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Daily Pivots: (S1) 1.0821; (P) 1.0844; (R1) 1.0861; More.....

Intraday bias in EUR/USD stays on the downside, and fall from 1.0947 short term top should extend to 55 D EMA (now at 1.0813). Sustained break there will argue that whole rebound from 1.0601 has completed with three waves up to 1.0947, and target 1.0601/0665 support zone. On the upside, above 1.0896 minor resistance will turn intraday bias neutral first. But, risk will stay on the downside as long as 1.0947 resistance holds, in case of recovery.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern that's still be in progress. Break of 1.1138 resistance will be the first signal that rise from 0.9534 (2022 low) is ready to resume through 1.1274 (2023 high). However, break of 1.0665 support will extend the correction with another falling leg back towards 1.0447 support.

Daily Pivots: (S1) 1.2877; (P) 1.2907; (R1) 1.2938; More...

Intraday bias in GBP/USD remains neutral first. Further rally is expected with 1.2859 resistance turned support intact. Break of 1.3043 will resume the rise from 1.2298. However, firm break of 1.2859 will turn bias to the downside for deeper decline to 55 D EMA (now at 1.2771).

In the bigger picture, corrective pattern from 1.3141 medium term top (2023 high) could have completed with three waves to 1.2298 already. This will now remain the favored case as long as 1.2612 support holds. Firm break of 1.3141 will target 61.8% projection of 1.0351 (2022 low) to 1.3141 from 1.2298 at 1.4022.

Daily Pivots: (S1) 0.8813; (P) 0.8868; (R1) 0.8907; More…

Intraday bias in USD/CHF remains on the downside for the moment. Fall from 0.9223 is in progress for 61.8% retracement of 0.8332 to 0.9223 at 0.8672. For now, risk will stay on the downside as long as 0.8923 resistance holds, in case of recovery.

In the bigger picture, with 0.9243 resistance intact, medium term outlook in USD/CHF is neutral at best. For now, more sideway trading is likely between 0.8332/9243. However, firm break of 0.9243 will indicate larger bullish trend reversal.

The U.S. economy surprised to the upside in the second quarter of 2024, expanding by 2.8% quarter-on-quarter (q/q, annualized) against expectations for around 2%.

Looking under the hood, consumer spending was slightly stronger than we had forecast, advancing by 2.3% q/q. That was driven by a rebound in durable goods spending (+4.7%), while spending on services downshifted to a modest 2.2%, from 3.3% in the first quarter.

Business investment rose a sturdy 5.2% on a surge in equipment spending (+11.6%). Meanwhile, spending on structures gave back a small part of its recent strength (-3.3%) and spending on intellectual property products continued running at a healthy clip (4.5%).

Two other areas of upside surprise were government outlays and residential investment. Government spending rose 3.1%, driven by a 5.2% increase in national defense outlays. Residential investment still declined by 1.4% on the quarter, but that was a smaller drop than we had pencilled in.

Inventory building added significantly to growth in the second quarter, contributing 0.8 percentage points (p.p.) on a quarterly basis. However, that was nearly entirely offset by the drag from net exports (-0.7 p.p.). Imports were up strongly on the quarter, subtracting 0.9 p.p. from headline growth.

Final domestic demand was up a healthy 2.7%, building on the 2.4% gain in the first quarter.

Key Implications

We had expected the U.S. economy to gear down a bit more in the second quarter, but its resilience was on display once again. However, the details of the report are consistent with further slowing ahead, as outlined in our June forecast. The uptick in consumer outlays was driven by a rebound in durables spending, which we don't expect to be sustained, while the larger services spending category is slowing in the background. We will get the June personal spending data tomorrow, which will clarify how momentum was looking as we headed into the third quarter.

Also, the upside surprise on government spending coming from national defense may be a one-off, and could likely downshift in the coming quarter. All that to say we appear to be in a goldilocks scenario for the U.S. economy – growth is moderating gradually while inflation is getting closer to the Fed's target. This should enable the Fed to start cutting interest rates later this year.

Daily Pivots: (S1) 152.68; (P) 154.33; (R1) 155.56; More...

Intraday bias in USD/JPY is turned neutral first with current recovery, and some consolidations would be seen above 151.93 temporary low. But risk will remain on the downside as long as 155.36 support turned resistance holds. Decisive break of 151.89 resistance turned support will argue that large scale correction is underway to 148.66 fibonacci level. Nevertheless, break of 155.36 will turn bias back to the upside for stronger rebound.

In the bigger picture, considering the depth and momentum of the current decline, 161.94 should be a medium term top already. Fall from there is seen as correcting the whole rise from 127.20 (2023 low) at least. Break of 151.89 will pave the way to 38.2% retracement of 127.20 to 161.94 at 148.66. Risk will now stay on the downside as long as 55 D EMA (now at 157.25) holds, in case of rebound.

Dollar rises modestly in early US trading following stronger-than-expected Q2 GDP data. The robust performance overshadowed the mixed durable goods orders data, instilling some optimism in the market. Despite this, overall market reactions remain subdued. US futures point to a flat open, suggesting a degree of stabilization following yesterday's sharp selloff. Additionally, 10-year yield has recovered slightly from its earlier dip.

