The next key catalyst for the EUR/USD price will be the latest European consumer inflation data

Bearish view

• Set a sell-stop at 1.0150 and a take-profit at 1.00.
• Add a stop-loss at 1.0250.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 1.0235 and a take-profit at 1.0300.
• Add a stop-loss at 1.0150.

The EUR/USD price rose slightly after the Federal Reserve published minutes of the last monetary policy meeting. The pair rose to 1.0200, which was a few points above this week’s low of 1.0120. It remains substantially lower than last week’s high of 1.036.

Fed minutes and EU inflation data

The EUR/USD price tilted upwards after the FOMC published minutes of the past meeting. The minutes showed that some officials judged that it will be necessary to decelerate the pace of interest rate hikes in a bid to evaluate the impact of the past meetings.

Members were worried that the bank could be tightening at a substantially faster pace than is necessary. In that meeting, the committee decided to hike interest rates by 0.75% for the second straight month. It brought the total rate hikes this year to 225 basis points. The minus added:

“As the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation.”

A lot has happened since the Fed met in July. Data by the Bureau of Labor Statistics (BLS) showed that the country’s unemployment rate dropped to 3.5%. Further, inflation moderated slightly in July as it dropped from 9.1% to 8.7%.

On Wednesday, data showed that retail sales did well in July. Headline sales rose at an annual pace of 10.1%. Additionally, big retailers like Walmart and Home Depot published results that were better than expected.

The next key catalyst for the EUR/USD price will be the latest European consumer inflation data. Based on the previous estimates, analysts believe that the headline consumer inflation rose to 8.9% while core inflation rose by 4%.

The pair will also react to the latest existing home sales numbers. Economists expect the data to show that sales dropped from 5.12 million to 4.89 million in July. Fed officials like Esther George and Neel Kashkari will also deliver speeches.

EUR/USD forecast

The four-hour chart shows that the EUR/USD price has been in a strong downward trend this week. It managed to move below last week’s high of 1.0366 to a low of 1.0123. The pair has dropped below the 25-day and 50-day moving averages and the ascending purple trendline. It is also between the 23.6% and 38.2% Fibonacci Retracement level. The pair will likely continue falling and retest the crucial parity level at 1.000.

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During the middle of this week’s trading, the price of the EUR/USD currency pair is subjected to selling operations. As mentioned before that this may be very likely as the markets prepare for the reaction from the announcement of the US jobs numbers. This is in addition to the continuing strong threat to the energy future in Europe, increasing global geopolitical tensions, and the dollar as a safe haven. The selling of the Euro-dollar reached the support level of 1.0122 before settling around the 1.0170 level in the beginning of trading today, Thursday.

What is adding to the euro’s losses in the forex currency market?

Recent indications from the results of economic data from the eurozone, which confirm that the bloc is suffering from recession due to the interruption of crucial Russian energy sources, which may stop the path of raising interest rates by the European Central Bank. On the other hand, the Federal Reserve is indifferent to fears of economic stagnation and is determined to raise US interest rates until containing US inflation, which recorded its highest in 40 years.

It appears that ECB officials have invested billions of Euros in bond purchases to protect Italy and other southern Euro members since activating their first line of defense a month ago to keep speculators at bay. Data released this week indicates a significant use of debt-free funds maturing in its pandemic program portfolio, indicating the use of a tool crafted by policy makers as an initial response to any market turmoil.

The statistics, available on a two-month-only basis, show net holdings of German, French and Dutch bonds fell by 18.9 billion euros ($19.3 billion) through July. Net purchases of debt from Italy, Spain, Portugal, and Greece amounted to 17.3 billion euros. The figures are the first hard data to reveal the European Central Bank’s intervention in the debt markets after the explosion in bond yields in June forced President Christine Lagarde to hold an emergency meeting where officials agreed on the need to respond.

As an initial step, policymakers agreed to be flexible in reinvesting upcoming paybacks into the €1.66 trillion pandemic-era asset purchase program. To regulate bond purchases, they divided the eurozone into three categories: donors including Germany, France and the Netherlands, recipients from Italy, Greece, Spain and Portugal, and so-called neutrals.

Lagarde described this resilience as the ECB’s first line of defense against market volatility that threatens the transmission of monetary policy, with the newly created debt-buying tool in the background in case bolder interventions become necessary. Italy has been the focus of investor interest since before the collapse of Italian Prime Minister Mario Draghi’s government last month and elections were put on the agenda in late September.

