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As shown on the XAU/USD chart, Monday, 22 July marked the fourth consecutive day of declining gold prices. The change from the historical peak reached on Wednesday is around -3.5%.

Bearish sentiment is driven by:

→ Market participants' assessment of prospects due to the change of the Democratic Party's presidential candidate in the US.

→ Caution in anticipation of economic news. On Thursday at 15:30 GMT+3, US GDP data will be released. On Friday at the same time, the Core PCE Price Index data will be published.

Market participants may also be influenced by the psychological level of $2500.

Can the Gold Price Fall Further?

Technical analysis of the XAU/USD chart provides valuable insights:

→ In June, the gold price was within the range of 2290-2385. The rise to July's peak corresponds to a target calculated by the range height: 2385 + (2385 - 2290) = 2480;

→ After reaching a record on 17 July, the price failed to hold above the May peak, which is a bearish sign;

→ The XAU/USD chart shows increasing support points for a descending channel (shown in red), which may form a corrective movement within a broader upward trend (shown in blue).

Bulls may take advantage of the gold price being near the support block of 2365-2385, which is formed by:

→ The former resistance at 2385;

→ The median lines of the blue and red channels.

However, if we see a weak rebound from this block, it may indicate that the gold price is indeed in a corrective phase.

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• The FTSE 100 is currently consolidating, trading within a range, with the possibility of a significant breakout.
• Glencore and Anglo American experiencing declines while Compass reports strong revenue growth.
• The S&P 500 faces a critical resistance level that could shift market momentum, with Alphabet and Tesla’s earnings reports expected to influence investor sentiment.

FTSE 100

The FTSE 100 has entered a period of consolidation following the UK election, posting a modest gain of approximately 0.29% for July. Year-to-date (YTD), the FTSE 100 has delivered a steady, though not spectacular, performance with gains around 6%.

The start of this week has seen some notable movements, particularly in the mining sector. Miner and commodities trader Glencore (GLEN.L) fell as much as 2.4% this morning, leading the losses on the FTSE 100. This decline followed an HSBC analyst downgrade, which reduced Glencore’s price target from 455p to 435p and Anglo American’s (AAL.L) price target to 2300p due to the temporary closure of GEMCO’s operations.

As a result, Glencore is down about 8% YTD, while Anglo American remains up approximately 11.5% YTD.

Sector Performance, FTSE 100, July 23, 2024

Source: LSEG

The standout performer today has been contract caterer Compass (CPG.L), which reported a 10% rise in revenue and highlighted strong industry trends. The only downside noted by Compass was the strength of the GBP, which has been near multi-month highs. The company’s stock is up 4.88% on the day, leading the day’s gainers.

FTSE 100 Daily Chart, July 23, 2024

Source: TradingView.com (click to enlarge)

Since the UK election, the FTSE 100 has been trading within a range, consolidating between the support level at 8117 and the resistance level at 8273. Recent price movements have been erratic, with lower highs and higher lows indicating market indecision.

The longer prices remain in a range or wedge pattern, the more intense the eventual breakout is likely to be. For intraday trading, immediate resistance is at 8240, followed by the top of the wedge pattern near the 8273 mark.

On the downside, initial support is at 8187, with further support at the lower end of the wedge pattern and the 8117 level.

S&P 500: Earnings Heats Up, Tesla (TSLA.O) and Alphabet (GOOGL.O) After Market Close Today

The S&P 500 and the Nasdaq 100 are heading into a significant week following last week’s tech selloff. Earnings reports from major tech companies begin today, with Alphabet (GOOGL.O) and Tesla (TSLA.O) both releasing their results after market close (PMC).

What can we expect from Alphabet?

Alphabet is expected to report earnings of $1.85 per share for the second quarter, which is slightly lower than the $1.89 per share from the previous quarter but still a 28% increase compared to the same quarter last year.

Total revenue is projected to be $84.3 billion, marking a 4% increase from the first quarter and a 13% rise compared to the same period last year.

The Graph below depicts the Price Target average by various institutions around the world. 

*The Chart below is based on a average estimates by analysts who have set a price target around $199.37. The current price of Alphabet shares are around the $181, which means analyst are eyeing further gains of around 10% for Alphabet moving forward.  

Source: LSEG

Markets seem slightly more cautious due to the recent sector rotation, which has favored smaller stocks and benefited the Russell 2000 index.

For now, US election uncertainty is taking a backseat as it appears that current Vice President Kamala Harris will secure enough votes for the Democratic party nomination. This development seems to have alleviated concerns among market participants regarding a potential challenger to Donald Trump.

S&P 500 Daily Chart, July 23, 2024

Source: TradingView.com (click to enlarge)

The S&P 500 is approaching a crucial resistance level that could shift market momentum and encourage bullish sentiment. After rebounding from the ascending trendline and moving higher again, the resistance zone around 5575 will be critical.

