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This month has dragged on and seems to be lasting forever. One reason could be that it is my last full month as a keyboard warrior, toiling as the voice of reason as I try to make sense of the nonsense in the financial markets. The second, and more likely, is that the US FOMC policy meetings falls at the end of the month, instead of its usual mid-month slot. But as the last week of July arrives, so does the FOMC policy meeting, with the results due out in the early hours of Thursday morning Singapore time. For what its worth, I am in Team Taylor, and going for 75 basis points, with 100 being a bridge to far.

Last Friday’s price action may have softened the ardour of the 100 basis point hikes on the committee as well. Equity markets finished sharply lower, ostensibly because of soft social media earnings, but given Wall Street’s schizophrenic nature of late, it was just as likely to be recession fears, booking some short-term profits, and cutting exposure ahead of the weekend and any potential risks that emerged over it. Currency markets had a noisy day but finished not far from unchanged across the DM and EM space, so I don’t think Friday’s equity sell-off was a structural move.

Friday’s S&P Global Manufacturing and Services PMIs for Europe and the US were disappointing to say the least, coming in softer across the board. Eurozone bond yields moved sharply lower as the market falls over itself to price in a recession there. Even Italian BTPs rallied. That seems to have flowed into the US bond market as well, with the US yield also moving sharply lower across the 5 to 30-year tenors, and even 2-years closed under 3.0%. The R-word remains on everyone’s lips. Even gold managed to string two consecutive positive days together, while oil markets were broadly unchanged.

Agricultural commodities fell on Friday after Russia and Ukraine signed a Turkey-brokered deal to allow Ukrainian grain exports to resume from Black Sea ports such as Odessa. Naturally, Russia decided to rain cruise missiles down on Odessa over the weekend, including one that hit a grain silo. That has seen wheat futures rise by 2.0% this morning and has led to some US Dollar strength and extended the risk-off tone to equity markets. Various news outlets are also running a story about China’s increasingly strident warnings behind the scenes to US officials around Nancy Pelosi’s intended visit to Taiwan sometime in the next few weeks.

This week features a raft of heavyweight US second-quarter earnings from tech heavyweights, which could drive volatility on stock markets in addition to the FOMC. Alphabet and Microsoft announce tomorrow, Meta on Wednesday, perhaps the highest risk one looking at the ad-strewn content-light wasteland of my Facebook and Instagram feed. Apple announces after the bell on Thursday evening NYT. Falling across the FOMC, we could be in for some tasty volatility around the mid-week hump.

Alongside the FOMC, we have the German Ifo this afternoon, US Durable Goods Wednesday, German Inflation and US GDP on Thursday, and German, French, Italian, Spanish and Eurozone GDPs Thursday, and then Eurozone Inflation prints and US Personal Consumption and Expenditure data and the Chicago PMI on Friday. Slap in some China property and Taiwan risk, Eastern Europe risk, and the US President who has covid, and good luck picking the bones out of this week. It’s the show with everything but Yul Brunner. I’ll be in Bali next week for four days, and mightily glad I am, watching the dust settle from the distance.

Closer to home, we see Singapore Core Inflation for June (4.20% exp. YoY), and Headline Inflation (6.20% exp YoY), released at 1300 SGT today. Having already made an unscheduled monetary tightening this month, higher than expected inflation data this afternoon will lock-and-load the Monetary Authority of Singapore to tighten again at their scheduled October meeting. I am in Singapore this week, and although COE’s have hit record high prices in July, I am still seeing a lot of brand new Mercedes and Range Rovers being driven around. I also paid just over seven dollars for a quite small, but pleasing, hipster latte in Singapore this morning. My feeling is that inflation will come in on the high side this afternoon, which may give local equities some headwinds this week, while supporting the Singapore Dollar.

On a similar note, Australia releases its Q2 CPI on Wednesday, and we can expect volatility over the number as the street uses it to reprice the trajectory of the Reserve Bank of Australia tightening cycle. The Australian Dollar’s value is a function of international investors macro outlook for the world economy, risk-on/risk-off for those of us in pilot fish part of the financial markets. A high CPI print could also be a headwind for Australian equities though, although they have been mostly content to follow Wall Street like a doting puppy of late.

It is a slow week for China data, with just Industrial Profits on Wednesday. However, we do see official PMIs released this weekend on Sunday, and the Caixin PMI next Monday. The focus is likely to remain on China’s covid-19 trajectory and the China property market woes. Evergrande is approaching an end-of-month deadline around debt restructuring, and if no progress is made, this could start grabbing more headlines as the week advances.

The bear market rally in equities faces more than a few hurdles this week as outlined above. Currency markets technical picture look a bit clearer and the US Dollar correction lower would appear to still have legs. There are rising and falling wedge breakouts everywhere. The dollar index is testing the base of its rising wedge, USD/JPY has broken lower out of its, GBP/USD, AUD/USD and NZD/USD have all broken higher out of falling wedges. USD/JPY has the potential to be the most emotional, especially if the evolution of the week sees US yields move sharply lower again. Long USD/JPY is a very crowded trade, and a thinning of the herd is long overdue.