Technical analysis of the EURUSD:

EUR/USD is moving within a range, with support around 1.0120 and resistance at 1.0270. The price attempted to break above the top but has since fallen back inside the pattern. The pair is approaching the bottom of the range, which may once again settle as a floor. In the near term the 100 SMA is above the 200 SMA to indicate that there is a chance to go up but lacks strong momentum.

Stochastic is also moving higher to show that buyers are in control. The oscillator has room to rise before reaching an overbought area to reflect fatigue among buyers, so another bounce to resistance may follow. EUR/USD fell below the dynamic inflection points at the moving averages as an early sign of selling pressure. A break below the support level could lead to a decline that is the same height as the consolidation pattern or 150 pips.

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The pair will likely keep rising as buyers target the key resistance at 1.2300.

Bullish View

• Buy the GBP/USD pair and set a take-profit at 1.2300.
• Add a stop-loss at 1.2050.
• Timeline: 1-2 days.

Bearish View

• Set a sell-stop at 1.2130 and a take-profit at 1.2050.
• Add a stop-loss at 1.2250.

The GBP/USD price made a bullish breakout as investors reflected on last week’s Federal Reserve decision and the upcoming Bank of England (BoE) meeting. The pair rose to a high of 1.2230, which was the highest point since June 28th of this year. It has risen by about 3.60% from the lowest level this year.

Fed and BoE Decisions

The GBP/USD pair moved sideways last week as investors reflected on the latest decision by the Federal Reserve. The bank decided to hike interest rates by 0.75% for the second consecutive meeting. This increase was smaller than the 1% that most analysts were expecting.

Focus now shifts to the Bank of England (BOE), which will start and complete its monetary policy meeting this week. Analysts expect that the bank will hike rates for the sixth consecutive time in a bid to fight inflation. Based on recent comments by Andrew Bailey, analysts expect that the BoE will hike rates by 0.50%.

Data published by the Office of National Statistics (ONS) revealed that the country’s consumer price index (CPI) rose to a multi-decade high of 9.4%. This makes it the biggest inflation in the G7 followed by the United States whose CPI rose by 9.1% in June.

Meanwhile, the UK labor market is still strong. The unemployment rate remained unchanged at 3.8%, which means that the labor market is still tightening. However, data revealed that the country’s retail sales recoiled in June as inflation jumped.

The GBP/USD pair will next react to the latest UK and US PMI numbers. In the UK, analysts expects that the country’s inflation dropped to 52.2 in July. In the US, economists expect that the data by the Institute of Supply Management (ISM) will show that the manufacturing PMI dropped from 53.3 to 52.2.

GBP/USD Forecast

The four-hour chart shows that the GBP/USD pair has been in a strong bullish trend in the past few weeks. It has risen by more than 3.50% from its lowest level in July. Along the way, the pair has moved above the 25-day and 50-day moving averages. It is also supported by the ascending blue trendline.

Most importantly, the pair rose above the important resistance at 1.2085, which was the neckline of the inverted head and shoulders pattern. Therefore, the pair will likely keep rising as buyers target the key resistance at 1.2300.

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During the last week’s trading, the most prominent decline in the Forex market was the collapse of the GBP/USD pair towards the 1.1975 support level, penetrating the 1.2000 psychological support. This indicated the possibility of moving towards it a lot, especially when the GBP/USD approached the 1.2175 support. With the beginning of this week’s trading, the GBP/USD pair tried to maintain its gains around 1.2165, but the pressures on the sterling pound are still strong and continuous, and the currency pair settled around the 1.2100 support level, waiting for any new developments.

The British Pound overcame a reversal of a bullish dollar since the beginning last week and had slipped below the 1.20 level on Friday before the greenback suffered a setback from the June ISM manufacturing PMI reading. Commenting on this, Chris Weston, chief market analyst at Pepperstone.” Friday’s US ISM manufacturing report showed a significant deterioration in new orders and sub-components of employment (both moved into contraction) and while inventories rose to 56.0, the sentiment is not a sign of easing supply chains (Positive in stocks), but a sign that demand is declining.”

