For three trading sessions in a row, the GBP/USD currency pair is subjected to selling operations, as a result of which it settled around the 1.2105 support level. It is close to testing an important support 1.2045, which supports more bears’ control of the trend. The gains of the GBP/USD last week brought it to the resistance level of 1.2277, but as I mentioned many times before, the gains of the currency pair will remain subject to selling as long as the US dollar is strong with the expectations of raising the US interest rate and the investors’ demand for it as a safe haven. On the other hand, sterling is in the position of worrying about a strong recession in Britain, as well as worrying about the future of political life in the country.

According to the fundamental analysis, the GBP/USD is trading affected by the announcement that the UK’s primary GDP for the second quarter exceeded the expected change (Quarterly) by -0.2% with a change of -0.1%. The Equalizer (YoY) also beat expectations at 2.8% with a 2.9% reading, while June GDP beat expectations (MoM) at -1.3% with -0.6%. On the other hand, Industrial Production for June came in stronger with -0.9% (MoM) change vs. -1.3% expected. Industrial production for June also outperformed both estimates (MoM) and (YoY) at -1.8% and 0.9% respectively with readings of -1.6% and 1.3%.

From the US, the Michigan Preliminary Consumer Confidence Index for August exceeded expectations at 52.5 with a reading of 55.1. Initial jobless claims exceeded 263 thousand with 262 thousand, while continuing claims lost 1.407 million with 1.428 million.

GBP/USD Technical Analysis

In the near term and according to the hourly chart, it appears that the GBP/USD is trading within a descending channel formation. This indicates a significant short-term bearish momentum in market sentiment. Therefore, the bears will look to extend the current declines towards 1.2107 or lower to 1.2067. On the other hand, the bulls will target short-term profits at around 1.2164 or higher at 1.2204.

In the long term and according to the performance on the daily chart, it appears that the GBP/USD currency pair is trading within an ascending channel formation. This indicates a long-term bullish slope in market sentiment. Therefore, the bulls will look to extend the current gains towards 1.2294 or higher to 1.2466. On the other hand, bears will look to pounce on profits at around 1.1980 or lower at 1.1806 support.

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• US inflation figures shook the strength of expectations for the future of a strong and continuous tightening of the US Federal Reserve.
• The continuous rise in US interest rates was supportive of the USD/JPY currency pair in moving towards its highest in 25 years.
• Yesterday it collapsed to the support level 132.00 starting from the resistance 135.30 in one trading session.
• The price of the dollar yen is stable around the level of 132.60 at the time of writing the analysis.

Currently, economists are divided over whether the slowdown in US consumer price growth for July means the Federal Reserve could ease its aggressive program to raise US interest rates, making 75 basis points less specific. Labor Department data on Wednesday showed that the US Consumer Price Index rose 8.5% from a year earlier, cooling off June’s 9.1% advance which was the largest in four decades. Prices were unchanged from the previous month.

Markets are now pricing in the possibility of a 50 basis point increase in September instead of the 75 basis point, and less than 100 basis point gains over the next two meetings. Commenting on this, Derek Holt, an economist at Scotiabank, said: “Whether it’s 50 or 75 in September, it will probably go lower.” on wage-driven catalysts for future inflation versus the latest CPI print, but it’s too early to judge the September move.”

The US central bank’s FOMC raised its benchmark rate by three-quarters of a percentage point in July for the second month in a row, marking the largest consecutive increases in more than a generation to once again tame inflation. 2% target. The next Federal Open Market Committee will meet on September 20-21.

Fed Chairman Jerome Powell told reporters after the July 27 decision that officials could raise rates by the same amount at the next meeting, depending on readings from the economy now and then. It will slow at some point in the future. Federal Reserve officials who have spoken out in recent days have effectively countered a narrative in financial markets that policy makers are envisioning a shift away from tightening amid evidence of a turnaround in the US economy, saying that bringing price growth back to the 2% target remains a priority.