One could also argue that both Bitcoin and gold are trying to form bases as well, but let’s not get too far ahead of ourselves, they remain the ugliest horses in the glue factory. However this week plays out, I suspect today will be the most sedate day of the week to come, enjoy the peace and quiet while you can.

Asian equity markets mostly softer

Wall Street unwound some of its gains on Friday, as investors lightened positions ahead of the weekend ahead of heavyweight US earnings this week, and recession nerves. The S&P 500 finished 0.93% lower, the Nasdaq slumped by 1.87%, and the Dow Jones eased by 0.43%. In Asia, US futures are mixed, S&P 500 and Dow futures edging 0.15% lower, with Nasdaq futures gaining 0.15%.

Asian markets have been mostly content to follow Wall Street once again, although without the tail-chasing volatility, and are cautiously lower today. The exception is South Korea’s Kospi, which has moved 0.40% higher today. Elsewhere, Japan’s Nikkei 225 is down 0.80%. News that China is setting up an investment fund to prop up embattled China property developers has had little to no impact on markets today. The Shanghai Composite is down 0.55%, the CSI 300 is 0.65% lower, while the Hang Seng has fallen by 0.85%.

In regional markets, Singapore has gained 0.40%, while Taipei has fallen by 0.20%. Jakarta and Kuala Lumpur unchanged, with Bangkok down 0.25%, and Manila drooping by a hefty 1.30%. Australian markets are slightly softer, the All Ordinaries and ASX 200 have eased 0.10% lower.

European markets finished modestly higher on Friday, but the move lower by Wall Street, and the cruise missile attack on Odessa over the weekend just after the grain export deal was signed, is likely to spook European markets once again. Wall Street has so many variables this week, I am not even going to hazard a guess as to what mode the FOMO gnomes will show up in today.

US Dollar moves higher in Asia

The US Dollar has moved slightly higher in Asia today versus both the DM and Asia FX space, most likely due to the Russian attack on Odessa over the weekend. Friday saw a noisy session, with large intra-day trading ranges versus the major currencies. As the dust settled though, the US Dollar finished only modestly lower.

The dollar index was almost unchanged at 106.55 on Friday, edging higher to 108.65 in sedate Asian trading. The bottom of its rising wedge is at 106.30 today, and a sustained failure suggests a much deeper correction to 104.00, and potentially to its 102.50 long-term breakout point. Resistance remains at 107.40 and 108.00.

EUR/USD traded another wide range on Friday, but closed just 0.15% lower at 1.0215, easing to 1.0205 in Asia. It has resistance at 1.0275, which allows for a test of the 1.0360/1.0400 resistance zone. Only a sustained rise above would suggest a longer-term low is in place. EUR/USD has support at 1.0130 and 1.0100.

GBP/USD closed almost unchanged overnight at 1.2010 on Friday, falling to 1.1990 in Asia. GBP/USD has broken out of its falling wedge but need to take our heavyweight resistance around 1.2060 to confirm a low is in place. It has support at 1.1900 and 1.1800, with resistance at 1.2060 and 1.2200.

Lower US yields across the curve saw the Japanese Yen emerge a winner overnight as the US/Japan rate differential narrowed, with the street still long to the eyeballs of USD/JPY. USD/JPY finished 0.92% lower at 136.10 overnight, rising slightly to 136.20 in Asia. Its has broken out of its rising wedge support at 135.50 initially. Initial resistance is distance at 139.00, followed by 139.40. The US/Japan rate differential continues to hold USD/JPY in its thrall, and if US yields move sharply lower this week, the technical picture suggests USD/JPY could fall back to 132.00.

AUD/USD and NZD/USD fell slightly overnight to 0.6925 and 0.6250, easing to 0.6905 and 0.6235 in Asia, likely due to the Russia missile attack on Odessa. Both currencies remain well above their upside breakout points and only a move back below either 0.6700 or 0.6100 changes the bullish technical outlook.

USD/Asia finished almost unchanged on Friday, with the USD between 0.10% and 0.20% versus the THB, TWD, MYR, and CNY today. Both the INR and KRW have strengthened slightly and in USD/IDRs case, it looks like Bank Indonesia is on top at 15,000.00 today. I expect volatility in Asian currencies to increase as the week goes on and we get more inputs from tier-1 data, the US FOMC, and US earnings. Overall, Asian currencies remain under pressure versus the greenback, and I believe we will need to see a sustained move lower by the US 2-year yield to change that dynamic. A hawkish FOMC likely sees selling pressure return to Asia FX.

Oil prices ease in Asia

Brent crude and WTI had another choppy intra-day session on Friday, but like currency markets, closed almost unchanged as the dust settled on the day. ​ Futures markets remain deeply in backwardation, suggesting that in the real world, prompt supplies are as tight as ever, however rising recession fears globally do suggest that gains are likely to be limited in the shorter-term, geopolitics aside. Oil futures biggest problem is that the mind-boggling intra-day volatility seen of late, is likely to reduce risk positioning, and thus, trading liquidity. A negative feedback loop likely to exacerbate prices moves.