“The potential for a technical recession is now very high, and although the labor market is in poor health, not many will feel long-term economic pain,” he added. That may, unfortunately, come too far during the year and the fact that we have cuts of 77 basis points in US rates for 2023 indicates that the market sees this as an increasing possibility.

The US dollar did not benefit from Friday’s downside surprise in the ISM manufacturing survey or the core PCE price index, the Fed’s preferred inflation measure, which paused for June on Thursday and dragged the annual rate down from 4.9% to 4.7% on the way.

Also, the British Pound extended its losses and only accumulated gains on the Dollar among the major data releases, while many analysts attributed this to growing market concerns about the outlook for US and global economic growth. So says Paul Robson, currency analyst at Natwest Markets, “The only economy where growth forecasts have actually been revised down significantly is the UK. Bank of England Governor Bailey sounded very cautious about the economy in Sintra, noting that the UK was at a tipping point and may be weakening faster than other countries.

“It appears to be a widely held view in the market already, so there is less room for such comments to alter sentiment toward the currency,” the analyst added. The GBP/USD continues to trade weakly, against our expectations, although this week the story has been more stronger than the US Dollar It’s more of an independent weakness story. With the USD outlook more balanced, we hold the view that GBP/USD forms a base around 1.20.”

It may also be relevant this week, however, as Friday’s rally was accompanied by continuous joint movements between GBP/USD and GBP/CAD during the hours before and after the London close, indicating the emergence of a bid Great sterling in Asia. Where this persists for more than a moment in GBP/CNH, it likely reflects oversight of the floating renminbi-sterling exchange rate by the People’s Bank of China (PBoC); Something that the sterling bears might overlook at their own risk. But it is also likely that much will now depend on whether the dollar continues its decline on Friday from long-term highs against many currencies, which in turn will likely depend on the market’s response to a host of events in the US calendar for the coming days.

GBP/USD analysis

Bearish penetration of the price of the GBP/USD currency pair to the support level 1.2175 still supports the move towards psychological support 1.2000 and much less than that. The US dollar is still stronger with expectations of raising US interest rates throughout 2022 and the pound, despite the expectations of raising interest rates from the Bank of England, but it faces pressure factors from British political anxiety and fears of a grinding economic recession. On the other hand, to cause a breach of the current trend, the bulls will have to rush towards the resistance level 1.2465, according to the performance on the daily chart below. The British pound will interact today with the announcement of the British Services PMI reading and the statements of the Governor of the Bank of England.

EUR/USD will likely resume the bearish trend ahead of the Fed decision.

Bullish view

• Buy the EUR/USD pair and set a take-profit at 1.0522.
• Add a stop-loss at 1.0350.
• Timeline: 1-2 days.

Bearish view

• Set a sell-stop at 1.0420 and a take-profit at 1.0350.
• Add a stop-loss at 1.0500.

The remarkable EUR/USD sell-off accelerated as volatility in the financial market spread. The pair dropped to a low of 1.0430, which was the lowest point since May 17th. It has been in a strong sell-off since the ECB decision on Thursday last week.

Market volatility surges

The EUR/USD pair declined sharply as the strength of the US dollar conntinued. The dollar index surged by over 0.72% while the closely watched CBOE volatility index rose by over 20%.

At the same time, the stock market continued falling, with the Dow Jones falling by more than 700 points. This means that the blue-chip index has fallen by more than 1,800 points in the past three trading days. The S&P 500, Nasdaq 100, and Russell 2,000 have also plummeted.

The main catalyst for the EUR/USD sell-off is the fact that the American labor market has tightened while consumer inflation has surged. The unemployment rate is hovering near its record low while the overall rate of inflation has surged to the highest level since 1981.

Therefore, analysts believe that the Federal Reserve will be more hawkish in its battle against inflation. Most analysts believe that the Fed will hike by 0.50% on Wednesday. Some expect that the bank will surprise the market by hiking rates by 0.75%.

The EUR/USD pair will react to the latest consumer inflation data from Germany. Analysts believe that the country’s consumer inflation rose to 7.9% in May while the harmomised inflation rose to 8.7%. If accurate, these will be the highest point in decades,

Another important data will be the Euro area industrial production data. Analysts expect the data to show that the sector declined in April as the cost of doing business jumped.

EUR/USD forecast

The EUR/USD pair continued its bearish trend as the dollar strength continued. The pair dropped to a low of 1.0420, which was significantly lower than its month-to-date high. It has moved to the lower side of the Bollinger Bands. The pair moved below the 25-day moving average while the Stochastic Oscillator moved below the oversold level.

