The pair will likely resume the bearish trend as sellers attempt to move below the support at 1.2000.

Bearish View

• Set a sell-stop at 1.2000 and a take-profit at 1.1900.
• Add a stop-loss at 1.2200.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.2135 and a take-profit at 1.2250.
• Add a stop-loss at 1.2000.

The GBP/USD price rose slightly ahead of the upcoming UK consumer and producer inflation data and the relatively weak US housing numbers. It rose to 1.2100, which was about 70 basis points above the lowest level this week.

UK Inflation and US Retail Sales Data

The GBP/USD price will be in the spotlight on Wednesday as investors reflect on key data from the United States and the UK.

The Office of National Statistics (ONS) will publish July’s inflation numbers. Economists surveyed by Reuters expect the data to show that inflation continued rising in July. Precisely, they expect that the headline CPI rose from 9.4% in June to 9.8% in July on a year-on-year basis. On a positive note, they believe that inflation dropped from 0.8% to 0.4%.

Excluding the volatile food and energy prices, analysts expect that the country’s inflation rose from 5.8% to 5.9%. On Tuesday, data compiled by Kantar showed that food prices in the country rose by 11.6% YoY in the four weeks to August 7. This was the biggest increase since the company started collecting the data in 2008.

The data will come a day after the UK published relatively weak jobs data as the unemployment rate rose from 3.7% to 3.8%. The employment rate dropped t 75.5% while the number of open vacancies dropped to 1.27 million.

The GBP/USD price will next react to the upcoming American retail sales numbers. With inflation soaring, analysts believe that sales dropped from 1.0% in June to 0.1% in July while core sales fell from 0.6% to -0.6%. On a positive note, top retailers like Walmart and Home Depot published strong results on Tuesday.

The pair will also react to the latest minutes of the FOMC. These minutes will provide more color about what the officials talked about in their meeting.

GBP/USD Forecast

The GBP/USD pair has been in a strong downward trend in the past few days. This decline started when the pair formed a double-top pattern at around 1.2288. In price action analysis, this pattern is usually a bearish sign. The pair rose in the overnight session after it hit the neckline of this pattern.

The GBP/USD pair remains below the 25-day and 50-day moving averages and the 38.2% Fibonacci Retracement level. Therefore, the pair will likely resume the bearish trend as sellers attempt to move below the support at 1.2000.

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The US Federal Reserve’s last meeting minutes and US job numbers announcement are the most important events for the Forex currency market in general and for the US dollar in particular this week. The US dollar continues to achieve record gains against the rest of the other major currencies, and in the case of the USD/JPY currency pair, it moved towards its highest in 24 years. The currency pair is stabilizing around the 135.20 level at the time of writing the analysis, after gains towards the 137.00 resistance level.

The clear contrast between the future of global central bank policy tightening and economic performance between the US and Japan remains in favor of the overall bullish trend for the currency pair. The US Federal Reserve continues to confirm that it is determined to raise the US interest rate more times until the record inflation in the country is contained, and at the same time, the economic performance of the United States provides it with enough impetus to pass it.

On the other hand, the Japanese central bank is completely unlikely to follow in the same footsteps as global central banks, and is still providing more stimulus to the Japanese economy, which is suffering from the consequences of the epidemic and finally the Russian-Ukrainian war. And according to what was recently announced, Japan’s tax income for the year ending in March rose to a record high for the second year in a row, as corporate profits and incomes jumped amid the ongoing recovery from the epidemic.

Tax income for the most recent fiscal year was 67 trillion yen ($492 billion), according to a statement issued by Japan’s Ministry of Finance. With an unexpected big jump in sales and corporate tax revenue, total revenue increased about 10% from last year’s record high of 60.8 trillion yen. The positive numbers suggest that Japan’s recovery may be stronger than expected, and that less debt issuance may be required if tax revenue levels continue. However, the fee gains are not enough to reduce Japan’s debt mountain and the country will need to continue issuing government bonds to ensure that the social security system continues to be funded.

Sales tax income for the year ending in March was 21.9 trillion yen, up 900 billion yen from the previous year and hitting a record high. The ministry’s data showed that corporate tax increased to 13.6 trillion yen, while income tax rose to 21.4 trillion yen. For the year starting in April of this year, the government expects total revenue to be 65.2 trillion yen, but that figure may be revised upward if the trend continues last year.

The Finance Ministry also said that as a result of higher tax income levels, the government will issue 8 trillion yen less new government bonds.