Brent crude closed 0.25% lower at $103.60 on Friday, falling by 1.10% to $102.50 a barrel in Asia today. WTI closed 1.45% lower at $95.00 on Friday, losing another 1.0% to $94.05 a barrel in Asia today. Brent crude has well-denoted resistance at $108.00 a barrel on the charts, and then 111.00. It has support at $101.75 and $101.00 a barrel.

WTI looks the more vulnerable, moving below its 200-day moving average (DMA) at $94.75 today, and taking out support at $94.30 a barrel. traced a double bottom $94.30, its overnight low and its 200-day moving average. (DMA). That now opens a retest of the July lows at $90.60 a barrel. Resistance is distant at $100.00 a barrel.

Brent’s outperformance likely reflects its use as the international benchmark for global trade in oil, where physical supplies remain tight. WTI, on the other hand, is a domestic benchmark meaning that US recession nerves seem to be more heavily weighing on its price. Brent crude continues to hold comfortably above its 200-DMA at $97.65 a barrel, and until that comprehensively breaks, I am not yet pencilling in the demise of high oil prices, although I have long said I believe a medium-term high is in place. The more analysts there were calling for $200 and $300 a barrel crude, the more confident I became.

Gold’s is trying to form a base

Gold closed higher for the second session in a row on Friday, quite the achievement given its woeful performance of late. Gold closed 0.50% higher at $1727.50 an ounce on Friday, edging slightly lower in moribund Asian trading to $1728.75. Two positive sessions do not mean gold is out of the woods, but the technical picture does suggest it is trying to form a base, having bounced of long-term support near $1680.00 an ounce last week. It faces a myriad of data and event risk this week, but the chart does suggest buying the dips toward $1700.00 with a tight stop wouldn’t be the dumbest call of your career.

Gold needs to overcome heavy resistance at the $1745.00 an ounce triple top before the gold bugs can really start to get excited. ​ It has support at $1680.00, and then the longer-term support around $1675.00 an ounce zone. A sustained failure of $1675.00 will signal a much deeper move lower targeting the $1450.00 to $1500.00 an ounce regions.

DXY:

On the H4, with prices moving below the ichimoku indicator, we have a bearish bias that prices will drop to the 1st support at 105.642 in line with overlap support, 61.8% fibonacci projection and 61.8% fibonacci retracement. Take note of intermediate support at 106.410 where the overlap support is. Once there is downside confirmation of price breaking 1st support structure, we would expect bearish momentum to carry price to 2nd support at 103.475 in line with swing low support. Alternatively, price could rise to 1st resistance at 107.514 where the pullback resistance and 50% fibonacci retracement are.

Areas of consideration:

• H4 time frame, 1st resistance at 107.514
• H4 time frame, 1st support at 105.642

XAU/USD (GOLD):

On the H4, with price moving within a descending channel and RSI moving in a descending trendline, we have a bearish bias that price will rise and drop from 1st resistance at 1739.80 where the swing high resistance is to 1st support at 1679.28 in line with 100% fibonacci projection and swing low support on the daily timeframe. Alternatively, price could break 1st resistance and rise to 2nd resistance at 1786.59 where the 50% fibonacci retracement, 161.8% fibonacci extension and pullback resistance are.

Areas of consideration:

• H4 time frame, 1st Resistance at 1739.80
• H4 time frame, 1st Support at 1679.28

GBP/USD:

On the H4, with prices moving within an ascending channel and above the ichimoku indicator, we have a bullish bias that price will rise to the 1st resistance at 1.20469 where the swing high resistance and 61.8% fibonacci projection are from the 1st support at 1.19320 where the pullback support, 38.2% fibonacci retracement and 78.6% fibonacci projection are. Alternatively, price could break 1st support and drop to 2nd support at 1.17599 where the swing low support and 100% fibonacci projection are.

Areas of consideration:

• H4 1st resistance at 1.20469
• H4 1st support at 1.19320

USD/CHF:

On the H4, with price moving along the descending channel, we have a bearish bias that price might drop from our 1st resistance at 0.96407, which is in line with the previous swing low to the 1st support, which is in line with 78.6% fibonacci retracement, if the price keep going down, it may drop to our 2nd support at 0.94952, which is in line with the swing low. Alternatively, price may break 1st resistance and head for 2nd resistance at 0.97250 where the close swing high and 50% fibonacci retracement is.

Areas of consideration

• 1st resistance level at 0.96407
• 1st support level at 0.95647

EUR/USD :

On the H4, with price moving above the ichimoku cloud and breaking out of the descending trend channel, we have a bullish bias that price will continue to rise from the 1st support at 1.01904 at the overlap support. If price breaks above the intermediary resistance at 1.02698 in line with the 50% fibonacci retracement, we have upside confirmation that price will continue to rise to the 1st resistance at 1.03570 at the pullback resistance in line with the 61.8% fibonacci retracement. Alternatively, price may break the support structure at the 1st support and drop to the 2nd support at 1.01213 at the overlap support.