The pair will likely have a relief rally as bulls target the key resistance level at 1.0522. In the longer term, the pair will likely resume the bearish trend ahead of the Fed decision.

There is a likelihood that the pair will continue the bullish trend since it is stuck above the two MAs. If this happens, the next key resistance will be at 0.7300

Bullish view

• Set a buy-stop at 0.7250 and a take-profit at 0.7300.
• Add a stop-loss at 0.7200.
• Timeline: 1 day.

Bearish view

• Sell the AUD/USD pair and set a take-profit at 0.7100.
• Add a stop-loss at 0.7280.

The AUD/USD pair continued after the surprise interest rate hike by the Reserve Bank of Australia (RBA). The pair is trading at 0.7220, which is close to its month-to-date high of 0.7287. It has risen by over 5.66% from its lowest point in May.

RBA rate hike

In 2021, the RBA spent most of the year talking about transitory inflation. At the time, it signaled that it will hike interest rates either in 2023 or 2024. Therefore, the bank caught many analysts by surprise when it reversed its dovish tone in May.

It implemented its first 0.25% rate hike in May. And this week, the RBA surprised investors by hiking interest rates by 0.50%. This was the first time it made a 0.50% hike since 2000. Also, it was the first time that it made a back-to-back rate hike since 2010.

Most importantly, the RBA signaled that it will deliver more rate hikes this year as it continues battling the soaring inflation. Analysts believe that it will push rates to 1.35% in its July meeting. Still, the risk is that an aggressive tightening will lead to a major deterioration of the economy.

For example, if banks fully pass rates to borrowers, homeowners will need to pay $295 extra per month for a $750k mortgage. This could be a big hit to individuals considering that wage growth has been a bit weak this year.

With the RBA done, the next key data to watch will be the upcoming American inflation data that is scheduled on Friday. Analysts expect the data to show that the country’s inflation moderated slightly in May this year.

AUD/USD forecast

The AUD/USD pair has been in a strong bullish trend since mid-June because of the strong US dollar. It has risen by more than 5.8% in this period. At the same time, the pair formed an ascending channel pattern that is shown in black. On Tuesday, it had a false breakout after the RBA decision.

The pair has moved slightly above the 25-day and 50-day moving averages while the MACD is approaching the neutral point. It is slightly below the 50% retracement point.

Therefore, there is a likelihood that the pair will continue the bullish trend since it is stuck above the two MAs. If this happens, the next key resistance will be at 0.7300

The pair will likely keep rising as bulls target the key support at 1.0750.

Bullish View

• Buy the EUR/USD and set a take-profit at 1.0750.
• Add a stop-loss at 1.0600.
• Timeline: 1-2 days.

Bearish View

• Set a sell-stop at 1.0600 and a take-profit at 1.0500.
• Add a stop-loss at 1.0700.

The EUR/USD moved sideways after the latest minutes by the Federal Reserve. The pair is trading at 1.0673, which is slightly below this week’s high of 1.0750. The next key data to watch will be US pending home sales and GDP numbers.

FOMC Minutes

The FOMC published minutes of this month’s meeting. The minutes showed that members agreed that the bank needs to continue with the 50 basis point hikes in the next few meetings in order to fight inflation. By being this aggressive, officials believe that the bank will be positioned well to assess the effects of policy firming.

Before the minutes, most investors were expecting that the bank will only deliver 50 basis point hikes in the next two meetings and then move to 20 basis points. Also, the officials noted that the bank may need to move above the neutral level of rate that will support the economic growth without causing inflation.

The FOMC minutes came a few hours after pressure mounted on the European Central Bank (ECB) to start normalizing its policies. In a statement, Charles Goodhart, a former official at the BOE warned that  ECB officials face a “very difficult” task ahead to contain inflation.

He spoke in a panel led by ECB’ Chief economist, Philip Lane. Still, there are signs that the ECB has started listening to critics. This week, Christine Lagarde wrote a lengthy blog post in which she made the case of starting rate hikes in the July meeting and then exiting negative rates in September.

The next key data that will have an impact on the EUR/USD will be the upcoming US GDP numbers that will come out in the afternoon session. Since these are the second estimates, their impact on the pair will be limited. The pair will also react to the latest US pending home sales numbers.

