The pair will likely continue falling as sellers target the next key support at 1.1650.

Bearish view

• Sell the GBP/USD pair and set a take-profit at 1.1650.
• Add a stop-loss at 1.1850.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 1.1800 and a take-profit at 1.1900.
• Add a stop-loss at 1.1700.

The GBP/USD exchange rate is hovering near its lowest level since March 2020 as the US dollar makes a strong comeback. The pair dropped to a low of 1.1745 on Monday, which was about 17.80% below the highest point this year.

US dollar makes a comeback

The GBP/USD price has come under intense pressure in the past few weeks because of the substantially strong US dollar. The dollar index rose to $109, which is a few points below its highest point in more than 20 years.

This rally accelerated after the latest hawkish statement by Jerome Powell and other Fed officials like Neel Kashkari, Charles Evans, and Mary Daly insisted that it was too early to declare victory on inflation.

Most Fed officials who talked at the Jackson Hole Symposium noted that the bank will continue hiking interest rates in the coming months. Analysts expect that the bank will hike by 0.50% after rising by 150 basis points in the past two meetings. Also, they also believe that rates will stay at high levels for some time.

The GBP/USD pair also remained under pressure as concerns about the UK economy continued. Last week, the country’s energy regulator decided to increase the energy price cap by 80% to 3,549 pounds as natural gas prices soared. Sadly, analysts expect that prices will continue rising in the coming months.

In a statement last week, analysts at Citigroup warned that the country’s inflation will rise to 18.3% in January. The Bank of England sees inflation rising to over 13% while Goldman Sachs expects that prices will rise to 15%.

Therefore, there is a likelihood that the UK will go through a recession soon, which will put the Bank of England in the difficult position of hiking during a recession.

GBP/USD forecast

The GBP/USD price continued its bearish trend as the US dollar continued gaining. It was trading at 1.1745 on Monday morning, which was slightly below the important support at 1.1769. This price was the lowest level on July 14. It has moved below the 25-day and 50-day moving averages.

The pair has also formed an inverted cup and handle pattern. In price action analysis, this pattern is usually a bearish sign. Therefore, the pair will likely continue falling as sellers target the next key support at 1.1650.

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There is a likelihood that the pair will have a pullback in the next few days.

Bearish View

• Sell the EUR/USD pair and set a take-profit at 1.0450.
• Add a stop-loss at 1.065.
• Timeline: 1-3 days.

Bullish View

• Set a buy-stop at 1.0600 and a take-profit at 1.0670.
• Add a stop-loss at 1.0525.

The EUR/USD pair tilted upwards as the Federal Reserve testified before Congress. The pair rose to a high of 1.0610, which was the highest point since Friday last week. It has jumped by more than 2% from its lowest point this week.

Jerome Powell on Fed Actions

EUR/USD and American stocks jumped as Jerome Powell testified before a Senate committee. At the same time, bond yields dropped for the second day straight, with the 10-year and 30-year falling to 3.14% and 3.2%, respectively.

In his statement, Powell said that the Fed will continue hiking interest rates until there is evidence that inflation was falling towards its 2% target. At the same time, he lamented that the labor market was extremely hot and that tightening could lead to a recession.

Analysts believe that a recession is inevitable. A poll by the Wall Street Journal showed that the possibility of a recession was 44%. Most of the economists polled cited the rising consumer inflation, low unemployment rate, and the ongoing supply chain challenges.

Still, there are some positives. The price of crude oil has slumped from $124 to less than $110. Natural gas prices have also retreated while the price of some food products have continued falling. Therefore, there is a likelihood that inflation has reached its peak.

The next key driver for the EUR/USD pair will be the testimony by Jerome Powell. Still, historically, the second day of Fed chair’s testimony does not have a major impact on currencies and stocks.

Meanwhile, Markit, a company owned by S&P Global will publish the latest flash manufacturing and services PMI numbers. Analysts expect the data to show that business activity in Europe and the US weakened slightly as inflation surged.

EUR/USD Forecast

The EUR/USD pair continued rising after the latest statement by Jerome Powell. On the four-hour chart, the pair has formed an ascending channel that is shown in purple. It is now along the upper side of this channel. At the same time, the pair has formed an inverted cup and handle pattern. The current rebound is part of the handle pattern.

Therefore, there is a likelihood that the pair will have a pullback in the next few days. If this happens, the next key level to watch will be the lower side of the cup at 1.0365.

 In the past few days, key commodity prices have been in a strong bearish trend

Bearish view

• Sell the AUD/USD pair and set a take-profit at 0.6830.
• Add a stop-loss at 0.7020.
• Timeline: 2 days.

Bullish view

• Set a buy-stop at 0.700 and a take-profit at 0.7050.
• Add a stop-loss at 0.6950.

The AUD/USD pair moved sideways on Tuesday morning after the latest minutes by the Reserve Bank of Australia (RBA). It is also reacting to the falling iron ore prices as concerns about global growth remains. The pair is trading at 0.6957, which is slightly below this week’s high of 0.700.

Global recession worries

The Australian dollar has struggled in the past few days as investors continue worrying about the global economy as central banks embrace a more hawkish tone.

According to the Wall Street Journal, odds of an American recession happening in 2022 rose to 44% from the previous 26%. The report was based on estimates by leading economists in the US.

The AUD/USD pair tends to underperform in periods of weak output because of the role commodities play in Australia. The country exports key commodities like coal, natural gas, and iron ore.