Core inflation, excluding volatile food and energy, rose 0.3% from June and 5.9% from a year ago. While these numbers were better than expected, Fed officials are likely to be concerned about how far away they are from the 2% inflation target.

USD/JPY Technical Outlook:

On the daily chart below, the price of the USD/JPY currency pair is at the beginning of the phase of breaking the general upward trend. The direction may change completely in case it moves towards the 130.00 psychological support level. I still prefer to buy the dollar yen from every descending level. Over the same time period, a move towards the resistance levels 133.80 and 135.00 will be important to the extent to which the bulls control the trend again. The dollar-yen pair will be affected today by the announcement of a new round of US inflation, the producer price index and the number of weekly jobless claims.

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There is no doubt that the decline in US inflation rates stronger than expected contributed a lot to the decline of the US dollar against the rest of the other major currencies. The share of the EUR/USD currency pair rose quickly, reaching the resistance level of 1.0368, the highest for the currency pair in a month. The rebound was due to the investors’ view of the US inflation figures, which might impede the path of a strong tightening of the US interest rate hike. The EUR/USD pair is stabilizing around the 1.0300 level at the time of writing, awaiting a new round of important US economic data.

All in all, the EUR/USD exchange rate jumped to a double level of technical resistance on the charts after both official measures of US inflation came in lower than market expectations for July, dragging down US bond yields and the dollar more than recent highs. Falling gasoline prices have lowered the overall inflation rate in the US from 9.1% to 8.5% last month

How does the economy affect the markets?.

Economists had expected that metric to fall to 8.7% although if gasoline and natural gas prices fell, increases in the cost of electricity, food and housing would weigh on the metric. Meanwhile, the top rate of core inflation rose 5.9% unchanged last month in the face of expectations for an increase of 6.1% after declines in airline tickets, used cars and trucks, telecommunications and clothing prices offset increases in other categories.

Commenting on this, Biban Ray, FX Analyst at CIBC Capital Markets says, “The impulse in commodity-driven inflation is probably going down, but not so much from the services side (which tends to be more flat).” He noted that the 50-day moving average is an area. Possible short-term resistance of the price of the euro against the dollar. Analysts and economists warned on Wednesday that the data was unlikely to prevent the Federal Reserve from moving toward the interest rate forecast it set in June, which envisions a US interest rate of between 3% and 3.5% by the end of the year.

“The continued decline in gasoline will mean the headline rate drops further in August, but core inflation is likely to be more steady due to labor costs and will keep the Fed in a tightening mode,” says James Knightley, chief economist at ING. As Knightley cautioned after reviewing the data: “Core inflation remains on an upward trajectory due to rising housing rental costs and service sector inflation pressures. Wages are the largest cost input to the service sector.”

Wednesday’s numbers were closely followed by other data from the Bureau of Labor Statistics that on Tuesday indicated that US labor costs, or individual labor costs, rose by more than double during the second quarter and for the second consecutive quarter. This data is in part a reflection of higher wage growth rates that were also depicted rising at an accelerating pace in the US Non-Farm Payrolls report released last week.

Euro forecast against the dollar:

• The recent gains for the EUR/USD pair are a first step towards breaking the downside trend.
• The currency pair will need to move towards the 1.0400 and 1.0485 resistance levels to confirm that according to the performance on the daily chart.
• On the downside, the euro dollar price returned towards the support levels 1.0225 and 1.0155, ending the bullish aspirations.
• We prefer to sell EURUSD from every bullish level.
• Today, the currency pair will await the release of the US Producer Price Index as well as the number of jobless claims

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The GBP/USD exchange rate attracted bid from the market when it dropped near the 1.20 support before the weekend, but it could slide towards or even below that level later this week if the US inflation figures for July provide further insight. During last week’s trading, the GBP/USD pair was on the threshold of the 1.2300 resistance, but the dollar gained more momentum for the future of raising the US interest rate after the recent job numbers. The pound sterling dollar fell towards the 1.2003 support level and settled around the 1.2085 level at the time of writing the analysis amid the continued control of bears.

