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The Australian dollar has stabilized against the US dollar, currently trading around 0.6738. This follows a period of decline influenced by ongoing speculations regarding the US Federal Reserve's impending policy actions. Expectations are set for the Fed to initiate rate cuts starting in September, with an additional reduction anticipated before the year's end.

Fed Chairman Jerome Powell recently reinforced these expectations by indicating that the regulator might not wait for inflation to hit the 2% target before reducing rates, responding to the current trajectory of the consumer price index.

Conversely, the Reserve Bank of Australia (RBA) is perceived to be trailing its international counterparts in easing monetary policy, which has contributed to the subdued performance of the AUD.

Later this week, Australia is slated to release its employment statistics. These figures are crucial as they provide a tangible measure of the labour market's health and could potentially influence the RBA's policy decisions moving forward.

AUD/USD technical analysis

The AUD/USD pair is currently developing a downward movement towards the 0.6703 level, which serves as a local target. Upon reaching this level, a corrective movement upwards to 0.6747 is expected, which will test this resistance from below. Following this correction, the market may resume its downward trend towards 0.6696, completing the current correction wave before potentially initiating a new upward trajectory towards 0.6811. The MACD indicator supports this outlook, with its signal line indicating a downward trend despite being above the zero mark.

On the hourly chart, the AUD/USD has established a consolidation range around the 0.6747 level. With a downward exit, the pair continues to develop a downward structure aiming for the 0.6704 level. After this target is achieved, an upward correction to retest 0.6747 is anticipated. Subsequently, a new decline towards 0.6696 may occur. The Stochastic oscillator suggests that the current upward momentum is waning, with its signal line poised to drop from above 80, indicating potential for further declines.

Investors and traders should monitor these levels closely, especially in light of forthcoming economic data from Australia, which could significantly sway market sentiment and currency valuation.

In this technical article we’re going to take a quick look at the Elliott Wave charts of Dollar Index DXY , published in members area of the website. As our members know, Dollar has given us recovery against the 105.21 peak. It found sellers after 3 waves pattern and made the decline toward new lows as expected. Consequently, we expect more short-term weakness in the near term. In the further text, we are going to explain the wave count.

DXY H1 Midday Update 07.15.2024

DXY ended cycle from the 105.217 peak as 5 waves structure leading diagonal. Current view suggests we are getting wave (ii) blue recovery , that can be unfolding as 3 waves bounce. We expect Dollar index to keep finding intraday sellers in 3, 7, and 11 swings.

DXY H1 Asia Update 07.17.2024

DXY made clear 3 waves up from the lows. Current view suggests wave (ii) blue recovery is done at 104.50 high, labeled as abc red. As far as the price holds below that level, we expect more downside in near term. We would like to see break below (i) blue to confirm next leg down is in progress.

DXY H1 London Update 07.17.2024

Dollar index made a further decline as expected. The price made break of previous low , confirming wave (iii) blue is in progress.

• Eurozone inflation remained stable at the end of Q2 2024, with core inflation for services and non-energy goods unchanged at 4.1% and 0.7% respectively.
• EU services inflation remains persistently high and is unlikely to decrease significantly in the near future. A challenge for the ECB?
• EUR/USD is approaching a key resistance zone around 1.0950 ahead of the ECB meeting, which could be pivotal for sustained bullish momentum.

EUR/USD continued its advance above the 1.0900 handle this morning as eurozone inflation matched the consensus and first estimates. An accelerated selloff in the DXY has also benefited EUR/USD, as traders increase their bets on rate cuts from the US Federal Reserve, putting pressure on the US Dollar.

US Dollar Index (DXY) Daily Chart, July 17, 2024

Source: TradingView.com

Inflation in the Eurozone remained mostly stable at the end of the second quarter. Energy inflation saw a slight decrease to 0.2% year-over-year from 0.3% in May. Inflation for food, alcohol, and tobacco dropped by 0.2 percentage points to 2.4%.

Core inflation for both services and non-energy goods stayed the same at 4.1% and 0.7%, respectively. The month-over-month increase in core inflation was revised up by 0.1 percentage points to a 0.4% rise. Year-over-year rates matched the advance estimates, except for a minor downward adjustment of 0.1 percentage points in the inflation of food, alcohol, and tobacco, which was initially reported at 2.5%.