I have often mentioned that after the recent and continuous record gains for the USD/JPY currency pair, this may be punctuated by the occurrence of profit-taking sell-offs, and then the currency pair will complete its natural course to the upside. As the technical indicators are still moving towards overbought levels, the markets have fully absorbed the factors of the US dollar’s gains. The closest targets for the bulls are currently 136.00, 136.85 and 138.00, respectively. On the other hand, according to the performance on the daily chart, the actual reversal of the general trend to the downside will not occur without breaching the 130.00 psychological support level. Otherwise, the general trend will remain bullish.

We expect the lira’s decline to continue.

Today’s recommendation on the lira against the dollar

Risk 0.50%.

None of the buying or selling transactions of yesterday were activated.

Best selling entry points

• Entering a sell position with a pending order from 17.41 levels
• Set a stop-loss point to close the lowest support levels 17.65.
• Move the stop loss to the entry area and continue to profit as the price moves by 50 pips.
• Close half of the contracts with a profit equal to 55 pips and leave the rest of the contracts until the strong resistance levels at 16.40.

Best entry points buy

• Entering a buy position with a pending order from 17.00 levels
• The best points for setting the stop loss are closing the highest levels of 16.88.
• Move the stop loss to the entry area and continue to profit as the price moves by 50 pips.
• Close half of the contracts with a profit equal to 55 pips and leave the rest of the contracts until the support levels 17.40

The Turkish lira stabilized without changes against the dollar during today’s trading. The lira did not retreat after the US Federal Reserve’s decision yesterday, which raised the lending rate by 75 basis points, amid expectations of a similar hike during next month’s meeting. The declines of most currencies against the US dollar, especially the currencies of emerging economies. This suggests an indirect intervention by the Turkish Central Bank, which succeeded in fixing the lira’s loss. Turkey is facing a crisis in the size of strong inflation, which reached its highest level in 24 years, led by jumps in the prices of energy imports, in light of the state’s adherence to not raising the interest rate to keep pace with the movements of the US Federal Reserve. In the meantime, investors are awaiting decisions from the Treasury Department regarding bonds aimed at pushing the lira to consolidate against the dollar.

On the technical level, the Turkish currency was stable for the fourth consecutive day. The pair maintained its trading in a general bullish trend above the level of 17 pounds, with the pair trading the highest levels of support, which are concentrated at levels of 17.00 and 16.80, respectively. The pair also continued trading above the 50, 100 and 200 moving averages, respectively, on the four-hour time frame, while the price traded between the same averages on the 60-minute time frame. At the same time, the lira is trading below the resistance levels at 17.40 and 17.80, respectively. The level of 17.41 represents a strong resistance level. We expect the lira’s decline to continue, as every decline on the pair represents an opportunity to repurchase, especially if it crosses the mentioned resistance levels. Please adhere to the numbers in the recommendation with the need to maintain capital management.

The pair will likely have a relief rally ahead of the Fed decision and then resume the bearish trend ahead of the BOE.

Bearish View

• Sell the GBP/USD pair and set a take-profit at 1.1850.
• Add a stop-loss at 1.2050.
• Timeline: 1 day.

Bullish View

• Set a buy-stop at 1.1980 and a take-profit at 1.2050.
• Add a stop-loss at 1.1900.

The GBP/USD price continued its remarkable sell-off as UK stagflation risks continued. The pair slumped to 1.1950, which was the lowest level since March 2020. It is on track to drop for the third consecutive week. Also, sterling has dropped by over 16% from its highest point in May 2021.

UK Stagflation Concerns

The UK is going through a period of stagflation where slow economic growth has converged with a period of high inflation.

Data published on Monday revealed that the country’s economy contracted for the second straight month in April. The numbers also showed that key sectors of the economy like construction, industrial, and manufacturing output also declined in April.

And on Tuesday, data by the Office of National Statistics revealed that the labor market is also experiencing jitters as inflation soars. The unemployment rate rose unexpectedly while wage growth rose at a slower pace than expected. These numbers imply that inflation is rising at a faster pace than wages.

Therefore, the GBP/USD pair is crashing as investors anticipate divergence between the Federal Reserve and the Bank of England.

On the one hand, the Fed is expected to continue tightening at a more aggressive pace, with some analysts expecting a 0.75% increase. The bank is also expected to point towards more hikes later this year.

On the other hand, analysts expect that the Bank of England will hesitate when it meets on Wednesday. This means that the bank will deliver a relatively bearish rate hike. The concern among the BOE is that more rate hikes in a period of stagflation will hurt the economy.