GBP/USD turned lower due to a string of US economic data that argued strongly against the recent notion of a recession in the world’s largest economy. Commenting on this, Bob Schwartz, chief economist at Oxford Economics, says: “The continued high demand for workers is fueling large wage gains, providing families with larger salaries that will support spending for the foreseeable future.”

“Before the jobs report, market sentiment was increasingly pivotal to the belief that the US Federal Reserve would cut its rate hike forecast at the next policy meeting,” he added. This narrative has lost credibility, as the strong jobs report and strong wage gains have strengthened the inflationary tailwind.”

Bond yields and the US dollar rose after the Institute for Supply Management surveys of the manufacturing and services PMI for July rose in contrast to their more dismal peers in Standard & Poor’s Global ahead of the US non-farm payrolls report for July. It was released on Friday that sparked open cynicism at the idea of faltering economy. Meanwhile, along the way, Fed policymakers appeared to have repeatedly warned financial markets of their latest assumption that US interest rates could be lowered as soon as the second quarter of next year from the high levels expected to be reached in the last quarter.

Michael Cahill, FX analyst at Goldman Sachs, wrote in a research briefing on Friday, “Over the past two weeks, it has been clear that the FOMC wants to slow the pace of rate hikes. What’s less clear is whether the data will finally give them a chance to do so, and more recently, data that the FOMC has highlighted as important inputs to its decision to slow has continued to show signs of an overheating labor market and strong wage pressures. Cahill added that this week’s inflation report is unlikely to provide “convincing evidence” of a slowdown.

Last week’s data and political talks raised expectations for the US Federal Reserve’s interest rate in September and beyond while reviving the previously stalled rise in US bond yields and calling for a halt to the dollar’s recent corrective slide. Accordingly, the pound requested a bid from the market when it traded lower to 1.2003 in the wake of the US payroll report on Friday, although whether it can continue above that level this week likely depends on the US inflation figures on Wednesday and the market’s willingness to sterling in the meantime.

GBP/USD forecast today:

There is no doubt that the GBP/USD pair’s move below the 1.2000 psychological support level will bring the bears more momentum to move down strongly towards stronger support levels and the closest ones after that are 1.1920 and 1.1800 levels, respectively. On the upside and according to the performance on the daily chart below, the movement of the bulls towards the 1.2300 resistance level will be important to break the current downtrend. Sterling dollar gains are still subject to selling.

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The best opportunity is likely to be long from supportive confluence.

My previous signal on 27^th June was not triggered, as none of the key support and resistance levels were reached that day.

Today’s AUD/USD Signals

Risk 0.75%

Trades must be entered before 5pm Tokyo time Friday.

• Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of the descending trend line shown in the price chart below which currently sits at about 0.6943.
• Place the stop loss 1 pip above the local swing high.
• Move the stop loss to break even once the trade is 20 pips in profit.
• Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.

Long Trade Ideas

• Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 0.6848 or 0.6774.
• Place the stop loss 1 pip below the local swing low.
• Move the stop loss to break even once the trade is 20 pips in profit.
• Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

AUD/USD Analysis

I wrote in my previous forecast on 27^th June that we had a fairly wide and choppy consolidation pattern playing out between the very big round number at 0.7000 which is acting as resistance, and the nearest support level at 0.6840. I thought that the price would remain between these levels, and it did. In fact, three days later it continues to do so.

The technical picture now remains consolidative but interesting, with the consolidation reinforced by a narrowing triangle formation which is holding the price, shown in the price chart below. The lower edge of this triangle is very close to what looks to be a strong support level at 0.6848, which already held a few hours ago.

I think the best opportunity which could set up here today would be a long from another rejection of this level at 0.6848. I am not so keen on a short trade from the top of the triangle at 0.6943.

If the price does break below 0.6848, and can end the day trading firmly lower, that would be a very bearish sign and suggest a continuing fall to new long-term lows would be likely. This would probably require another major downwards move in stocks to happen due to the Aussie’s status as a risk barometer.

Concerning the USD, there will be a release of Core PCE Price Index data at 1:30pm London time. There is nothing of importance scheduled today regarding the AUD.