In a similar vein to the UK, services inflation remains as sticky as ever and a concern for the European Central Bank (ECB). The inflation picture in the eurozone also faces some near-term challenges.

In France, energy inflation is expected to rise in July due to an increase in gas distribution costs. Additionally, the Taylor Swift tour across major European cities in July poses an additional upside risk to inflation in hotels and other accommodations.

Despite a summer of challenges on the inflation front two more rate cuts from the ECB do appear on the cards with markets currently pricing in 48 bps of cuts before the year end. Market participants have been emboldened by the increase in US rate cut bets, but I expect that the majority of that has now been priced in.

The Week Ahead: ECB Meeting Up Next

The Economic docket is light in the US this week, with Federal Reserve policymakers the main attraction. Comments from Fed policymakers could stoke volatility but are unlikely to sway growing rate cut bets.

The ECB meeting tomorrow will now be the center of attention. EUR/USD is in a delicate position heading into the meeting as it rests just shy of a key confluence zone. The ECB are expected to hold rates steady tomorrow with the press conference likely to hold more sway.

Technical Analysis

From a technical perspective, EUR/USD is currently trading at levels not seen since March 2024. Bulls might be concerned about the long-term descending trendline, which sits just above a crucial resistance zone around the 1.0950 mark.

This zone could be pivotal for sustained bullish momentum; however, a rejection at this trendline could push EUR/USD back towards support at the 1.0840 level in the coming weeks.

EUR/USD Chart, July 17, 2024

Source: TradingView (click to enlarge)

Support

• 1.0900
• 1.0840
• 1.0800

Resistance

• 1.0950
• 1.1000
• 1.1093

The British pound continues to roll and is up for a sixth straight day. GBP/USD is trading at 1.3038 in the European session, up 0.51% on the day. The pound has sparkled in July, climbing 3% and hitting its highest level since July 2023.

UK inflation unchanged

UK consumer inflation remained at 2% y/y in July, unchanged from June. This was higher than the market estimate of 1.9% but it’s hard to complain when inflation is at the BoE’s 2% target for two months running. Monthly, inflation dipped to 0.1%, down from 0.3% a month earlier, and matching the market estimate. Core inflation rose 3.5% y/y, unchanged from June and matching the market estimate. Monthly, core inflation dropped from 0.5% to 0.2%, below the market estimate of 0.1%.

The inflation report was positive and the pound responded by extending its impressive July rally. The fly in the ointment was services inflation, which the Bank of England watches keenly for signs of domestic inflationary pressure. Services inflation has been an outlier and was unchanged at 5.7% in July.

How will the BoE view the inflation report? Overall the release was positive, but services inflation is almost three times higher than the 2% target, which is a concern for policy makers. The cash rate is currently at 5.25%, unchanged since August 2023 when inflation was 7.9%. There is pressure on the BoE to provide relief and hit the rate-cut trigger but the central bank may lack the confidence to make a move at the next meeting on August 1.

The remainder of the week will be busy, with the UK releasing the employment report on Thursday and retail sales on Friday.

GBP/USD Technical

• GBP/USD is testing resistance at 1.3008. Above, there is resistance at 1.3051
• 1.2987 and 1.2944 are the next support levels

Market picture

The crypto market is recovering faster than it was falling, adding another 2.4% in 24 hours to $2.4 trillion. Bitcoin has rallied 15% since Saturday, now testing $66K. Ethereum is trying to cross $3500. Among the top coins, XRP stands out, soaring 12% in a day and 38% in 7 days, taking out Solana with its more modest 3.4% rise in a day.

The move in XRP is truly outstanding, proving once again the importance of global support at $0.4. The coin has been performing worse than the market for a long time, but the reversal of sentiment in crypto has sparked a rise on steroids in the once-largest altcoin. On the latest bounce, the price rose to $0.6, its highest since April. This is an attempt to jump back into the uptrend of the past two years. However, it may well turn out that XRP needs to rest after the climb. And this high is appropriate, as we saw prolonged consolidations here in November-December and March.