The GBP/USD pair will react mildly to the latest US retail sales numbers that will come out during the American session. These numbers are expected to show that the country’s retail sales declined in May.

GBP/USD Forecast

The three-hour chart shows that the GBP/USD pair has been in a strong bearish trend in the past few days. Its attempt to rebound on Tuesday failed when it moved to 1.2200. The pair managed to move below the important support at 1.2163, which was the lowest level on May 13th. It also dropped below 1200.

It has moved below the 25-day and 50-day moving averages and is along the lower side of the Bollinger Bands. Therefore, the pair will likely have a relief rally ahead of the Fed decision and then resume the bearish trend ahead of the BOE. The key level to watch will be at 1.1900.

Bearish View

• Sell EUR/USD and set a take-profit at 1.0353.
• Add a stop-loss at 1.04600.
• Timeline: 1 day.

Bullish View

• Set a buy-stop at 1.0446 and a take-profit at 1.0500.
• Add a stop-loss at 1.0380.

The EUR/USD price is hovering near its lowest level since May 16th as investors focused on the upcoming Fed decision and the hawkish ECB. It is trading at 1.0423, which is slightly above this month’s low of 1.040.

FOMC Decision Ahead

The EUR/USD pair maintained its bearish momentum as the US bond sell-off continued. The yield of the 10-year Treasury bonds rose to 3.45% while the 2-year rose to 3.41%. This is a sign that investors are now pricing in a more aggressive Federal Reserve.

The bond sell-off coincided with another decline in American equities. The Dow Jones erased another 150 points on Tuesday, a day after it dropped by over 800 points. The S&P 500 index remains in a deep bear territory, meaning that it has fallen by 20% from its YTD high.

Based on the Fed’s estimates, most analysts now believe that the bank will hike rates by 0.50% and commit to its quantitative tightening policy. But economists at companies like Barclays and Goldman Sachs now believe that a 0.75% hike is possible.

Before the FOMC, the EUR/USD will react mildly to the upcoming US retail sales data. Analysts believe that sales remained under pressure as inflation remained at elevated levels. This is an important figure since consumer spending is the biggest part of the American economy.

The EUR/USD is also under pressure after the relatively strong European inflation data. On Tuesday, data from Sweden and Germany showed that inflation remained at elevated levels in May. Later today, France is also expected to publish high inflation data.

These numbers reinforce the case that the ECB will also start hiking rates in its July meeting. Some analysts even expect it to move before the official meeting.

EUR/USD Forecast

The EUR/USD pair has been in a strong bearish trend in the past few weeks. The sell-off continued even after the hawkish interest rate decision by the ECB. It also accelerated after the pair dropped below the important support at 1.0630, which was the lowest level since June 1.

The pair has also dropped below the 25-day and 50-day moving averages while the RSI has continued falling. Therefore, the pair will likely continue falling as bears target the key support at 1.0353, which is the lower side of the inverted cup and handle pattern.

The pair’s outlook is still bearish, with the next key support level to watch being at 1.0400.

Bearish View

• Sell the EUR/USD pair and set a take-profit at 1.0400.
• Add a stop-loss at 1.060.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.0550 and add a take-profit at 1.0650.
• Add a stop-loss at 1.0.480.

The EUR/USD pair dropped sharply as investors reacted to the hawkish interest rate decision by the European Central Bank (ECB) and the strong US inflation data. It dropped to a low of 1.0475, which was the lowest level since May 19^th.

Fed Decision Ahead

The US dollar strengthened while stocks tumbled after data showed that American inflation was still surging. According to the Bureau of Labor Statistics (BLS), the headline consumer inflation rose from 8.3% to 8.6% in May. This figure was higher than the median estimate of 8.1% and it was the highest level in over 40 years.

The strong inflation data happened mostly because of the rising prices of energy and food prices. The price of most food items like eggs, milk, and meat has jumped by more than 10% in the past 12 months. At the same time, the cost of energy has also jumped sharply. During the weekend, Gass Buddy’s average of gasoline prices jumped to $5 for the first time on record.

These numbers came a day a week after the US published strong jobs numbers. The data revealed that the country’s unemployment rate remained at 3.6% in May as the economy added over 390k jobs. The participation rate remains strong.

Therefore, analysts believe that the Federal Reserve will continue tightening its monetary policy as planned in a bid to fight the soaring inflation. The Federal Open Market Committee (FOMC) will start its meeting this week and deliver a 0.50% hike. Some analysts are even pricing in a 0.75% rate hike.

The EUR/USD also declined as investors focused on the interest rate decision by the European Central Bank. The ECB left rates unchanged and signaled that it will start hiking in the coming month.

