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Hedge funds Sell USD ahead of the FOMC meeting
Recently, gold prices settled by -0.41% at 59309 as the dollar and bond yields rose. However, hopes for a pause in US rate hikes limited the decline after the July meeting of the Federal Reserve. The unexpected drop in new claims for unemployment benefits in the US also contributed to the market sentiment.
Physical gold demand in India stalled due to monsoon rains and higher domestic prices, while in China, bullion was sold at high premiums. Indian dealers offered discounts of up to $6 an ounce over official domestic prices, and in China, gold changed hands at premiums of $9 to $17 an ounce. Swiss gold exports fell 23% in June due to lower shipments to China and India. Let’s take a look at the technical analysis.
US Dollar - D1 Timeframe
The US Dollar ended the last week with a bullish run all through the week, in a move that seems to be set to continue even further. We see the price sharply pull away from the demand zone on the charts as it heads toward the 50 and 100-period moving averages. The implication is that we are bound to see the bullish move continue until it finds a credible resistance from the moving averages and resistance trendline.
Analyst’s Expectations:
- Direction: Bullish
- Target: 102.381
- Invalidation: 101.174
EURUSD - D1 Timeframe
The price action on EURUSD has recently broken out of the wedge and seems to be heading toward the trendline and moving averages in search of support. It is important to note the bullish array of the moving averages to indicate what is most likely to occur once the price reaches the support area. In the meantime, we remain bearish.
Analyst’s Expectations:
- Direction: Bearish
- Target: 1.09637
- Invalidation: 1.10901
GBPUSD - D1 Timeframe
GBPUSD made a huge dump from the pivot supply zone on the daily timeframe. However, the current state of the price action suggests that the price may be heading for the support trendline with a confluence from the 50-period moving average. The trend remains bullish, though, so it would be smart to exercise a sizable degree of risk management on this idea.
Analyst’s Expectations:
- Direction: Bearish
- Target: 1.27373
- Invalidation: 1.28905
CONCLUSION
The trading of CFDs comes at a risk. Thus, to succeed, you have to manage risks properly. To avoid costly mistakes while you look to trade these opportunities, be sure to do your due diligence and manage your risk appropriately.
EURCHF Wave Analysis
- EURCHF broke support zone
- Likely to fall to support level 0.9500
EURCHF currency pair earlier broke the support zone lying between the key support level 0.9600 (which reversed the pair earlier this month) and the support trendline of the the daily down channel from March.
The breakout of this support zone accelerated the active impulse waves iii and (3).
Given the clear multi-month downtrend, EURCHF can be expected to fall further toward the next major support level 0.9500 (which reversed the price multiple times in last September).
EURGBP Wave Analysis
- EURGBP reversed from resistance level 0.8665
- Likely to fall to support level 0.8520
EURGBP currency pair recently reversed down from the key resistance level 0.8665, former support from May, strengthened by the daily down channel from February and the 50% Fibonacci correction of the downward impulse from April.
The downward reversal from the resistance level 0.8665 stopped the previous short-term correction ii.
Given the clear daily downtrend and the strongly bearish euro sentiment, EURGBP can be expected to fall further toward the next support level 0.8520 (which has been reversing the price from June).
AUD/USD Jumps Ahead of Australian Inflation
- Australian inflation expected to slow in Q2
- US consumer confidence jumps
- AUD/USD rises sharply
The Australian dollar has gained ground on Tuesday. In the North American session, AUD/USD is trading at 0.6783, up 0.65%.
Australian inflation expected to decelerate
Australia releases the second-quarter inflation report on Wednesday. The consensus is expecting inflation to slow down to 6.2% y/y after a 7.0% print in the first quarter. The core trimmed mean measure of CPI, a key gauge of underlying inflation, is expected to fall from 6.6% to 6.0%.
The RBA will be keeping a close eye on the inflation data, which is the final key release ahead of the RBA decision on August 1st. Recent RBA decisions have been close calls and that could well be the case with the August decision. The money markets have priced in a 41% probability of a 0.25% rate hike, which would bring the cash rate to 4.35%. If inflation falls significantly as expected, the money markets will likely lower the probability of a rate hike in August.
Last week’s employment report reiterated that the labour market remains tight. The economy added 32,500 jobs in June, beating expectations, and unemployment remained at 3.5%. The strong labour market is driving inflation and complicating the RBA’s attempts to bring inflation back down to the 2% target.
US consumers more optimistic
The US Conference Board (CB) consumer confidence index rose in July to 117, up from 110.1 in June. This beat the consensus estimate of 110.5 and was the highest level since July 2021. Consumer expectations also rose significantly. The CB report attributed the boost in consumer confidence to falling inflation and the tight labour market. The CB noted that consumer expectations of a recession have eased compared to earlier in the year, but the CB still considers a recession as “likely” before the end of the year.
