger picture, fall from 208.09 medium term top is seen as correcting the up trend from 123.94 (2020 low). Deeper decline is in favor as long as 55 W EMA (now at 189.31) holds. But strong support could emerge between 178.32 and 38.2% retracement of 123.94 to 208.09 at 175.94 to bring rebound. Meanwhile, sustained trading above 55 W EMA will suggest that the range for the medium term corrective pattern is already set.

Daily Pivots: (S1) 154.80; (P) 157.51; (R1) 160.60; More...

EUR/JPY recovered after diving to 154.40 and intraday bias is turned neutral first. Some consolidations would be seen but upside should be limited by 162.87 resistance to bring another fall. Break of 154.40 will resume the decline from 175.41 to 153.15 support next.

In the bigger picture, fall from 175.41 medium term top should be correcting the whole rise from 114.42 (2020 low). Deeper fall could be seen as long as 55 W EMA (now at 161.79) holds. But strong support should emerge between 153.15 and 38.2% retracement of 114.42 to 175.41 at 152.11 to bring rebound (at least on first attempt). Meanwhile, sustained trading above 55 W EMA will argue that the range of the medium term corrective pattern has already been set.

Daily Pivots: (S1) 0.8521; (P) 0.8571; (R1) 0.8619; More....

Intraday bias in EUR/GBP remains on the upside at this point. Further rise should be seen to 0.8643 resistance. Decisive break there will strengthen the case of larger bullish reversal and target 0.8764 key resistance next. On the downside, though, below 0.8550 minor support will turn intraday bias neutral first.

In the bigger picture, while the rebound from 0.8382 is strong, there is no confirmation of trend reversal yet. As long as 0.8643 resistance holds, down trend from 0.9267 could still resume through 0.8382 at a later stage. However, firm break of 0.8643 will indicate that such down trend has completed, and turn outlook bullish.

Daily Pivots: (S1) 1.6665; (P) 1.6926; (R1) 1.7118; More...

Intraday bias in EUR/AUD is turned neutral first as it retreated after hitting 1.7180. Some consolidations would be seen but downside should be contained above 1.6474 support to bring another rally. On the upside, break of 1.7180 will resume larger up trend to 1.7715 fibonacci projection level next.

In the bigger picture, decisive break of 1.7062 resistance will confirm resumption of whole up trend from 1. 1.4281 (2022 low). Next target is 61.8% projection of 1.4281 to 1.7062 from 1.5996 at 1.7715. For now, further rally is expected as long as 55 D EMA (now at 1.6355) support holds, even in case of deep retreat.

We have added additional rate cuts at the November and January FOMC meetings to our profile. Our unrevised terminal rate of 3.375% is now seen at end-2025 instead of mid-2026.

July’s US employment report unnerved global markets. Growth in nonfarm payrolls slowed to less than half the average of the prior twelve months (including revisions) and the unemployment rate rose by 0.2ppts in the month to 4.3%.

The unemployment rate’s rise held particular significance for many in the market. Firstly, it triggered the Sahm Rule (an indicator that states that a recession has started once the three-month moving average of the unemployment rate is 0.5ppts above the lowest three-month average of the past 12 months). In addition, the July print was 0.1ppt above the peak rate the FOMC foresaw through 2024–2026 at the time of their June meeting.

Fearing the FOMC may have missed their opportunity to produce a soft landing, participants quickly jumped to price in a near 100% chance of a 50bp cut in September and a 60% chance of a follow-up 50bp move in November. Around 110bps of easing is currently expected by end-2024, to be followed by a string of additional cuts in 2025 towards the FOMC’s 2.8% ‘longer run’ estimate.

Westpac has warned throughout 2024 of a coming deterioration in the US labour market, so July’s outcomes are not a big surprise. However, we remain confident in the underlying health of the US economy and believe the FOMC will as well, resulting in a more muted easing cycle than the market currently expects.

In gauging the underlying health of the US economy, firstly it is important to recognise that US employment estimates are, at worst, pointing to a stalling out of job growth, not an outright contraction, with household employment, the weaker of the two key measures, having averaged +19k the past six months.

While the ISM surveys have, over the past six months, signalled the possibility of a dramatic reduction in labour demand, the NFIB small business survey’s employment measure has held modestly above average and the Federal Reserve’s Beige Book is in keeping with the household survey’s signal of ‘only’ a stalling out of employment growth. Hours worked from the establishment survey also continues to track nonfarm payrolls, so there is no evidence of hours being reduced disproportionately either.

Current momentum in US economic activity is also healthy, with domestic final demand growth around average in the first half of 2024, circa 2.5% annualised. Households’ decision to lock in historically low rates before and during the pandemic continues to provide benefit, while consumer wealth and debt levels remain constructive for spending and confidence.

For the FOMC then, as inflation continues to come down and with the labour market weaker today than expected over the forecast period, there is cause to cut decisively into year end and through early-2025. But, given the economy’s resilience and the absence of evidence that inflation will soon undershoot the FOMC’s 2% target, there is no need to rush to neutral or below.

As before, we look for the FOMC to begin the cutting cycle in September with a 25bp cut. In view of the greater downside risks becoming evident in the labour market data, we now also forecast 25bp cuts at the November 2024 and January 2025 meetings in addition to those already expected in December 2024 and March 2025. A cut per quarter from the June quarter will see our unrevised terminal rate of 3.375% reached at end-2025 instead of mid-2026.

We will have more to say on the implications for term interest rates and the Australian dollar in our forthcoming August Market Outlook. But, broadly speaking, while we expect the 10-year to hold near its current level over the remainder of the year as rate cuts commence, it is then anticipated to drift back up to around 4.00% in mid-2025, putting in place a sizeable spread to the fed funds rate.

This will be a consequence of the US economy’s underlying health, but also the established trend for the Federal deficit and evidence of inflation pressures related to capacity constraints and trade policy. While these uncertainties remain, it will prove difficult for the Australian dollar to stage a strong rally, although the recovery in Australian growth in 2025 and improving global sentiment should allow for a slow uptrend through USD0.70 from late-2025.

Daily Pivots: (S1) 0.9235; (P) 0.9310; (R1) 0.9408; More....

EUR/CHF recovered after hitting 0.9029 and intraday bias is turned neutral for consolidations first. But near term outlook will stay bearish as long as 0.9476 support turned resistance holds. Below 0.9209 will target 161.8% projection of 0.9928 to 0.94767 from 0.9772 at 0.9041 next.

In the bigger picture, current downside acceleration argues that medium term corrective pattern from 0.9407 (2022 low) might have completed with three waves to 0.9928. Decisive break of 0.9252 (2023 low) will confirm long term down trend resumption. Next target will be 61.8% projection of 1.1149 to 0.9407 from 0.9928 at 0.8851. For now, outlook will stay bearish as long as 0.9928 resistance holds, even in case of strong rebound.