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EURGBP could not find enough buyers to print a new higher high above July’s peak of 0.8700 last week, pausing its latest upleg lower at 0.8668.

Unfortunately, the bears are currently trying to push the price below the short-term bullish channel and the 50-day SMA, which previously prevented a drop below 0.8585.

The downward trajectory in the momentum indicators is endorsing the negative momentum in the price, though only a decisive close below the previous low and the 61.8% Fibonacci retracement of the 0.8200-0.9249 upleg at 0.8535 would shatter hopes for a bull market. If that proves to be the case, the door will open for the 0.8500 floor, a break of which is expected to squeeze the price towards the 0.8400-0.8425 constraining area.

Should the price return above the 50-day SMA, buyers may wait for a sustainable rally above the 0.8620-0.8670 region and out of the broad bearish channel before targeting the 200-day SMA and the 50% Fibonacci level of 0.8725. A close higher could face a new challenge at the upper boundary of the short-term bullish channel at 0.8765. If the bulls knock down that wall too, rekindling optimism for an upside reversal, the price could advance towards the 38.2% Fibonacci of 0.8850.

Summing up, EURGBP seems unable to power its mission for an upside reversal above 0.8700. A close below 0.8535 would eliminate hopes for a continuation higher.

Yesterday, data from Statistics Canada was published, which testified to the stability of inflation in the country: the rise in prices for the month amounted to +0.6% (+0.3% was expected).

This increased the likelihood that the Bank of Canada will raise the rate yet again. Now it is at a maximum for 22 years and is 5.0%.

As a result, USD/CAD is declining today after a volatile Tuesday.

Bullish arguments:

→ the price may be supported by the median line and the lower limit of the current ascending channel;

→ the price may be supported by the level of 1.34, which previously served as resistance;

→ support may continue to be provided by the level of 1.344.

Bearish arguments:

→ the price made a false breakout of the top on August 8;

→ resistance is provided by the psychological level at 1.35;

→ divergence on the RSI indicator;

→ the price is in the zone of a sharp fall in the rate recorded on June 1 — sellers can maintain control.

Since August 1, the USD/CAD rate has risen by more than 2.3%. In such conditions, a correction may be a fairly natural scenario.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Wednesday’s Asian / European action was so far shaped in a long-legged Doji candle, signaling indecision, as oversold conditions on daily chart suggest some profit-taking after the pair was in a steep fall in past four weeks (down around 5%).

Bears faced headwinds from significant supports at 0.6463/58 (Fibo 61.8% of 0.5509/0.8007 / May 31 spike low), which offer solid ground for consolidation / limited correction.

Larger picture remains firmly bearish, with fresh pressure on Aussie dollar coming from stronger than expected US retail sales, which add to signals that the US economy is in a good shape and possible further rate hikes won’t be harmful that keeps the US dollar underpinned.

Markets also await release of FOMC July’s policy meeting, due later today, with prevailing expectations that the central bank will keep hawkish stance over monetary policy.

Daily studies are firmly bearish and along with negative fundamentals, point to mild correction before larger bears resume.

Falling 10DMA offers initial resistance at 0.6516, which should ideally cap, with extended upticks not to exceed broken Fibo level at 0.6547 (61.8% of 0.6170/0.7157) to keep bears intact.

Res: 0.6481; 0.6547; 0.6616; 0.6661.
Sup: 0.6427; 0.6403; 0.6272; 0.6170.

Eurozone industrial production rose 0.5% mom in June, well above expectation of 0.1% mom. Production of energy grew by 0.5%, while production of durable consumer goods fell by -0.1%, capital goods by -0.7%, intermediate goods by -0.9% and non-durable consumer goods by -1.1%.

EU industrial production rose 0.4% mom. Among Member States for which data are available, the highest monthly increases were registered in Ireland (+13.1%), Denmark (+6.3%) and Lithuania (+3.2%). The largest decreases were observed in Sweden (-5.3%), Finland and Malta (both -3.3%) and Belgium (-3.0%).

Full Eurozone industrial production release here.

Market picture

The crypto market lost 1.2% over the past 24 hours to $1.156 trillion. This is a downward move, albeit small, after a long consolidation. Larger currencies have seen less pressure than smaller altcoins. Rising US Treasury yields put pressure on riskier assets and attracted some capital. Thus, Bitcoin lost 0.7% on the day, Ethereum – 1%, and altcoins lost from 6.3% (Solana) to 1.1% (Tron).

According to The Block, bitcoin volatility fell to a record low, with BTC’s 30-day volatility on an annualised basis dropping to 15.5% from 61.4% last year. Glassnode also notes the extreme level of apathy and exhaustion amid the drop in volatility.

Bitcoin approached $29.0K after a prolonged consolidation of around $29.4K. Technically, the sell-off in Bitcoin could gain momentum on a break below $28.9K. In this case, the price could quickly fall to $28.0K or even $27.2K.