EUR/USD Forecast

The EUR/USD pair declined to the lowest level since May 19th after the latest consumer inflation data. It fell to a low of 1.0475 and managed to move below the symmetrical triangle pattern shown in black. The pair has also dropped below the 23.6% Fibonacci retracement level. At the same time, it has moved below the 25-day and 50-day moving averages.

Therefore, the pair’s outlook is still bearish, with the next key support level to watch being at 1.0400. A move above the resistance level at 1.0550 will invalidate the bearish view.

By failing to move above the resistance at 30,000 this month, it seems like bears have prevailed.

Bearish View

• Set a sell-stop at 24,915 and a take-profit at 23,000.
• Add a stop-loss at 26,000.
• Timeline: 1 day.

Bullish View

• Set a buy-stop at 25,500 and a take-profit at 27,000.
• Add a stop-loss at 24,000.

The BTC/USD price crashed to the year-to-date low as investors remained concerned about the rising inflation, interest rates, and recession chances. It dropped to a low of 24,915, which was the lowest level since 2021.

Bitcoin Remains Under Pressure

Bitcoin and stocks are struggling after the strong American inflation data signaled that a major recession could happen in the coming months.

American stocks declined sharply on Friday, with the Dow Jones falling by over 800 points and the Nasdaq 100 shedding over 400 points.

At the same time, the bond sell-off continued after the consumer price index data. The yield of the 10-year bond rose to 3.16% while that of the 30-year rose to 3.20%. Bond yields are usually inverse to their prices.

This performance is mostly because of the changing market conditions as inflation surges and the unemployment rate remains low.

Therefore, analysts believe that the Federal Reserve will embrace a more hawkish tone when it completes its meeting this week. It will likely hike rates by 0.50% and hint towards more hikes later this year. It is also continuing with its quantitative tightening policy.

Still, there are lingering concerns about a recession considering that the yield curve inverted a few months ago. In a statement during the weekend, Larry Summers, who warned about inflation said:

“When inflation is as high as it is right now and unemployment is as low as it is right now, it’s almost always followed within two years by recession. The Fed’s forecasts have tended to be much too optimistic there, and I hope they’ll realize fully the gravity of the problem.”

The BTC/USD pair will react to the upcoming interest rate decision by the Fed. Also, with the Consensus event done, enthusiasm about crypto could be a bit limited.

BTC/USD Forecast

The BTC/USD pair made a bearish breakout during the weekend. It managed to move below the important support level at 25,480, which was its lowest level this year. The pair has moved below the 25-period and 15-period moving averages. It also seems like it has formed a head and shoulders pattern.

Therefore, by failing to move above the resistance at 30,000 this month, it seems like bears have prevailed. As a result, a drop to the 2017 high of 19,815 cannot be ruled out. In the near term, the next psychological level to watch will be at 23,000.

The pair will likely continue falling ahead of the Fed decision.

Bearish View

• Sell the AUD/USD pair and set a take-profit at 0.7000.
• Add a stop-loss at 0.7170.
• Timeline: 1 day.

Bullish View

• Set a buy-stop at 0.7150 and a take-profit at 0.7250.
• Add a stop-loss at 0.7035.

The AUD/USD pair retreated slightly even after the Reserve Bank of Australia (RBA) delivered a more hawkish interest rate hike than expected. The pair is trading at 0.7092, which is about 0.80% below the highest level this week.

RBA Decision Review

In 2021, the RBA assured investors that its highly accommodative policy would continue until at least 2023. At the time, most analysts believed that the bank was missing the point on inflation, which pushed the Australian dollar sharply higher against the US dollar.

The RBA caught investors by surprise on Tuesday when it implemented a bigger rate hike than what they were expecting. Philip Lowe made a 0.25% rate increase, the first time it has done that in eleven years. Data compiled by Reuters showed that most analysts were expecting the bank to deliver a small rate hike of about 0.15%.

The RBA also signaled that it will keep hiking interest rates this year as it warned that inflation could soar to over 65 this uear. This inflation estimate was double what the bank was hinting at before. Data published recently showed that the headline CPI rose to 5.1% in the first-quarter while core CPI increased by 3.7%.

At the same time, the RBA signaled that the unemployment rate will keep falling and reach a low of 3.25% in early 2023.

Economists at Commonwealth Bank now believe that the RBA will deliver another hike in June, July, August, and November. If this happens, the rate will rise to 1.35%. The 10-year government yield rose to 3.14%, the highest level since 2014. Banks also increased their variable interest rates. The AUD/USD pair will next react to the upcoming interest rate decision by the Federal Reserve.