Areas of consideration :

• H4 1st resistance at 1.03570
• H4 1st support at 1.01904

USD/JPY:

On the H4, with price broken out of the ascending trendline and moving below the ichimoku indicator, we have a bearish bias that price will rise and drop from our 1st resistance at 136.661 where the overlap resistance is to the 1st support at 134.781 where the swing low support and 61.8% fibonacci retracement are. Alternatively, price could break 1st resistance structure and head for 2nd resistance at 137.792 where the pullback resistance and 61.8% fibonacci retracement are.

Areas of consideration:

• H4 time frame, 1st resistance at 136.661
• H4 time frame, 1st support at 134.781

AUD/USD:

On the H4, with price moving above the ichimoku cloud and breaking out of the descending trend channel and moving in an ascending support, we have a bullish bias that price will rise from the 1st support at 0.68863 at the overlap support to the 1st resistance at 0.69939 at the swing high in line with the 78.6% fibonacci retracement. Alternatively, price may break support at the 1st support and drop to the 2nd support at 0.68023 at the overlap support.

Areas of consideration

• H4 1st resistance at 0.69939
• H4 1st support at 0.68863

NZD/USD:

On the H4, with price breaking the descending trend channel, short term ascending support and moving above the ichimoku cloud, we have a bullish bias that price will rise from the 1st support at 0.62177 at the overlap support. If price breaks the intermediary resistance at 0.62707 at the swing high in line with the 61.8% fibonacci retracement and 100% fibonacci projection, we will have upside confirmation that price will rise to the 1st resistance at 0.63269 at the swing high in line with the 78.6% fibonacci retracement. Alternatively, price may break the support structure at the 1st support and drop to the 2nd support at 0.61419 at the pullback support.

Areas of consideration:

• H4 time frame, 1st support at 0.62177
• H4 time frame, 1st resistance at 0.6326

USD/CAD:

On the H4, with the price breaking the ascending channel, we have a bearish bias that the price may drop from our 1st support at 1.29356, which is in line with 23.6% fibonacci retracement to our 2nd support at 1.28500, which is in line with 127.2% % fibonacci extension. Alternatively, the price may rise to the 1st resistance at 1.29875, which is in line with the close swing high.

Areas of consideration:

• H4 time frame, 1st support at 1.29356
• H4 time frame, 2nd support at 1.28500

OIL:

On the H4, with price moving along the bearish channel, we have a bearish bias that price might drop to our 1st support at 102.004, which is in line with 50% retracement. If the price keeps going down, it may drop to our 2nd support at 100.405, which is in line with 61.8% fibonacci retracement. Alternatively, price may rise to 1st resistance at 106.207, which is in line with overlap resistance.

Areas of consideration:

• H4 time frame, 1st support of 102.004
• H4 time frame, 2nd support of 200.405

Dow Jones Industrial Average:

On the H4, with price moving with a bearish channel and having a bullish break, we have a bullish bias that price might rise from our 1st resistance at 31906, which is in line with the swing highs to our 2nd resistance at 32701, which is in line with -27.2% fibonacci expansion. Alternatively, price may reverse off the 1st resistance and drop to the 1st support at 31529, which is in line with the overlap support and 38.2% fibonacci retracement, if the price keeps going down, it may drop to our 2nd support at 30971, which is in line with 61.8% fibonacci retracement.

Areas of consideration:

• H4 time frame, 1st resistance of 31906
• H4 time frame, 2nd resistance at 32701

Daily Pivots: (S1) 1.2849; (P) 1.2889; (R1) 1.2954; More...

Intraday bias in USD/CAD stays neutral at this point. On the downside, break of 1.2818 support will bring deeper fall back to 1.2516 key support. On the upside, above 1.2988 minor resistance will reinforce near term bullishness, and turn bias back to the upside for retesting 1.3222 instead.

In the bigger picture, down trend from 1.4667 (2020 high) should have completed at 1.2005, after defending 1.2061 long term cluster support. Rise from there should target 61.8% retracement of 1.4667 to 1.2005 (2021 low) at 1.3650. This will remain the favored case now as long as 1.2516 support holds.

Dollar recovers mildly in quiet Asian session today, but it's bounded inside Friday's range except versus Canadian. The greenback will most probably wait until Fed Chair Jerome Powell's comment, after another 75bps this week, before taking another firm move. As for today, Euro is so far the firmer ones, follow by Yen. New Zealand Dollar is leading commodity currencies lower. Sterling and Swiss Franc are mixed.

Technically, Dollar's selloff lost some momentum towards the end of the week. But for now, further decline will remain in favor. Levels to watch include 1.0118 minor support in EUR/USD, 0.9738 minor resistance in USD/CHF, 0.6858 minor support in AUD/USD and 1.2988 minor resistance in USD/CAD. As long as these levels hold, near term risks stay on the downside for the greenback.