News background

Kevin Kelly, Delphi Digital co-founder and head of research, sees signs of an early bull rally in the crypto market. He believes BTC could reach new all-time highs around the end of 2024, following its halving.

Crypto-related activity may pose new and complex risks to the US banking system that are difficult to assess fully. This is the conclusion of the US Federal Deposit Insurance Corporation’s (FDIC) annual review.

UK-based Jacobi Asset Management has launched Europe’s first spot bitcoin ETF. The instrument is listed on Euronext Amsterdam and includes a renewable energy certification solution.

New Zealand cryptocurrency exchange Dasset has closed customer access to assets and announced it will begin liquidation after six years of operation. According to media reports, users had been trying unsuccessfully to withdraw funds from the platform for months.

NZDUSD is finally edging higher today following four consecutive red candles and after registering a new 2023 low. It appears to be the bulls’ first serious attempt to put a stop to the bearish breakout from the rectangle that has been in place since February 2023. They could potentially threaten the aggressive July 14, 2023 downward sloping trendline that NZDUSD has actually been religiously respecting.

The momentum indicators continue to reflect the recent downleg from the mid-July NZDUSD highs. However, there are some early signs that a reversal could be on the cards. More specifically, the RSI is edging higher after recording its lower print since the September 2022 sell-off. Similarly, the stochastic oscillator is stuck at the bottom of its oversold territory and is apparently preparing for a move higher. Should the Average Directional Movement Index (ADX) move back to a range-trading signal, then the market would probably be ripe for a proper rebound.

Should the bears ignore today’s green candle, they would try to record a new 2023 low and finally break the May 15, 2022 low at 0.5920. The door would then be open for both the 23.6% Fibonacci retracement of the April 5, 2022 – October 13, 2022 downtrend at 0.5870 and the October 6, 2022 high at 0.5813.

On the flip side, the bulls are keen on building upon today’s move with first resistance coming at the July 14, 2023 trendline. Higher, the busy 0.6060-0.6092 range, defined by the 38.2% Fibonacci retracement and the July 14, 2022 low respectively, is critical from a short-term momentum perspective and it is the final step before pushing NZDUSD back inside the aforementioned rectangle.

To conclude, NZDUSD bulls are trying to react to the continued bearish pressure. However, the bears appear to be relaxed for as long as the July 14, 2023 trendline holds.

USDJPY has been storming higher in the short term, posting a fresh 9-month high of 145.85 on Tuesday before paring some gains. Undoubtedly, the pair has approached a critical technical region around where the first round of intervention by the Japanese authorities took place, thus traders should be cautious as the probability of an impending correction has increased.

The momentum indicators currently suggest that bullish forces are intensifying. Specifically, the MACD is strengthening above zero and its red signal line but has not yet reached June highs, while the RSI is hovering deep in the positive zone after failing to pierce through the 70-overbought mark.

If buying interest persists, the price could initially face the September 2022 high of 145.89. Conquering this barricade, the bulls could aim at the 148.80 resistance territory observed in November 2022. A violation of that zone could set the stage for the 32-year high of 151.94.

On the flipside, should the rally lose steam and the price reverse lower, the previous 2023 high of 145.06 could prove to be the first barrier for the bears to clear.  Piercing through that region, the pair might test 142.24 ahead of the 140.90 hurdle, which has acted both as resistance and support in the past. Further retreats could then cease at the July low of 137.23.

Overall, USDJPY seems to be stuck in a steep uptrend, but the price has reached levels that in previous occasions the Japanese policymakers were willing to protect. Will this scenario play out again?

• OCR remained at 5.5% as Westpac and the market had expected.
• The RBNZ's forecasts for near term growth have been revised up, and its OCR profile revised higher to 5.6% between December 2023 and June 2024, implying around a 40% chance of a further rate hike to 5.75%.
• The RBNZ has revised up its assumption for the neutral OCR by 25bps to 2.25%, lifting the OCR profile.
• The RBNZ's medium term CPI profile remained unchanged although with higher interest rates. CPI inflation still gets back inside the range September 2024, with risks seen as 'balanced'.
• Westpac retains its call for a 25bps increase in the OCR in November.

What happened?

The RBNZ left the OCR at 5.5% as widely expected. The overall tone of the Statement is a touch more hawkish than in the May Statement. In many respects the RBNZ's view on the balance of risks for inflation and interest rates is converging towards our own. That said, during the press conference, Governor Orr indicated that he remained "very comfortable" with the current OCR setting, suggesting that the MPC still has some ground to travel before they decide to implement the 25-basis point hike in the OCR that we continue to expect in November.