This explains why the pair is struggling. In the past few days, key commodity prices have been in a strong bearish trend. For example, copper has tumbled to the lowest level in more than 12 months. Similarly, iron ore has crashed as investors anticipate weak spending as interest rates rise.

The pair is also under pressure as investors reflect on the actions of the Fed and the Reserve Bank of Australia (RBA). Last week, the Fed decided to hike interest rates by 0.75%, the biggest increase in almost three decades. Officials also hinted that more hikes were on the way.

The decision came a week after the RBA surprised investors by hiking rates by 0.50%. Analysts were expecting a 0.25% hike. Minutes published earlier on Tuesday revealed that officials expressed hopes that they will continue hiking rates in the upcoming meetings. But they also cautioned that inflation will continue as the crisis in Ukraine escalates.

AUD/USD forecast

The four-hour chart shows that the AUD/USD pair has formed what looks like an inverted cup and handle pattern that is shown in black. The lower side of this pattern is at 0.6831. The pair remains slightly below the 25-day and 50-day moving averages.

It has moved to the standard pivot point while oscillators are pointing downwards. Therefore, because of the inverted cup and handle pattern, there is a possibility that it will have a bearish breakout to the first support at 0.6831.

The outlook for the pair is still bearish because of the hawkish Fed and the ongoing challenges in Europe.

Bearish View

• Sell the EUR/USD pair and set a take-profit at 1.0300.
• Add a stop-loss at 1.0522.
• Timeline: 1 day.

Bullish View

• Set a buy-stop at 1.0522 and a take-profit at 1.0600.
• Add a stop-loss at 1.035.

The EUR/USD pair rose in the overnight session as the European energy crisis escalated and after the Fed made its rate decision. The pair rose to a high of 1.0460, which was sharply higher than the intraday low of 1.035.

Fed and ECB Meetings

The ECB held an emergency meeting to address the recent volatility in the European bond market. After last week’s monetary meeting, bond yields of vulnerable countries like Italy and Greece surged. Bond yields usually move inversely to prices. As a result, the spread between the safer German bonds and riskier Italian bonds surged to 2.34%.

In its meeting, the ECB decided to create a new “anti-fragmentation instrument” to address the crisis. While the bank did not offer more details about the instrument, analysts believe that the ECB will continue buying bonds from distressed countries. This will be similar to what it did between 2010 and 2012 when it bought bonds worth 220 billion euros.

The ECB meeting happened on the same day that Russia continued flexing its muscle in the region. The country’s energy company, Gazprom, decided to reduce the gas it pumps to Italy and Germany. The company attributed the decision to technical challenges caused by sanctions. Germany, on the other hand, accused it of being a political move.

This is a notable move since Russia is the biggest supplier of natural gas to Europe. At the same time, the bloc’s natural gas prices have helped push inflation to the highest level on record.

The EUR/USD pair also rose after the Federal Reserve decided to hike interest rates by 0.75% for the first time since 1994. In a press conference, Jerome Powell warned that the bank will likely deliver another 0.75% hike in July this year even after data showed that retail sales slumped in May.

EUR/USD Forecast

The EUR/USD pair pulled back after the hawkish Fed decision. It rose to a high of 1.045, which was higher than this week’s low of 1.035. It has formed an inverted cup and handle (C&P) pattern on the four-hour chart.

The pair also remains below the 25-day and 50-day moving averages. At the same time, the MACD has pointed upwards. The outlook for the pair is still bearish because of the hawkish Fed and the ongoing challenges in Europe. Therefore, the next key level to watch will be at 1.0300.

LUNA will likely resume the bearish trend as bears target the key support level at $76.

Bearish View

• Sell Terra and set a take-profit at $76.
• Add a stop-loss at $110.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at $90 and a take-profit at $100.
• Add a stop-loss at $80.

The Terra price is crawling back after dropping sharply in April. The LUNA/USD pair is trading at 85.70, which is above the important support level at 76.53, which was the lowest level in April. This price is below the year-to-date high of about 120.

Terra’s Recent Developments

Terra is a leading blockchain platform that is changing the financial industry. Developed in South Korea, it has become one of the most influential projects in the sector. For example, it has been used to build Chai, a financial application that has over 2 million users.

Terra is best-known for its stablecoin known as Terra USD, which has a total market cap of more than $18 billion, making it the third-biggest stablecoin in the world after Tether and USD Coin. Further, the platform has been used to build some of the biggest Decentralized Finance (DeFi) applications in the industry. They include Anchor Protocol and Astroport.

The LUNA/USD underperformed in April even as the total value locked (TVL) in the ecosystem rose to more than $30 billion. This makes it the second-biggest platform after Ethereum. While the TVL rose, data compiled by Terrascope shows that the number of transactions in most of the networks declined. The chart below shows that activity in Terra rose and then tumbled in April.

The LUNA/USD is now bouncing back as investors react to the recent interest rate decision by the Federal Reserve. The bank decided to hike interest rates by 0.50%, which was the biggest hike in over 20 years.

Therefore, the price action is happening since the hawkish tone by the Fed was already priced in by investors. It is also rising in line with the performance of other cryptocurrencies like Bitcoin and stock indices like Dow Jones.

Terra Price Prediction

The four-hour chart shows that the LUNA price found a strong support at $76.53 in April. It has now crawled back after the latest interest rate decision by the Federal Reserve. A closer look shows that the coin has formed what looks like an inverted cup and handle pattern. The MACD has moved slightly above the neutral level while the Relative Strength Index is at about 50. Therefore, the coin will likely resume the bearish trend as bears target the key support level at $76.