In Asia, at the time of writing, Nikkei is down -0.76%. Hong Kong HSI is down -0.75%. China Shanghai SSE is down -0.71%. Singapore Strait Times is up 0.32%. Japan 10-year JGB yield is down -0.0230 at 0.191, back below 0.2% handle.

ECB Lagarde will keep raising rates for as long as necessary

In a blog post, ECB President Christine Lagarde said that last week 50bps rate hike, the first rate increase in 11 years, was "only the latest step in our journey to unwind the special measures we had to take to fight a series of crises", following the end of the net asset purchase programs.

"With these actions, we are sending a clear message to companies, workers and investors: inflation will return to our 2% target over the medium term," she added. "We will keep raising rates for as long as necessary to bring inflation down to our target over the medium term."

While Europe is facing great uncertainty, "not least over the war and energy prices... the Governing Council will review the situation and decide on the right pace for our next steps depending on the incoming data."

ECB Holzmann: We'll need in autumn to decide to do another 0.5% or less

ECB Governing Council member Robert Holzmann told Austrian broadcaster ORG on Sunday, "the economy will grow less strongly, the forecasts point in this direction, that has made us somewhat cautious."

"We will see in the autumn what the economic situation is. Then we can probably decide if we do another 0.5% (rate hike) or less," he added.

He also noted that ECB might have to accept a moderate recession to curb inflation. "We hope that won't become necessary," he said.

WTI heading back to 90 as rebound lost momentum

WTI crude oil turns weaker today as the recovery from 90.97 lost momentum ahead of 106.19 resistance. The selloff came on the back on gloomy economic outlook, as indicated by the poor PMI data from Eurozone and US released last week. There's growing expectation that a global recession is inevitable as central banks move to tighten monetary policy to curb inflation.

Development in WTI suggests that fall from 124.12 is still in progress and further decline would be seen to 90.97 support and below. Current decline from 134.12 is seen as the third leg of the corrective pattern from 131.82. Deeper fall could be seen to 85.92 resistance turn support (100% projection of 131.82 to 93.47 from 124.12 at 85.77). Stronger support should be seen there to finally complete the pattern to bring sustainable rebound. This will remain the favored case as long as 106.19 resistance holds.

Fed to hike 75bps; GDP from US, Eurozone and Canada

FOMC rate decision in a major focus this week and Fed is widely expected to hike by 75bps. Given recent poor PMI and consumer sentiment data, it's likely for Fed to deliver a larger hike. The question is indeed on whether Chair Jerome Powell would signal a slowdown in tightening after this move, and his view on recession risks. On central bank front, BoJ will release meeting minutes and summary of opinions.

Also, attention will be on GDP data from US, Eurozone and Canada. CPI from Australia and Eurozone will also be watched, as well as US PCE inflation. Some focuses will also be on Germany Ifo business climate and Gfk consumer sentiment; US consumer confidence and durable goods orders. Here are some highlights for the week:

• Monday: Germany Ifo business climate.
• Tuesday: BoJ minutes, corporate services prices; US house price index, consumer confidence, new homes sales.
• Wednesday: Australia CPI; Germany Gfk consumer climate; Swiss Credit Suisse economic expectations; Eurozone M3; US durable goods orders, goods trade balance, pending home sales, FOMC rate decision.
• Thursday: New Zealand ANZ business confidence; Australia import prices, retail sales; Germany CPI flash; US Q2 advance GDP, jobless claims.
• Friday: BoJ summary of opinions, Japan Tokyo CPI, unemployment rate, retail sales, consumer confidence, housing starts; Australia PPI, private sector credit; France consumer spending, GDP; Germany GDP, import prices, unemployment; Swiss retail sales, KOF economic barometer; Italy GDP; UK mortgage approvals, M4 money supply; Eurozone GDP; Canada GDP; US personal income and spending, and PCE inflation, Chicago PMI.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2849; (P) 1.2889; (R1) 1.2954; More...

Intraday bias in USD/CAD stays neutral at this point. On the downside, break of 1.2818 support will bring deeper fall back to 1.2516 key support. On the upside, above 1.2988 minor resistance will reinforce near term bullishness, and turn bias back to the upside for retesting 1.3222 instead.

In the bigger picture, down trend from 1.4667 (2020 high) should have completed at 1.2005, after defending 1.2061 long term cluster support. Rise from there should target 61.8% retracement of 1.4667 to 1.2005 (2021 low) at 1.3650. This will remain the favored case now as long as 1.2516 support holds.

Economic Indicators Update

WTI crude oil turns weaker today as the recovery from 90.97 lost momentum ahead of 106.19 resistance. The selloff came on the back on gloomy economic outlook, as indicated by the poor PMI data from Eurozone and US released last week. There's growing expectation that a global recession is inevitable as central banks move to tighten monetary policy to curb inflation.

Development in WTI suggests that fall from 124.12 is still in progress and further decline would be seen to 90.97 support and below. Current decline from 134.12 is seen as the third leg of the corrective pattern from 131.82. Deeper fall could be seen to 85.92 resistance turn support (100% projection of 131.82 to 93.47 from 124.12 at 85.77). Stronger support should be seen there to finally complete the pattern to bring sustainable rebound. This will remain the favored case as long as 106.19 resistance holds.