The British pound has fallen significantly during the Monday session as the 1.22 level has been pierced, just as the recent lows have been broken. The interest rates in the 10-year note continue to rise in America, which will make the US dollar much more attractive. At this point, the Federal Reserve is backed into a corner, and therefore will be forced to tighten monetary policy going forward. This makes the US dollar much more attractive, especially when it is looked at through the prism of a safety asset.

At this point, I would anticipate that the British pound should go lower, reaching the 1.20 handle. The 1.20 handle is an area that has been important more than once, so therefore it’s very likely that we will continue to see a lot of fighting in that area. If we can break down below there, then it’s likely that we will continue to see even further losses, and I just don’t see how the British pound turn things around.

More likely than not, we may get a short-term rally, but that rally for me is going to be an opportunity to pick up “cheap US dollars.” The 1.24 level is what I think could be the ceiling right now, but this remains to be seen. I don’t think that we have enough momentum to continue to go higher, and therefore we need to see signs of exhaustion and therefore we can jump on them. I just don’t see how the Federal Reserve has the ability to change its trajectory or a now, due to the fact that inflation in America is raging at levels not seen in over 40 years. Because of this, we will continue to see the Federal Reserve have to tighten, and therefore we will continue to see the US dollar strengthen.

Something is eventually going to break. I don’t necessarily think it will be the British pound, but there are a lot of candidates out there. We have already seen crypto completely collapse, and it’s probably only a matter of time before the credit markets do the same. At this point, the US dollar is just about the only asset that you want to own, so it won’t be any different here.

The Euro has broken down during the trading session on Tuesday to break through a short-term uptrend line. You can make an argument that we have pierced the bottom of a rising wedge, but it’s also worth noting that the market did a lot of recovery later in the day. In other words, we are still spinning our wheels and trying to figure out where we go next.

With inflation numbers in America coming out on Friday, it could very well be a situation where we are going to kill time between now and then. I certainly know that the market has been choppy enough to make it feel like that. If we do rally from here, the 1.08 level is a significant amount of resistance, as it was previous support. We also have the 50 Day EMA just about, and that will more likely than not show quite a bit of noise as it typically does.

If we were to break down through the bottom of the candlestick, then we could go looking to reach the 1.06 level, possibly even down to the 1.04 level, which would be a fulfillment of the measured move of the rising wedge. Breaking below the 1.04 level opens up the possibility of a move down to the 1.02 level, followed by parity. A lot of pundits do believe that the Euro will eventually go to parity, but it’s obvious that we are fighting to see that happen.

Interest rates will drive everything, and at this point, some traders are starting to think that the European Central Bank will have to become a bit more aggressive with its monetary policy, due to inflation in the continent. However, the Europeans also have a growth problem, so it’s a much more complex situation than the very complex situation in the United States. In a situation where we will more likely than not continue to see a lot of concern, it also makes sense that the US dollar would be favored. We are in a downtrend, so I have to assume that the sellers will continue to come back into the picture. However, if we were to break above the 1.09 level, then we may make a move to reach the 200 Day EMA, which is at roughly 1.1140 at the moment.

At this point, Ethereum looks like it’s got further to go to the downside.

Ethereum fell on Friday to reach the $1750 level. This is an area where we had seen support previously, and now it looks like we may very well break down through it. If we do, that opens up the floodgates and Ethereum could see a move to the $1500 level rather quickly. The fact that we did this on a Friday does not bode well, because it shows just how little interest in Ethereum there is by institutional investors.

I would not be surprised to see this market hit $1500, where one would assume there is a certain amount of psychological support. If we were to break down below the $1500 level, it’s likely that we will go much lower. Rallies at this point would be opportunities to sell, and as you can see I have a descending triangle on the chart that shows signs of being broken down below, and the “measured move” suggests that we could go as low as $1450.