If a four-hour candle closes above 5575, it could pave the way for further gains. The next key level to watch is around 5600, followed by the recent highs near 5660.

Gold price edges higher in European trading on Monday, after Monday’s Doji candle signaled that pullback from new record high ($2483) might be running out of steam.

Pullback was contained by solid supports at $2390 zone (daily Kijun-sen / 50% retracement of $2293/$2483 upleg), with oversold conditions on daily chart and indicators predominantly in bullish setup, contributing to initial signal of an end of corrective phase.

However, fundamentals are expected to play the key role in defining metal’s near term direction, with US Q2 GDP and June PCE data, being in focus.

Investors will be looking for more information about the condition of the US economy, as well as signals about timing of start of Fed’s rate cuts from inflation numbers.

Lift above daily Tenkan-sen ($2427) is seen as minimum requirement for recovery to generate firmer bullish signal and spark further recovery.

Otherwise, the price may hold in extended consolidation with risk of fresh attempts through $2390 pivot, though larger bullish bias will remain while the price stays above daily cloud top ($2363).

Res: 2411; 2421; 2427; 2445.
Sup: 2388; 2366; 2363; 2352.

USDJPY fell 0.7% in Asia on Tuesday after comments from Japanese official added pressure on the central bank for more rate hikes to further boost strengthening yen.

The latest comments further improved yen’s sentiment, though most analysts expect BoJ to keep rates unchanged in the next policy meeting.

Fresh weakness is pressuring key supports at 155.70 zone (daily cloud base / Fibo 61.8% of 151.85/161.95 upleg) where a bear trap has formed on last week’s strong downside rejection.

Reaction at daily cloud base (cloud is spanned between 155.87 and 156.30 and will thicken in coming days) will be key for near term direction.

Sustained break below cloud base and nearby July 18 low / 100DMA (155.35) would generate strong bearish signal and open way for deeper correction towards targets at 154.23/ 153.60.

Weakening daily studies (strong negative momentum / MA’s in bearish setup) support the notion, but risk of another downside rejection still exists.

Upticks should be ideally capped by converged 10/55DMA’s (157.81) to keep bears intact.

Only lift and close above daily Tenkan-sen / Kijun-sen (158.56/65) would sideline bears and signal formation of a higher base.

Res: 156.30; 156.83; 157.81; 158.56.
Sup: 155.71; 155.35; 155.00; 154.54.

Market picture

The cryptocurrency market lost 2% of its capitalisation in 24 hours to $2.41 trillion. However, this is a pullback from a high base. This tug-of-war between bulls and bears points to the importance of the current situation. Bitcoin and Ethereum are losing just over 1% each, while most altcoins are losing significantly more, ranging from 2.5% (BNB, Solana) to 3.5% (Dogecoin, Toncoin). The positive exception is XRP, which has maintained its 1.2% gain, although it has retreated 4% from its late-afternoon peak on Monday.

Bitcoin remains within a broad downward range for now, pressured by news of a new series of BTC transfers to exchanges from Mt. Gox. The previous actions did not lead to an extreme sell-off but kept the price from rising. The big question is how deep buyers’ pockets will be, given recent reports from Bloomberg citing RSM Global that the UK may sell 61,245 BTC ($4B) confiscated in 2018. The constant overhang of selling forms a series of lower price peaks.

Solana formed a peak above $180 earlier in the week, roughly reaching the levels of the May highs. In the short term, on a daily time frame, the RSI has moved out of the overbought territory, indicating the potential start of a correction. Looking at the medium-term outlook, Solana is behaving more confidently than many altcoins after strong support at 61.8% and the 200-day average in June and July.

News background

According to CoinShares, crypto fund investments rose by $1.353B last week after inflows of $1.439B a week earlier; the figure is up for the third consecutive week. Bitcoin investments increased by $1.277B, Ethereum by $45M, and Solana by $10M.

CryptoQuant noted that the market has seen a decrease in selling pressure from large investors as the price of the first cryptocurrency has consolidated near $67K. Meanwhile, realised gains for BTC holders are ‘minimal compared to March or May’.

BRN notes that Ethereum options have seen a sharp rise in implied volatility (IV). This suggests the risk of a wave of selling after the ETF launch to the $2800-3100 range, with a gradual recovery after that.

The ETF Store believes applications to launch ETFs based on a basket of assets, including Bitcoin, Ethereum, and Solana, will emerge in the next few months. According to Bloomberg, the SEC could register the Solana-ETF in mid-March 2025.

• AUDUSD falls back within a range
• RSI and MACD support further declines
• Dip below 0.6575 could carry larger bearish implications
• Rebound above 0.6690 may invite more bulls.