ECB Governing Council member Robert Holzmann told Austrian broadcaster ORG on Sunday, "the economy will grow less strongly, the forecasts point in this direction, that has made us somewhat cautious."

"We will see in the autumn what the economic situation is. Then we can probably decide if we do another 0.5% (rate hike) or less," he added.

He also noted that ECB might have to accept a moderate recession to curb inflation. "We hope that won't become necessary," he said.

In a blog post, ECB President Christine Lagarde said that last week 50bps rate hike, the first rate increase in 11 years, was "only the latest step in our journey to unwind the special measures we had to take to fight a series of crises", following the end of the net asset purchase programs.

"With these actions, we are sending a clear message to companies, workers and investors: inflation will return to our 2% target over the medium term," she added. "We will keep raising rates for as long as necessary to bring inflation down to our target over the medium term."

While Europe is facing great uncertainty, "not least over the war and energy prices... the Governing Council will review the situation and decide on the right pace for our next steps depending on the incoming data."

Full blog post here.

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EUR/USD: The ECB's Monetary Experiment: Crossing a Hawk with a Dove

The single European currency showed slight growth at the beginning of last week, fixing a local high at 1.0272. There are three reasons for this. The first and most banal one is a corrective rebound after the EUR/USD pair, having broken through the parity level of 1.0000, found the bottom at 0.9951 on July 14. The second one is the resumption of Russian gas supplies to the EU via the Nord Stream pipeline. And finally, the third and most important one is the expectation of a rise in the euro interest rate. Moreover, the market expected that the rate would be raised by 50 basis points (bp) at once, and not by 25, as announced by the ECB itself at its previous meeting. This is what happened in reality. For the first time in 13 years, the European regulator raised the lending rate from 0 to 0.5% on Thursday, July 21, and brought the deposit rate out of the negative zone, raising it from -0.5% to 0%.

The ECB explained in its press release that it felt appropriate to take a larger first step towards rate normalization for two reasons. The first is obvious and consists of an updated assessment of inflation growth. As a second reason, the ECB announced the launch of a new instrument, the Transmission Protection Instrument (TPI), which should allow, despite the increase in the rate, not to increase the cost of borrowing too aggressively in the vulnerable economies of the Eurozone. The TPI description explains that this tool was introduced to counter the unreasonable erratic market movements that took place in mid-June.

In short, the essence of TPI is that the ECB will be able to buy back securities issued in those EU countries where there is a destabilization of financial conditions unjustified by fundamental factors, on the secondary market. The volume of purchases is not limited by anything and will depend on the severity of the risks. In other words, the regulator will try to cross a hawk with a dove­: on the one hand, by raising the rate (QT), and on the other hand, by continuing potentially unlimited quantitative easing (QE). The market reaction to this monetary experiment turned out to be appropriate and predictable: the EUR/USD pair fell to 1.0152. After that, it went up again and completed the five-day period at the level of 1.0210.

There will be a meeting of the FOMC (Federal Open Market Committee) of the US Federal Reserve next week, on Wednesday, July 27. Almost no one doubts that the key interest rate will be raised there. But how much? By 100 bp, which hasn't happened since 1981, or by 75 bp? If the FOMC chooses the first option, the rate will reach 2.75%. It is this growth that the markets put into their quotes, expecting a new assault on the 1.0000 horizon by the EUR/USD pair. However, if the Fed abandons this idea and the rise is more modest, then a further rebound of the pair to the north is not ruled out.

At the time of writing this review, on the evening of July 22, 25% of experts supported the growth of the pair. The remaining 75% showed it the way to the south. The oscillator readings on D1 give a slightly different signal: 60% are colored red, 25% are green and 15% are neutral grey. As for the trend indicators, 65% look south, the remaining 35% have taken the opposite position. The immediate support for the EUR/USD pair is the 1.0150-1.0200 zone, then, of course, comes the 1.0000 level. After it is broken, the bears will target the July 14 low at 0.9950, even lower is the strong 2002 support/resistance zone. 0.9900-0.9930. The next serious task for the bulls will be to break through the resistance at 1.0270 and return to the 1.0400-1.0450 zone, followed by the 1.0520-1.0600 and 1.0650-1.0750 zones.

As already mentioned, the most important event of the upcoming week will be the FOMC meeting of the US Federal Reserve and its decision on the interest rate. The volume of US orders for capital goods and durable goods will become known on the same day, Wednesday, July 27. Data (CPI) on consumer markets in Germany and the Eurozone will arrive on Thursday, July 28 and Friday, July 29, respectively. The preliminary size of the US GDP (Q2) will be known on July 28, and the GDP of Germany and the Eurozone on July 29.