If we do rally from here, the $2000 level should offer significant resistance as it is an area where we’ve seen sellers previously, and is psychologically important. When you look at this chart, there’s nothing positive about it, and it’s not until we break above the $2250 level that I would consider a potential turnaround being shown. Ultimately, this is a market that has been noisy for a while, and as long as the US dollar remains strong, it’s very unlikely that Ethereum will find much of a bed.

At this point, the market is going to continue to see a lot of “risk-off”, so it makes quite a bit of sense that we will continue to see crypto get crushed. Ultimately, as long as there is no risk appetite out there, crypto is going to be one of the last places people would put money to work. Any rally at this point in time that shows signs of exhaustion would be a shorting opportunity. Ethereum also is suffering at the hands of its own inactivity, all of the upgrades seem to be taking longer than anticipated. Furthermore, I just read the other day that 1.3 million transactions on the Ethereum network failed last month alone. At this point, Ethereum looks like it’s got further to go to the downside.

We expect the index to continue declining during its upcoming trading.

The Dow Jones Industrial Average continued to decline during its recent trading at the intraday levels, to record losses for the fifth consecutive day, by -1.02%. It lost the index about -326.63 points and settled at the end of trading at the level of 31,834.12, which is the lowest new level for this year, after its decline on Tuesday, trading increased by -0.26%.

The index fell after US inflation data beat its estimates, higher price pressures may prompt the Federal Reserve to continue raising interest rates at its upcoming monetary policy meetings.

The Labor Department reported Wednesday that its consumer price index rose 8.3% year-on-year in April, above expectations of 8.1%, but down from the 8.5% increase in March. Higher prices for services such as an 18.6% increase in airfares month-on-month drove up inflation.

Core CPI, which excludes more volatile food and energy, rose 6.2% in April, down from 6.5% in March.

Technically, the index continues to decline amid the dominance of a bearish corrective wave in the short term, and was affected by the breach of a major bullish trend line earlier, as shown in the attached chart for a period of time (daily). In addition, the index suffers from continuing negative pressure due to its trading below the simple moving average for a period of the previous 50 days. We notice the influx of negative signals on the RSI indicators, despite reaching oversold areas, to break the 32,000 support level for the first time this year.

Therefore, we expect the index to continue declining during its upcoming trading, as long as it remains below the 32,000 level, to target the support level 30,547.50.

We expect more decline for the index during its upcoming trading.

The Dow Jones Industrial Average declined during its recent trading at the intraday levels, to record losses for the second day in a row, by -0.30%, to lose about 98.60 points. It settled at the end of trading at the level of 32,899.38, after its decline in trading on Thursday by -3.12%. During the past week, the index decreased by -0.23%, which is the sixth consecutive week in which the index closed with losses.

The April employment report showed that nonfarm payrolls rose by 428,000 jobs, more than the 380,000-increase expected in a Bloomberg poll, while payrolls for March were revised down from the previously reported result to be an increase in the revised reading.

However, the labor force participation rate declined to 62.2% from 62.4% in the previous month. Moreover, hourly earnings rose 0.3%, slower than the 0.4% gain expected and after a 0.5% increase in March.

Technically, the index’s decline came because of its collision earlier with the resistance of its simple moving average for the previous 50 days. It surrendered to the negative pressure, despite the start of the influx of positive signals in the relative strength indicators, after it reached areas of severe oversold operations. This indicates the control of the selling forces on the movement of the index, to cross its recent decline supported a major ascending trend line over the medium term, as shown in the attached chart for a period of time (daily). This may double the negative pressures on its upcoming trades.

Therefore, we expect more decline for the index during its upcoming trading, as long as the resistance 34,000 remains, to target the first support levels at 32,000.

Investors need to have confidence that the Fed will not rise too strongly and that the economy will fall into recession in their fight against inflation. The jobs report was balanced and may prove to mitigate the extreme volatility of recent days.

During a discussion at Carlson College of Management on Friday, Minneapolis Federal Reserve President Neil Kashkari responded to the views of many hawkish commentators that the Fed is too late in the battle to control inflation, Kashkari said the Fed’s future guidance has been successful in driving long-term interest rates.