AUD/USD Technical
- AUD/USD is testing resistance at 0.6767. Above, there is resistance at 0.6878
- 0.6687 and 0.6643 are providing support
Gold is Correcting, Not Reversing. Here’s Why
The US dollar has risen for the 6th consecutive session, weighing on gold. However, this corrective pullback now highlights gold’s internal strength.
Over the last week, gold fell 1.2% to $1953, erasing the rally of the 18th. However, longer declines than gains point to buyers on the downside. It’s also worth noting that the dollar index is up 1.7% over the same period, although gold tends to move with greater amplitude.
Earlier this month, gold reversed to the upside following a pullback to the 61.8% Fibonacci line from the rally from the November lows to the early May peak. When fully completed, this classic pattern offers an upside potential of $2370 (161.8% of the initial move).
Exactly a week ago, the market confirmed this bullish sentiment by climbing steadily higher and breaking above the 50-day moving average. Despite this week’s decline, gold remains above this important curve and is still formally in a bullish trend.
Given the prospects for further declines, a dynamic near $1947 and $1910 will be necessary. A break below the former would take gold back below its 50-day moving average, and a break above it could be seen as a false break.
A break below $1910 will take the price below the previous local lows. Combined with the lower local highs from mid-July, this would form a downtrend, trashing the current bullish scenario.
The bullish case for gold is also supported by the performance of silver, which rallied 12% from its late June lows before correcting 3%. A “golden cross” has formed on the weekly chart: The 50-week average rose above the 200-week average. For reference, gold has been in this mode since 2017.
The current situation allows traders to expect more decisive bullish momentum from Silver but also serves as an additional bullish indicator for Gold.
US consumer confidence rose to 117, highest in two years
US Conference Board Consumer Confidence rose from 110.1 to 117.0 in July, above expectation of 112.1. Present Situation Index rose from 115.3 to 160.0. Expectations Index also rose from 80.0 to 88.3.
"Consumer confidence rose in July 2023 to its highest level since July 2021, reflecting pops in both current conditions and expectations," said Dana Peterson, Chief Economist at The Conference Board.
"Headline confidence appears to have broken out of the sideways trend that prevailed for much of the last year....
"Assessments of the present situation rose in July on brighter views of employment conditions, where the spread between consumers saying jobs are 'plentiful' versus 'hard to get' widened further...
"Expectations for the next six months improved materially, reflecting greater confidence about future business conditions and job availability.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.1034; (P) 1.1091; (R1) 1.1121; More...
EUR/USD's fall from 1.1274 continues today and intraday bias stays on the downside. Still, outlook will remain bullish as long as 1.1011 resistance turned support holds. Above 1.1146 minor resistance will turn bias back to the upside for retesting 1.1274 high first. However, firm break of 1.1011 will argue that larger correction is underway.
In the bigger picture, rise from 0.9534 is still expected to continue as long as 1.1011 resistance turned support holds. Decisive break of 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273 will solidify the case of bullish trend reversal and target 1.2348 resistance next. However, firm break of 1.1011 will bring deeper fall back to 1.0634 support next.
GBP/USD Mid-Day Outlook
Daily Pivots: (S1) 1.2787; (P) 1.2835; (R1) 1.2873; More...
Intraday bias in GBP/USD remains neutral for the moment. On the downside, below 1.2796 will resume the fall from 1.3141 to 55 D EMA (now at 1.2703) next. On the upside, break of 1.2963 minor resistance will turn bias back to the upside retest 1.3141 high instead.
In the bigger picture, as long as 1.2678 resistance turned support holds, rise form 1.0351 (2022 low) is expected to continue. Next target is 100% projection of 1.0351 to 1.2445 from 1.1801 at 1.3895. However, sustained break of 1.2678 will argue that it's at least correcting this rally, with risk of bearish reversal.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 0.8656; (P) 0.8678; (R1) 0.8719; More...
USD/CHF's rebound from 0.8553 is still in progress and intraday bias stays mildly on the upside. Further rally would be seen towards 0.8818 support turned resistance. Rejection by 0.8818 will retain near term bearishness for another decline through 0.8553. Meanwhile for now, risk will stay mildly on the upside as long as 0.8553 holds, in case of retreat.
In the bigger picture, the break of 0.8756 (2021 low) indicates break out from the long term range pattern. For now, medium term outlook will stay bearish as long as 0.9146 resistance holds. Further fall would be seen to 61.8% retracement of 0.7065 (2011 low) to 1.0342 (2016 high) at 0.8317 next.