GBP/USD: The Battle for 1.2000 Continues

Last week was quite busy for the pound as for the publication of important macro-statistics on the UK. And although it turned out to be rather ambiguous, there were distinct positive notes in it, especially where it concerned the labor market. The number of applications for unemployment benefits in the country for the month decreased from 34.7K to 20.0K, and this is against the forecast of 41.2K.

Unlike EUR/USD, thanks to such statistics, the GBP/USD pair showed more confident growth and managed to return to where it was trading two and five weeks ago, putting the final chord at around 1.2000. And now the question arises: will this level turn into strong resistance or support?

At the moment, 75% of experts believe that the British currency will continue to lose ground, 25%, on the contrary, expect a rebound upwards. The readings of the indicators on D1 are as follows. Among the trend indicators, the balance of power is 65-35% in favor of the reds. Among the oscillators, the advantage of the bears is much less: 35% indicate a fall, 25% indicate an increase, the remaining 40% remain neutral. The closest support is located in the 1.1875-1.1915 zone. Below is the level of 1.1800, the low of July 14 of 1.1759, then 1.1650, 1.1535 and the lows of March 2020 in the zone 1.1400-1.1450. As for the bulls, they will meet resistance in the zones and at the levels of 1.2100, 1.2160-1.2175, 1.2200-1.2235, 1.2300-1.2325 and 1.2400-1.2430.

The macroeconomic calendar does not include major news from the United Kingdom itself. The determining factor for the dynamics of the GBP/USD pair, of course, will be the meeting of the US Federal Reserve on Wednesday, July 27. Recall that the interest rate on the pound is 1.25% at the moment , and the next meeting of the Bank of England (BOE) is scheduled for August 04, 2022.

USD/JPY: Correction or Trend Change?

What most experts dreamed about for so long has come true. The USD/JPY pair did not renew the 24-year high again, and did not even take a break, but literally collapsed down. And this despite the fact that the Bank of Japan (BOJ) once again left the interest rate unchanged at a negative level of -0.1% on Thursday, July 21. The management of the regulator did not even hint of tightening monetary policy. On the contrary, it was stated that the Japanese Central Bank will not hesitate to take additional easing measures (QE) if necessary, and also expects short-term and long-term interest rates to remain at the current or even lower (!) levels.

Although inflation in Japan tends to rise, it is still below 2%, which is many times lower than in the US and Europe. Thus, given the dynamics of domestic demand and weak wage growth, there is still little incentive for the BOJ to change its ultra-dove tack. So the current strengthening of the yen and the fall of the pair USD/JPY from 139.38 to 135.56 is due, with a high degree of probability, to its being strong overbought.

This time, 70% of experts are waiting for a new push of the pair to the height of 142.00. 15% hope for a continuation of the downtrend, the remaining 15% speak of a side corridor. The picture is vaguer in the readings of indicators on D1: trend indicators have a parity of 50% to 50%, 25% of oscillators look to the north, 40% to the south and 35% to the east. Supports are located at the levels and in the zones 135.55, 134.75, 134.00, 133.50, 133.00 and 131.40. Resistances are 136.35-137.00, 137.90-138.40, 138.50-1.139.00, followed by the July 14 high at 139.38 and round bull targets­ of 140.00 and 142.00.

No major events are expected in Japan this week. Of course, we can note the publication on Monday, July 26 of the report on the latest meeting of the Monetary Policy Committee of the Bank of Japan, however, it is unlikely that it will cause not only a tsunami, but even a small wave in the market. So the focus of attention, as for other currency pairs, will be on the meeting of the US Federal Reserve on Wednesday, July 27.

CRYPTOCURRENCIES: A Little Patience, Ladies and Gentlemen!

For the first time since June 13, BTC/USD rose above $23,000 and even hit $24,263 last week. What is this, a long-awaited change in trend? Or a brief thaw in the middle of a crypto winter? Or maybe another insidious trap arranged by bears for gullible investors? Let's figure it out.

We have repeatedly written that a popular marker among crypto-analysts is the 200-week moving average (SMA200), which has been referred to more and more often lately. The reason is that it used to be the main support for the BTC/USD pair. But it is not at all certain that what happened before will be repeated in the future. And the proof of this is the recent breakdown of this very SMA200. However, this technical analysis indicator is still one of the most used in making forecasts.

So, bitcoin managed to rise above the 200-week moving average last week. The reason for this, of course, is not that the flagship cryptocurrency has become stronger, but that the US dollar has weakened a little. Against this background, the US stock indices, S&P500, Dow Jones and Nasdaq went up, and after them the quotes of such risky assets as cryptocurrencies followed.

At the time of writing this review (Friday evening, July 22), bitcoin is trading around $22,670. The total capitalization of the crypto market is $1.026 trillion ($0.945 trillion a week ago). The Crypto Fear & Greed Index rose from 15 to 33 points in a week, and finally got out of the Extreme Fear zone into the Fear zone.

Thus, bitcoin is up about 20% from the July 13 low ($18.886) and is just above the 200-week moving average ($22.565). According to analysts at the Binance crypto exchange, such a close of the week gives hope for the restoration of strong support in the form of SMA200, which is typical for bitcoin bear cycles.