Another mature altcoin, Litecoin, gained persistent buyers’ interest, recording its ninth consecutive day of growth. At the start of the month, its price fell to $56 – a historically important support area. The sentiment in the crypto market changed at a critical moment for Litecoin. However, the same can be said about XRP.

News background

According to SoSoValue, on 15 July, inflows into spot bitcoin ETFs totalled $301.4 million, surpassing $300 million for the second day in a row. The positive trend continued for the seventh consecutive day at $1.49 billion, and it has increased to $16.11 billion since BTC-ETFs were approved in January.

The market was shaken up by Mt.Gox’s withdrawal of $6.1bn worth of bitcoins, which led to a short-term drop in BTC below $63,000. According to Arkham data, the bankrupt Mt. Gox exchange transferred nearly 96,000 BTC to unidentified addresses. Later, the Kraken exchange reported receiving some of Mt. Gox’s assets in BTC and BCH. Their distribution may take 7-14 days. In total, Mt.Gox will distribute 138,985 BTC worth ~$8.74bn.

Bloomberg analyst Eric Balchunas said spot ETH-ETF trading in the US will begin on 23 July. According to him, “The SEC finally asked issuers to return final Forms S-1 on Wednesday.”

Stripe, a payment service, now allows EU residents to purchase Bitcoin, Ethereum, and Solana using credit and debit cards. In 2018, Stripe abandoned digital assets, citing Bitcoin’s high volatility.

Jack Dorsey’s Block firm, the developer of the BitKey hardware wallet, has enabled users to buy BTC using credit cards, bank transfers and fintech solutions like Apple Pay, Google Pay and PayPal.

Announced in February, the Chrome browser extension for leading non-custodial exchange Uniswap became available to all users. Market participants can create a new wallet or import an existing one. The extension works with 11 networks – Arbitrum, Avalanche, Base, Blast, BNB Chain, Celo, Ethereum, Optimism, Polygon, ZKsync and Zora Network.

Gold hit new record high early Wednesday ($2482), following acceleration through former top on Tuesday (metal was up 1.9% for the day, the biggest daily gain since Dec 13).

Break above previous all-time high ($2450) signaled an end of corrective phase ($2450/$2286) and continuation of a larger uptrend.

Growing expectations for September Fed rate cut, fueled by the recent US inflation data and dovish comments from Fed officials, sparked fresh demand for the yellow metal.

Bulls approach immediate target at $2500, but may accelerate further, as favorable conditions on US rate outlook were boosted by heated geopolitical situation, as well as expectations that demand from gold’s top consumer China will remain strong, despite a pause in metal purchases in May and June.

Gold price entered uncharted territory again, with violation of $2500 barrier to expose targets at $ 2512/51/74 (Fibo projections).

Meanwhile, increased headwinds should be expected on approach to $2500 barrier, as daily studies are overbought.

Limited profit-taking is likely to mark a price adjustment before fresh push higher, with former top ($2450) and $2400 (psychological, reinforced by 10DMA) now acting as solid supports and expected to keep the downside protected.

Res: 2500; 2512; 2551; 2574.
Sup: 2461; 2450; 2400; 2368.

As the XAU/USD chart shows, on 16th July, the gold price rose above $2460 for the first time in history. The bullish sentiment is driven by:

→ Anticipation of Fed rate cuts, as the appeal of non-yielding bullion generally increases in low-interest-rate environments.

→ Geopolitical tensions, with an attempt on Trump's life possibly boosting demand for the "safe-haven asset."

→ Demand from central banks.

Reuters reports that analysts at Commonwealth Bank of Australia believe the gold price could exceed their forecast of $2500 per ounce by the end of 2024. "It is worth highlighting gold's ability to find support under any conditions this year," they say.

Can the gold price rise further?

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

→ The gold price is in an upward trend (shown in blue).

→ The support level at $2290, reinforced by the median line of the blue channel, pushed the price up (shown by an arrow).

→ The bulls managed to break the $2385 level, which had acted as resistance since 7 June (shown by arrows).

→ The bearish Head and Shoulders (SHS) pattern failed.