AUDUSD has been trading in a free-fall mode since July 15, while yesterday, the bears cleared the key barrier of 0.6690. Now, the pair is back within the sideways range that contained most of the price action between May 3 and July 3. As long as the pair remains within that range, the outlook could be considered neutral.

The RSI is lying below 50, pointing down, while the MACD, although still slightly positive, it is running below its trigger line. Both indicators suggest that the tumble may continue for a while longer, perhaps until the lower bound of the range, at around 0.6575.

For the picture to start being considered bearish, the price may need to fall below that barrier. Such a move may encourage more sellers to jump into the action and perhaps drive the battel towards the 0.6465 zone, marked as support by the low of May 1.

On the upside, a decisive rebound back above the range’s upper end, at around 0.6690 may allow advances towards the high of July 18 at 0.6743, the break of which could carry extensions towards the peak of July 11, at 0.6800.

To recap, AUDUSD has been tumbling since July 15, returning within the sideways range between 0.6575 and 0.6690. For the outlook to be considered bearish, the price may need to fall below the range’s lower end.

In an interview with Spanish news agency Europa Press, ECB Vice President Luis de Guindos emphasized the significance of new macroeconomic projections in September, together with another two months of data on inflation and underlying inflation. These projections and data will help ECB reassess its monetary policy stance more effectively.

De Guindos stressed the importance of having more confidence that inflation will reach ECB's target of 2% by the end of 2025, calling it the "key question." He acknowledged the high level of uncertainty, stating that ECB must be "prudent" when making decisions.

He predicted that inflation will remain "around current levels until the end of the year" and observed that all measures of underlying inflation are declining. He added, "The disinflation process will continue from the start of next year."

De Guindos also pointed out that wages are "starting to slow down," and firms expect wage increases to moderate, particularly from 2025 onward. This moderation in wage increases is expected to lead to a reduction in services inflation, helping ECB achieve its 2% inflation target by the end of next year.

• GBPUSD eases but remains above uptrend line
• Stochastics and RSI suggest more losses

GBPUSD is retreating after a strong rally towards the one-year high of 1.3045. The technical oscillators also confirm the bearish retracement. The stochastic is diving into oversold territory, while the RSI is pointing slightly down above the 50 level.

If the dive continues, immediate support could come from the 1.2860–1.2890 region, ahead of the 20-day simple moving average (SMA) at 1.2825. Steeper declines could pave the way for a retest of the 50-day SMA at 1.2760 and the ascending trend line near 1.2740.

In a positive scenario, a rebound from 1.2890 may take the price higher again, testing the previous peak at 1.3045. More upside pressures could push the market to its peak of 1.3140 in July 2023.

Summarizing, GBPUSD has been exhibiting a bullish tendency since April 22, and only a closing session beneath the 200-day SMA could change this outlook.

• EURJPY jumped to its highest since January 1992 on July 11
• But is trending lower since then due to Japanese intervention
• Oscillators deteriorate significantly, suggesting bearish bias

EURJPY has been in an uptrend since the beginning of the year, storming to a fresh 32-year peak of 175.41. Nevertheless, the pair experienced a pullback following a currency intervention from Japan, with the retreat extending towards the 50-day simple moving average (SMA) and ascending trendline in place since December 2023.

Should bearish pressures persist and the pair violate the upward sloping trendline, the June support of 167.50 could act as the first line of defence. A break below that zone could trigger a retreat towards 165.34 or 164.28, two previous resistance regions that could serve as support in the future.

On the flipside, if the price edges back higher, the April high of 171.56 may prevent initial advances. Higher, the pair could meet resistance at 173.50 ahead of its 32-year peak of 175.41. Conquering this barricade, the bulls could then attack the 180.00 psychological level.

In brief, EURJPY has been undergoing a steady correction following its 32-year peak of 175.41, with the pair currently challenging a crucial technical zone. Hence, a break below the fortified region that includes the 50-day SMA and ascending trendline could further deteriorate the technical picture.