The OCR profile has been revised upwards. To some extent this has been driven by changes in technical assumptions around the longer-run "neutral OCR" which has been revised up by 25bps to 2.25%. This essentially means the RBNZ now sees the currently 5.5% level of the OCR as being slightly less restrictive than it previously thought. As a result, a higher forecast OCR track is now needed to keep forecast inflation heading back to target expeditiously.

Recent developments have also pushed the forecast for the OCR higher in the near term. The RBNZ now recognizes that house prices have bottomed out earlier than expected and that they will rise from here (the RBNZ retains a more conservative view on house prices than Westpac - they see price growth of 3% over 2024 versus our view of an almost 8% increase). The higher June quarter out-turn for non-tradables inflation also played a role, as has an upward revision in near term growth and labour market forecasts. All of this was foreshadowed in recent weeks by our MPS preview and Economic Overview.

The factors pushing up inflation pressures have been balanced by the weaker external outlook. Commodity prices have fallen significantly recently which is weighing on incomes and growth over the forecast horizon.

The risks.

The RBNZ importantly has emphasized there are risks in both directions for the economy, inflation, and the OCR. The RBNZ has now moved to a more data-dependent approach – once again as we foreshadowed in our MPS preview. This is sensible and appropriate given the uncertainties out there. The Bank sees upside risks to growth and inflation in the near-term, with the unemployment rate now forecast to rise more slowly than in May. Looking towards the medium-term, the Bank emphasises downside risks to the growth and inflation outlook from the weaker external outlook, especially as regards China. This is unsurprisingly given recent negative trends in dairy prices. Indeed, following last night's auction, current dairy prices appear about 10% weaker than the Bank's assumed cycle low point. Overall, the RBNZ assessed that "the risks around the inflation projection remain balanced".

The bottom line – higher for longer.

The core message remains the same though. The RBNZ still sees an OCR of around the current level of 5.5% as sufficiently restrictive to bring inflation down over time. The OCR will need to remain at around these levels for longer than previously thought as the first easing comes either at the end of 2024 or early 2025 (compared to the September quarter 2024 in the May Statement).

Our view.

We continue to see a hike in the OCR to 5.75% in the November 2023 Monetary Policy Statement. Key indicators to watch, in order of importance, include:

• the September quarter CPI (where the RBNZ will be hoping to see tangible signs of core inflation measures decelerating – especially in non-tradables inflation),
• the September quarter labour market report (where the RBNZ will be watching the unemployment rate, employment growth, and wages indicators closely)
• business and consumer confidence indicators (to assess the extent that weaker commodity prices and farm incomes will flow through to broader economic growth)
• monthly housing market indicators (to check on the extent to which population growth pressures are leading to increased pricing pressures).

The RBNZ's economic projections.

Turning to the economic projections, following a weaker than expected March quarter, the RBNZ now estimates GDP growth of 0.5% in the June quarter – a sharp upgrade from the 0.2% contraction forecast in the May Statement. From that higher base, the RBNZ forecasts a slightly greater rate of contraction in the economy over the second half of this year. However, following the strong lift in employment reported in the June quarter, the RBNZ expects the unemployment rate to rise more slowly than in the May Statement, posing the risk that wage inflation may slow less quickly than projected previously. Specifically, the RBNZ now forecasts the unemployment rate to rise to 3.8% in the September quarter (previously 4.1%) and 4.4% in the December quarter (previously 4.6%). These revised forecasts address Westpac's previous concern that the RBNZ was overestimating the likely near-term loosening of the labour market.

Beyond this year, the RBNZ's projections point to a gradual pick-up in quarterly GDP growth but to rates that remain below the economy's 'potential' until the first half of 2025. In the detail, starting from a firmer base, the RBNZ has become more pessimistic about the outlook for growth in exports. However, this is balanced by a slightly more upbeat outlook for private consumption and a downward revision to forecast growth in imports. Cumulative GDP growth over 2024 and 2025 is slightly higher than in the May Statement, while projected growth in potential GDP has also been raised slightly. The bottom line is that, on average, activity is expected to track 1.7% below the economy's sustainable capacity, thus applying downward pressure on inflation. This is very similar (just 0.1% less) to what was projected in the May Statement. The unemployment rate is expected to reach a cyclical peak of 5.3% at the end of next year – 0.1% lower than forecast in May.

The RBNZ revised up its inflation forecasts – partly due to higher international oil prices although of more importance was the updated profile for non-tradables inflation. Nontradables inflation has been running hotter than the RBNZ had expected. In addition, measures of core inflation (which track the underlying trends in prices) indicate that price pressures have been easing only gradually two years after the OCR began rising. Consistent with those lingering domestic price pressures, the RBNZ has revised up its near-term forecast for non-tradables inflation.

The RBNZ has analysed the inflationary impact of migration and tentatively concluded that the inflationary impacts will be positive but lower than seen historically. More research is underway.