The contours of the upward channel suggest the potential for the gold price to rise to its upper boundary, where the psychological level of $2500 per ounce also lies. Thus, the Commonwealth Bank of Australia's forecast could come true much earlier than the end of 2024.

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Eurozone CPI was finalized at 2.5% yoy in June, down from May's 2.6% yoy. CPI core (ex-energy, food, alcohol & tobacco) was finalized at 2.9% yoy, unchanged from prior month's reading. The highest contribution to annual inflation rate came from services (+1.84 percentage points, pp), followed by food, alcohol & tobacco (+0.48 pp), non-energy industrial goods (+0.17 pp) and energy (+0.02 pp).

EU CPI was finalized at 2.6% yoy, down from May's 2.7% yoy. The lowest annual rates were registered in Finland (0.5%), Italy (0.9%) and Lithuania (1.0%). The highest annual rates were recorded in Belgium (5.4%), Romania (5.3%), Spain and Hungary (both 3.6%). Compared with May 2024, annual inflation fell in seventeen Member States, remained stable in one and rose in nine.

Full Eurozone CPI final release here.

• GBPUSD jumps to fresh 1-year high after UK CPI surprises slightly higher
• Technical indicators point to overbought conditions following steep rally
• UK employment figures next on the agenda due on Thursday 06:00 GMT

The UK CPI inflation data on Wednesday gave GBPUSD a slight boost as consumer prices grew by 2.0% instead of the expected 1.9%. The pair gently surpassed its previous peak to post a new one-year high of 1.3011.

After a continuous rise since June, we can anticipate some stability as both the RSI and stochastic oscillator indicate overbought conditions.

Therefore, traders might patiently await a clear breakthrough above the psychological level of 1.3000 and the 161.8% Fibonacci extension of June’s decline at 1.3012 before targeting the July 2023 peak of 1.3141. Note that the ascending trendline from April is within the neighborhood, and a violation there might be a prerequisite for a continuation towards the 261.8% Fibonacci of 1.3260.

If bullish forces quickly fade, causing a drop below the nearby support zone at 1.2960, attention may turn to Friday’s low at 1.2900. A deeper downfall could retest the former resistance territory around 1.2850. Otherwise, sellers could stay in play until the price reaches its 20- and 50-day simple moving averages (SMAs) as well as the broken 2021 descending trendline near 1.2750.

In summary, GBPUSD remains on a positive trajectory in the short- and medium-term. However, considering recent rapid appreciation and overbought signals, there could be some consolidation in the short-term.

• EURGBP drops to the lowest level since August 2022
• Political unrest and weaker economic data keep the euro under pressure
• Momentum indicators could point to a reversal soon

EURGBP is hovering around the lowest level since August 2022, having recorded a decent correction from the early July local peak. The newfound political stability in the UK is supporting the pound while the euro remains under pressure on the back of the political unrest in France and a series of weaker economic data prints. The market is preparing for Thursday’s ECB meeting, where a dovish show by President Lagarde could open the door to another downleg.

In the meantime, the momentum indicators are mostly mixed. The Average Directional Movement Index (ADX) remains above its 25-threshold, and it is edging higher in a vertical fashion. The RSI is stuck below its 50-midpoint, but it appears to be unable to test its mid-June lows. Similarly, the stochastic oscillator has returned inside its oversold area (OS), but it has failed to record a lower low as seen in the EURGBP. This could mean that a bullish divergence could be in the works.

Should the bulls manage to retake control, they could first try to push EURGBP above the 0.8401 level and then stage a rally towards the 50-day simple moving average (SMA) at 0.8484. If successful, they could then test their determination against the busy 0.8504-0.8521 area, which is defined by the February 24, 2012 high, the August 23, 2023 low and the 100-day SMA.

On the flip side, the bears appear determined to maintain their recent gains by keeping EURGBP below the 0.8401 level. They could then gradually push it lower towards the August 4, 2022 low at 0.8339, with the December 5, 2016 low being a tad lower at 0.8304.

To sum up, EURGBP remains on the back foot and a dovish show at Thursday’s ECB meeting could potentially open the door to a more protracted correction towards the 0.8300 area.