Meanwhile, the Japanese Yen, which had seen significant gains recently, is retreating slightly. The buying climax for the Yen might have passed, but it's too early to determine if risk sentiment has improved. Traders could be switching their positions to the Yen's safe-haven counterpart, the Swiss Franc, which is currently the strongest currency for the day.

In the broader currency markets, Swiss Franc is leading as the strongest performer, followed by Yen and Euro. Australian Dollar is at the bottom of the chart, followed by New Zealand Dollar. British Pound is currently the third weakest of the day. Dollar and Canadian Dollar are mixed in the middle.

Technically, Gold's pullback from 2483.52 record high resumed today. Immediate focus is on 55 D EMA (now at 2354.60) Strong support from there would keep near term outlook bullish for another rise through 2483.52 before topping. However, considering bearish divergence condition in D MACD, sustained break of 55 D EMA will argue that a medium term top was already in place. Fall from 2483.52 would then be correcting whole five wave rally from 1810.26. Next target is 38.2% retracement of 1810.26 to 2483.52 at 2226.33.

In Europe, at the time of writing, FTSE is down -0.29%. DAX is down -0.99%. CAC is down -1.81%. UK 10-year yield is down -0.0111 at 4.149. Germany 10-year yield is down -0.013 at 2.433. Earlier in Asia, Nikkei fell -3.28%. Hong Kong HSI fell -1.77%. China Shanghai SSE fell -0.52%. Singapore Strait Times fell -0.88%. Japan 10-year JGB yield fell -0.0029 to 1.075.

US Q2 GDP grows 2.8% annualized, inflation pressures ease

The advance estimate of US GDP growth in Q2 2024 showed a robust 2.8% annualized increase, significantly exceeding the anticipated 2.0% and doubling Q1's pace of 1.4%.

This stronger-than-expected growth was driven by rises in consumer spending, private inventory investment, and nonresidential fixed investment. Notably, imports also increased, which are subtracted in the GDP calculation.

On the inflation front, GDP price index slowed from 3.1% to 2.3%, falling below the expected 2.6%. PCE price index also eased from 3.4% to 2.6%, and core PCE price index saw a notable decrease from 3.7% to 2.9%.

The sharp uptick in GDP growth, coupled with cooling inflation metrics, presents an optimistic economic outlook. Deceleration in price indexes suggests easing inflationary pressures, which would support rate cut by Fed in the coming months.

US durable goods orders falls -6.6% mom, but ex-transport orders up 0.4% mom

US durable goods orders fell sharply by -6.6% mom to USD 264.5 in June, much worse than expectation of 0.4% mom rise. However, ex-transportation orders rose 0.5% mom to USD 188.7B, above expectation of 0.2% mom. Ex-defense orders fell -7.0% mom to USD 247.6B. Transportation equipment drove the headline contraction and fell -20.5% mom to USD 75.8B.

US initial jobless claims falls to 235k vs exp 238k

US initial jobless claims fell -10k to 235k in the week ending July 20, slightly below expectation of 238k. Four-week moving average of initial claims was relatively unchanged at 236k.

Continuing claims fell -9k to 1851k in the week ending July 13. Four-week moving average of continuing claims rose 5k to 1854k, highest since December 4, 2021.

German Ifo falls to 87, economy stuck in crisis

Germany's Ifo Business Climate Index fell from 88.6 to 87.0 in July, missing expectations of 89.0. Current Assessment Index also dropped from 88.3 to 87.1, below the anticipated 88.5. Additionally, Expectations Index declined from 88.8 to 86.9, underperforming the forecast of 89.0.

Sector-wise, manufacturing index plunged from -9.3 to -14.1, indicating significant dissatisfaction among manufacturers. Services sector saw a decline from 4.2 to 0.7, while the trade sector fell from -23.6 to -27.8. Construction also showed a decrease, moving from -25.2 to -26.0.

Ifo noted that sentiment has "declined considerably," with companies expressing growing dissatisfaction with the current business situation. The level of skepticism regarding the coming months has increased notably. The German economy, as described by Ifo, is currently "stuck in crisis."

Japanese government notes export stagnation as global risks mount

Japan's government maintained its economic assessment but noted a more pessimistic outlook for exports due to weakening demand from China.

According to the Cabinet Office's Monthly Economic Report, the Japanese economy is recovering at a "moderate pace," though it has recently "appeared to be pausing." The assessment of exports was downgraded from "appearing to be pausing for picking up" to "almost flat," reflecting the impact of slowing Chinese demand.

In the short term, the economy is expected to continue its moderate recovery, supported by an "improving employment and income situation." However, several risks threaten this outlook. These include the slowdown in global economies, high-interest rates in the US and Europe, and the "lingering stagnation of the real estate market in China."

The report also highlighted the need to monitor price increases, geopolitical tensions in the Middle East, and fluctuations in financial and capital markets.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 152.68; (P) 154.33; (R1) 155.56; More...