Markets

US President Biden stepping out of the presidential election race dominated press/market headlines yesterday. Still, the direct impact on global trading was modest after all. For now, the outcome of an expected contest between Donald Trump and Kamala Harris is too early to call. It is even more difficult to assess the concrete impact of post-election policy both the economy and a fortiori what it might mean for (global) markets trading. Equities had a good start to the new week (S&P +1.08%, Nasdaq +1.58%, EuroStoxx 50 +1.45%). However, coming on the back of a rather forceful correction last week and with investors looking forward to the earnings’ season, it’s unclear how much of this rebound was due to the political developments in the US. US and European yields extended last week’s bottoming out process. US yields rose marginally between 0.6 bps (2-y) and 2.5 bps (30-y). With an inaugural September 25 bps Fed rate cut almost fully discounted and more than one additional step priced for the end of the year, markets currently see no reason anticipate an even more aggressive Fed U-turn compared to the June dots (one 25 bps step this year). For that to happen, more soft US data and/or more concrete Fed guidance is probably needed. Bunds underperformed Treasury with German yields rising between 4.6 bps (2-y) and 1.5 bps (30-y). Markets are adapting to the message from last week’s ECB press conference that everything is open with respect to an additional ECB rate cut in September. Despite a (small) loss of relative interest rate support and a risk-on sentiment, the dollar only lost modest ground (DXY 104.30 from 104.39 on Friday, EUR/USD 1.0891 from 1.0882). The yen again marginally outperformed (close USD/JPY 157 area). Sterling showed signs of bottoming after a correction last week supported by tentatively higher UK yields (2-y + 5.9 bps). EUR/GBP closed at 0.842.

Asian markets (ex-China) this morning show a mild risk-on in the wake of yesterday’s WS rebound. The yen extends its rebound (USD/JPY 156.4). EUR/USD is going nowhere. US yields decline marginally (+/- 1 bp).

Eco data in the US (Richmond Fed manufacturing index, existing home sales) and E(M)U (EC consumer confidence) only are of intraday significance, at best. ECB’s Lane will speak. Equity investors will keep a close eye at earnings of Alphabet & Tesla. We assume more technical inspired trading with the preliminary PMI’s (tomorrow) and the first estimate of US GDP (including price deflators) on Thursday further shaping market expectations going into next week’s Fed, BOJ and BoE policy meetings. For now, we expect recent lows in US and EMU yields to hold. The dollar shows no clear trend. In other countries, the Central bank of Turkey (CBRT) and the National Bank of Hungary (MNB) will announce policy decisions today. The CBRT is expected to keep the policy rate unchanged at 50% but might take additional measures to reduce excess liquidity. Comments from MNB vice governor Virag last week suggested that there is still room for some guarded easing as inflation is still cooling (3.7% in June) and as the forint continues to hold up rather well. We expected an MNB rate cut from 7.0% to 6.75%.

News & Views

Car manufacturers and dealers in the US are increasingly cutting prices in an attempt to offset demand dented by high interest rates and to clear inventories at pre-pandemic levels. Auto data provider Motor Intelligence said that incentive packages, which include cash backs, low interest rates and price cuts, rose 53% y/y in June. Their efforts have been showing up in US inflation figures with the cost of new and used vehicles having fallen by 0.2% and 1.5% m/m respectively. The report adds to evidence that the Fed’s restrictive monetary policy is increasingly weighing on consumer demand, especially for big-ticket items.

Top Japanese lawmaker Toshimitsu Motegi is calling upon the Bank of Japan to more clearly reveal its monetary policy normalization intentions. Motegi is Secretary-General of the ruling Liberal Democratic Party (LDP) and shared growing frustrations among party members that the BoJ’s snail pace, even with inflation above target, is hurting the yen and biting in Japanese consumer’s purchasing power. Motegi’s remarks are closely watched. He’s seen as a possible contender with good odds in the September LDP leadership race. The outcome of the race ultimately determines who will be prime minister of Japan. The Bank of Japan is meeting July 31.

Graphs

GE 10y yield

The ECB cut its key policy rates by 25 bps at the June policy meeting. A more bumpy inflation path in H2 2024, the EMU economy gradually regaining traction and the Fed’s higher for longer US strategy make follow-up moves difficult. Markets are coming to terms with that. Meanwhile, much of the save haven bids were reversed after the (first round in) the French elections. The 2.34%-2.4% support zone looks solid.

US 10y yield

The Fed indicated that it needs more evidence to lower its policy rate. June dots suggested one move in 2024 and four next year. Disappointing ISM and back-to-back downward CPI surprises put the US money market back on (at least) two rate cuts this year (September/December). The US 10-yr yield tests the recent lows and the downside of the downward trend channel in the 4.2% area.

EUR/USD

EUR/USD is testing the topside of the 1.06-1.09 range as the dollar loses interest rate support at stealth pace. Markets consider a September rate cut a done deal and only need confirmation from high-ranked Fed officials. In the meantime, the euro got rid of the (French) political risk premium. Risks of a topside break have increased, bringing the psychologic 1.10 and the December 2023 top at 1.1139 on the radar.

EUR/GBP

Debate at the BOE is focused at the timing of rate cuts. May headline inflation returned to 2%, but core measures weren’t in line with inflation sustainably returning to target any time soon. Still some BoE members at the June meeting appeared moving closer to a rate cut. Labour has yet to reveal its policy plans after securing a landslide election victory. EUR/GBP 0.84 support is being tested.