Looking at inflation two to three years ahead, which is the key focus for the RBNZ when setting monetary policy, the central bank's forecasts for inflation are largely unchanged. However, that's because the RBNZ has revised up its longer-term forecast for the OCR. In other words, the RBNZ now thinks that domestic inflation pressures are stronger than it previously assessed, and accordingly that higher interest rates are needed to get inflation back to target.

At those longer horizons, the RBNZ has also revised up its forecast for the long-run neutral OCR by 25bps. However, the longer term forecast for the actual OCR has been revised up by more than the neutral OCR has been (an additional 10 to 15bps). While that's not a big change, it helps to highlight the RBNZ thinks the risks for inflation have tilted upwards in recent months. Inflation still returns to the 1-3% target range in September 2024.

Reinforcing the stronger outlook for inflation pressures, the RBNZ has revised up its forecast for house prices. While the RBNZ had previously expected house prices to continue falling through the back part of the year, prices have instead flattened off in recent months. The RBNZ now forecasts house prices to rise by around 3% next year, and that will help to support household spending.

EUR/USD started a fresh decline below the 1.0000 support. USD/CHF is rising and might aim a move toward the 0.8850 resistance.

Important Takeaways for EUR/USD and USD/CHF Analysis Today

• The Euro struggled to clear the 1.1040 resistance against the US Dollar.
• There is a major bearish trend line forming with resistance near 1.0920 on the hourly chart of EUR/USD at FXOpen.
• USD/CHF is gaining pace above the 0.8745 resistance zone.
• There is a key bullish trend line forming with support near 0.8760 on the hourly chart at FXOpen.

EUR/USD Technical Analysis

On the hourly chart of EUR/USD at FXOpen, the pair failed to clear the 1.1040 resistance. The Euro started a fresh decline below the 1.0000 support against the US Dollar, as mentioned in the previous analysis.

There was a move below the 50-hour simple moving average and 1.0970. The bears were able to push the pair below the 1.0900 pivot level. The pair traded as low as 1.0874 and is currently attempting an upside correction.

There was a move above the 1.0900 level. Immediate resistance on the upside is near the 50-hour simple moving average at 1.0920. There is also a major bearish trend line forming with resistance near 1.0920. The trend line is close to the 23.6% Fib retracement level of the downward move from the1.1065 swing high to the 1.0874 low.

The first major resistance is near the 50% Fib retracement level of the downward move from the1.1065 swing high to the 1.0874 low at 1.0970. An upside break above the 1.0970 level might send the pair toward the 1.1040 resistance. Any more gains might open the doors for a move toward the 1.1070 level.

On the downside, immediate support on the EUR/USD chart is seen near 1.0900. The next major support is near the 1.0875 level. A downside break below the 1.0875 support could send the pair toward the 1.0800 level.

USD/CHF Technical Analysis

On the hourly chart of USD/CHF at FXOpen, the pair started a decent increase from the 0.8700 support. The US Dollar gained climbed above the 0.8745 resistance zone against the Swiss Franc.

A base is formed above 0.8745 and the pair is now showing positive signs. It is trading near the 50% Fib retracement level of the downward move from the 0.8827 swing high to the 0.8744 swing low and above the 50-hour simple moving average.

On the upside, the pair is now facing resistance near 0.8785. The next major resistance is near the 76.4% Fib retracement level of the downward move from the 0.8827 swing high to the 0.8744 swing low at 0.8810.

If there is a clear break above the 0.8810 resistance zone and the RSI climbs above 60, the pair could start another increase. In the stated case, it could test 0.8850.

On the downside, immediate support on the USD/CHF chart is near the 50-hour simple moving average at 0.8775. The first major support is near a key bullish trend line at 0.8760. The next major support is near the 0.8745 level. Any more losses may possibly open the doors for a move toward the 0.8700 level or even 0.8680 in the near term.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Daily Pivots: (S1) 1.2668; (P) 1.2711; (R1) 1.2746; More...

GBP/USD is staying in established range despite today's recovery. Intraday bias remains neutral for the moment. On the downside, firm break of 1.2618, and sustained trading below 1.2678 resistance turned support will argue that it's already in a larger correction. Deeper decline would then be seen to 1.2306 support next. Nevertheless, break of 1.2817 minor resistance will indicate that the pull back has completed, and turn bias back to the upside for stronger rebound.

In the bigger picture, a medium term top could be in place at 1.3141 already, on bearish divergence condition in D MACD. Sustained trading below 55 D EMA (now at 1.2723) should confirm this case, and bring deeper fall to 38.2% retracement of 1.0351 to 1.3141 at 1.2075, as a correction to up trend from 1.0351 (2022 low). For now, rise will stay mildly on the downside as long as 1.3141 resistance holds, in case of strong rebound.