AUD/USD Forecast

The four-hour chart shows that the AUD/USD pair has been in a downward trend in the past few weeks. It found a strong support at 0.7031. The pair has moved slightly below the 25-day and 50-day moving averages while the Relative Strength Index has started forming a bullish divergence pattern. It has also moved slightly below the standard pivot point.

Therefore, the pair will likely continue falling ahead of the Fed decision. If this view is right, the next key support level to watch will be at 0.700. A move above the resistance at 0.7170 will invalidate the bearish view.

The pair will likely keep falling as bears target the neckline of the neckline at about 37,200.

Bearish View

• Sell the BTC/USD pair and set a take-profit at 36,000.
• Add a stop-loss at 40,000.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 39,250 and a take-profit 41,000.
• Add a stop-loss at 37,000.

The BTC/USD pair remained in a tight range as investors reacted to critical statements by Warren Buffett and Charlie Munger. Bitcoin is trading at $38,490, where it has been in the past few days. This price is about 20% below the highest level in April.

Bitcoin Still in Consolidation

The BTC/USD pair has been in a strong consolidation phase as investors reflect on the relatively strong US dollar. The dollar index has jumped to the highest level in years as investors focused on the upcoming interest rate decision.

Economists expect that the Fed will hike interest rates by 0.50% and then start implementing its quantitative tightening (QT) policy. In most cases, risky assets like Bitcoin and stocks tend to underperform in a period of high interest rates.

Bitcoin’s price action has also mirrored the performance of American shares. On Monday, the Dow Jones declined by more than 200 points while the Nasdaq 100 index fell by 50 points. At the same time, the CBOE VIX index rose by more than 4%, signaling that investors are getting fearful. Further, the Bitcoin fear and greed index has moved to the extreme fear zone of 26.

The BTC/USD pair is also consolidating after receiving criticism about Bitcoin from Warren Buffett and Charlie Munger. When holding their meeting in Omaha, the Berkshire Hathaway leaders argued that Bitcoin was a non-yielding asset. At some point, Buffett announced that he would not buy all Bitcoins in the world for $25.

His statement is closely watched because of his influence in the market since he is one of the most successful investor of all time. Bitcoin also declined after Wikimedia announced that it will stop accepting Bitcoin and Ethereum donations.

BTC/USD Forecast

The BTC/USD pair has been in a tight range in the past few days. The pair is trading slightly below the resistance level at 39,000. It has moved slightly below the 50-day exponential moving averages (EMA) while the Stochastic Oscillator has moved below the oversold level. Other oscillators like the Relative Strength Index (RSI) has also tilted lower.

Notably, the pair has formed a head and shoulders pattern, signaling that it will likely have a bearish breakout. The pair will likely keep falling as bears target the neckline of the neckline at about 37,200.

I will be watching this market quite closely at this point and could be setting up for a huge swing trade.

The Australian dollar fell a bit on Wednesday as we see a continuation of the shock to the markets after the FOMC statement suggested that the Federal Reserve is going to be much more hawkish than initially expected. Because of this, the US dollar strengthened, and it looks as if the Australian dollar is taking it on the chin. The market is trying to break through the 0.75 handle, and if it breaks through the 0.7450 level, it will have completely wiped out all of the potential reactions to the RBA statement.

The Australian dollar has been ripping higher for quite some time, so it will be interesting to see whether or not reactions continue to follow commodity markets higher, but it is worth noting that commodity markets have been hit as well. Ultimately, this is a market that I think will continue to see a lot of trouble ahead, and now we have the 0.75 level offering even more in the way of potential trouble, as we now will have to figure out whether or not we are going to hold the uptrend intact, or if we are going to turn things around.

There are a lot of concerns when it comes to the overall global economy, and that is one thing that you should keep in the back of your mind when you are looking at the Aussie dollar. If global growth suddenly stops, that would be extraordinarily negative for most assets with perhaps the exception of the US dollar. With that, I think that it is probably only a matter of time before we have to make some type of a longer-term decision, so the next couple of days are going to be crucial. At this juncture, if we were to break down below the 0.7450 level, that could open up a massive wave of selling. I will be watching this market quite closely at this point and could be setting up for a huge swing trade. Ultimately, if we turn around and clear the 0.7550 level to the upside, then it is possible that we could continue the overall uptrend. I suspect that the Thursday and the Friday sessions both are going to be very important. The next couple of days could determine the longer-term trend for this market.