Bitcoin's break above the 200-week SMA caused a surge of enthusiasm among investors. Amsterdam Stock Exchange trader Michael van de Poppe first tweeted out a graphical forecast anticipating a cryptocurrency rally to $28,000 and then compared the current market situation to the recovery from the memorable collapse triggered by the announcement of the coronavirus pandemic in March 2020. At that time, bitcoin collapsed to $3,782, but then rose by 1.600% over the next 13 months (to $64,853 in April 2021).

Analysts of the Kraken cryptocurrency exchange are equally optimistic, who also use the 200-week moving average as the main indicator. In particular, they drew attention to the multipliers with which BTC traded in the past relative to its 200-week SMA. Thus, having rebounded from the SMA200, bitcoin grew 15.2 times in December 2017. The growth was 13.2 times in November 2013. At the moment, BTC is trading close to its 200-week moving average. If the coin shows a multiplier in the range of 13x - 15x again, it may rise to about $300,000.

Of course, the multiplier for BTC was not always 10x when touching the SMA200. Growth peaked at 5.8x in March 2021 before the crypto market began to decline noticeably. However, even with this value of the multiplier, bitcoin can rise to $130,000. But when will this happen? The patience of many market participants has already run out.

We have already written that, according to Glassnode data, bitcoin's record price decline in June almost took the rest of the "market tourists" out of the game, leaving only hodlers "at the front". In the context of monthly dynamics, the situation was worse only in 2011. The largest outflow was recorded among institutional investors (companies with investments from $1 million), public miners (expanding production on credit), as well as speculators and casual players.

Assuming the market cycle repeats, the bearish phase of bitcoin will end in the first half of autumn. Such a conclusion can be drawn from the historical data provided by the analysts at Grayscale Investments. It took bitcoin 1,290 and 1,257 days to form a full cycle in 2012 and 2016, respectively. It took 391 and 364 days to fall from the peak by 73% in 2012 and by 84% in 2016. The duration of the current cycle, which began in 2020, has reached 1206 days (as of July 20, 2022). In other words, it may take another two to three months before reaching the bottom.

A crypto strategist with the nickname Rekt Capital came to similar conclusions. In his opinion, despite the oversold signals, the downward exchange rate movement may continue for quite a long time. The analyst noted that the Relative Strength Index (RSI) on the BTC monthly timeframe is now below the lowest levels of the bear markets of 2015 and 2018, which could become new resistance levels for bitcoin.

According to Rekt Capital, the short-term prospects of the coin do not look very good, and the bottom can be reached only in a few months: "Bitcoin has about 650 days before the next halving (April 2024). Historically, it bottomed around 517-547 days before its halving. In the event of a repeat of history, bitcoin will need another 100-150 days before reaching the bottom, which will form in the fourth quarter of 2022."

American businessman Thomas Peterffy, whose capital is estimated at $18.4 billion, is ready to buy bitcoins when the value of the cryptocurrency drops to $12,000. This chairman of Interactive Brokers admitted in a recent interview with Forbes that he does not intend to buy cryptocurrency at the current, in his opinion, high price, as he believes that in the future, bitcoin is very likely to depreciate or be banned in the United States.

Most traders from China are in solidarity with Thomas Peterffi. A poll on the social network Weibo with the participation of more than 2,200 people showed that Chinese traders are waiting for further decline in the price of bitcoin. 8% of respondents said they would buy BTC at $18,000 per coin. 26% of respondents will start purchases at $15,000. But if the bitcoin rate falls to $10,000, 40% of respondents will buy the first cryptocurrency.

It can be seen from all of the above that, despite the prospects for BTC to rise to the cosmic $300,000, there are no clear signals for investing in this coin yet. The US Federal Reserve will make a decision on the interest rate on Wednesday, July 27. And, most likely, the prospects for the BTC/USD pair will become more distinct after that. A sharp increase in the rate will lead to an increase in the DXY dollar index and a further drop in investor risk appetite. And then the chances of seeing bitcoin at $10,000 will increase dramatically. Otherwise, we'll see it aim for $30,000. It won't take long to find out which of these scenarios will come true. So, dear traders and investors, let's be patient.

EUR/USD's rebound from 0.9951 extended higher last week and confirmed short term bottoming. Further rise is in favor this week as long as 1.0118 minor support holds. Above 1.0277 minor resistance will target 1.0348 support turned resistance. Sustained break there will bring stronger rebound back to channel resistance (now at 1.0517). On the downside, below 1.0118 will bring retest of 0.9951 low instead.

In the bigger picture, down trend from 1.6039 (2008 high) is still in progress. Next target is 100% projection of 1.3993 to 1.0339 from 1.2348 at 0.8694. In any case, outlook will stay bearish as long as 1.0773 resistance holds, in case of strong rebound.

In the long term picture, long term down trend from 1.6039 (2008 high) resuming. Sustained break of 61.8% projection of 1.3993 to 1.0339 from 1.2348 at 1.0090 will pave the way to 100% projection at 0.8694.