Intraday bias in USD/JPY is turned neutral first with current recovery, and some consolidations would be seen above 151.93 temporary low. But risk will remain on the downside as long as 155.36 support turned resistance holds. Decisive break of 151.89 resistance turned support will argue that large scale correction is underway to 148.66 fibonacci level. Nevertheless, break of 155.36 will turn bias back to the upside for stronger rebound.

In the bigger picture, considering the depth and momentum of the current decline, 161.94 should be a medium term top already. Fall from there is seen as correcting the whole rise from 127.20 (2023 low) at least. Break of 151.89 will pave the way to 38.2% retracement of 127.20 to 161.94 at 148.66. Risk will now stay on the downside as long as 55 D EMA (now at 157.25) holds, in case of rebound.

Economic Indicators Update

Hello traders, welcome to a new blog post. Today, we will discuss USDCAD as the pair is set to break out of a range that has lasted over two years. How soon can the breakout happen?

In May 2021, USDCAD completed a five-year-long bearish corrective cycle that started in January 2016. Since then, the long-term bullish trend from 2007 has resumed. Despite that the pair has spent most of the last two years in a range, a breakout is imminent. The pair is expected to break out of the range in the long term. Afterward, the bullish sequence should extend beyond the January 2016 top towards prices not seen since 2003.

USDCAD Elliott Wave Analysis – Weekly Chart, 07.24.2024

Recently, on 07.24.2024, we shared the USDCAD weekly chart with members of Elliottwave-Forecast to show the long-term path. Our Elliott wave analysis calls for the extension of wave (V) of the supercycle degree that started in May 2021, where wave (IV) ended at the equal leg. The blue box shows where long-term buyers entered into positions. They are now in a risk-free area where they can anticipate more gains. Meanwhile, the price has completed sub-waves I to IV of (V). Wave IV ended as a triangle structure that lasted over two years. Thus, we are calling for wave ((1)) of V to extend out of the range with a 5-wave structure. Along wave ((1))’s path, we will buy the pullbacks in 3, 7, or 11 swings at the extreme on the H4 or Daily chart.

USDCAD Elliott Wave Analysis – H4 Chart, 07.24.2024

The chart above shows the shorter cycles on the H4 chart. We also shared this chart with members on 07.24.2024. The chart shows the early progress of wave V of (V). An impulse sequence appears to be emerging and close to completion from the July 2024 low. This bullish impulse sequence is expected to complete wave (1) of ((1)) of V of (V). Eventually, wave (1) will be completed, and a pullback in wave (2) will follow. Buyers will wait to buy again at the end of wave (2) if it completes a 3, 7, or 11 swing at the extreme.

GBP/USD pair is down to 1.2892 on Thursday. Selling intensified on the 18th of July. Since then, GBP has remained under pressure, although it is making attempts to stabilise.

Statistics released earlier showed that UK private sector activity improved in July. PMI data indicated that activity in the services sector expanded slightly, while in the industrial segment, it was the highest since February 2022.

The data aligned with forecasts and confirmed the positive sentiment in industrial production after Labour's convincing election victory.

The market is watching the situation with the Bank of England interest rate. The probability of a rate reduction at the August meeting is at most 40%. The UK regulator holds a neutral view of the monetary policy structure and is unlikely to make decisions that could have a mixed effect.

Overall, GBP remains under pressure from the US Dollar, which is receiving support from various sides.

GBP/USD Technical Analysis

On the H4 chart of GBP/USD, the market has formed a consolidation range around the 1.2911 level. Today, the market broke out of this range downwards. The potential for a downside wave to 1.2777 is almost open. The target is the first one. After reaching this level, we will consider the probability of correction to 1.2911 (test from below). Technically, this scenario is confirmed by the MACD indicator. Its signal line is above the zero mark and is directed strictly downwards.

On the H1 chart of GBP/USD, a correction wave to the level of 1.2937 is performed. Today, the structure of decrease to the level of 1.2858 is formed. After working off this level, we will consider the probability of a growth link to the level of 1.2897. At this point, the correction potential will be exhausted. After the correction is over, we will consider the beginning of a new wave of decline to 1.2824 with the prospect of trend continuation to the level of 1.2777. Technically, this scenario is confirmed by the Stochastic oscillator. Its signal line is under the level of 50 and continues to decline to the level of 20.

US initial jobless claims fell -10k to 235k in the week ending July 20, slightly below expectation of 238k. Four-week moving average of initial claims was relatively unchanged at 236k.

Continuing claims fell -9k to 1851k in the week ending July 13. Four-week moving average of continuing claims rose 5k to 1854k, highest since December 4, 2021.

Full US jobless claims release here.

US durable goods orders fell sharply by -6.6% mom to USD 264.5 in June, much worse than expectation of 0.4% mom rise. However, ex-transportation orders rose 0.5% mom to USD 188.7B, above expectation of 0.2% mom. Ex-defense orders fell -7.0% mom to USD 247.6B. Transportation equipment drove the headline contraction and fell -20.5% mom to USD 75.8B.

Full US durable goods orders release here.