EUR/USD Forecast

The EUR/USD pair formed a break and retest pattern when it moved to a low of 1.0640 on Wednesday. The pair is now trading at 1.0677, which is slightly below this week’s high of 1.0750. It remains above the 25-day and 50-day moving averages.

At the same time, it has moved slightly above the 38.2% Fibonacci Retracement level. The pair has moved above the neutral level. Therefore, the pair will likely keep rising as bulls target the key support at 1.0750.

The pair will likely have a relief rally as investors buy the dips.

Bullish View

• Buy the AUD/USD and set a take-profit at 0.7300.
• Add a stop-loss at 0.7100.
• Timeline: 1-2 days.

Bearish View

• Set a sell-stop at 0.7135 and a take-profit at 0.7050.
• Add a stop-loss at 0.7200.

The AUD/USD pair crashed to the lowest level since February this year as concerns about the Chinese economy pushed commodity prices sharply lower. The Aussie is trading at 0.7165, which is about 6.55% below the highest level this month.

Commodity Prices Retreat

The Australian dollar is often seen as a commodity currency because of the vast amount that it produces and exports. Some of the most important commodities in the country are iron ore, coal, and natural gas. Therefore, the Australian economy tends to do well when commodity prices are soaring.

This week, however, most commodity prices have dropped sharply as concerns about demand from China. The country’s government has embraced Covid-zero strategy that aims to end the virus completely. As a result, officials have ordered a lockdown in Shanghai, one of the biggest cities in the country.

The AUD/USD pair has also retreated as the risks associated with the upcoming election rise. Recent polls show that the race between Morrison and Albanese will be close even as the incumbent leads. An Ipsos poll showed that Albanese maintains low approval ratings.

The biggest catalyst for the pair on Tuesday will be the latest US consumer confidence data. This is usually an important figure considering that consumer spending is usually the most important part of the American economy.

Economists expect the data by Conference Board to show that confidence held steady in April even as most people continue to worry about inflation. They expect the number to reveal that consumer confidence rose to 108.0.

The other important data will be durable goods. Economists also expect these numbers will reveal that durable goods rose by 1.0% in March. Finally, the US will release the house price index and new home sales numbers.

AUD/USD Forecast

The four-hour chart shows that the Aussie has settled at a strong support level. It remains at its lowest level since March 15th. Oscillators show that he pair has gotten significantly overbought. At the same time, the Relative Strength Index (RSI) and the Stochastic Oscillator have started moving sideways, signaling that bottoming could be happening.

Therefore, the pair will likely have a relief rally as investors buy the dips. If this happens, the key reference level to watch will be at 0.7300. A drop below the support at 0.7100 will invalidate the bullish view.

The pair will likely resume the bearish trend as sellers target the horizontal line shown in purple at 1.300.

Bearish View

• Sell the GBP/USD and set a take-profit at 1.300.
• Add a stop-loss at 1.3120.
• Timeline: 1 day.

Bullish View

• Set a buy-stop at 1.3070 and a take-profit at 1.3135.
• Add a stop-loss at 1.3000.

The GBP/USD price was unchanged in the Asian session in a relatively calm week in the UK. The pair is trading at 1.3053, where it has been in the past few days. This price is about 1.9% below its highest level in March this year.

US Dollar in Focus

The GBP/USD pair has had a mixed week because of the limited economic data from the United Kingdom. Last week, the Office of National Statistics (ONS) published the most important numbers for the UK economy.

For example, on Monday, the agency published relatively mild GDP numbers. The data revealed that the economy barely grew in January. On the following day, the agency released the latest jobs numbers that revealed that the unemployment rate has dropped to where it was before the pandemic started.

The ONS then released the strong consumer and producer inflation numbers. In total, these numbers have jumped to the highest level in years.

Therefore, with these numbers, investors have already predicted the next action by the Bank of England. The bank is expected to be a bit cautious about its rate hikes although the hawkish sentiment will remain.

The GBP/USD price action is mostly because of the US dollar. The currency jumped sharply this week as bond yields rose to multi-year highs. The dollar index moved to $101 for the first time in years.

In the past two days, however, the situation has changed as the bond yield rally eases and as dollar holders start to take profits. On Wednesday, the US published weak existing home sales. The data revealed that sales dropped from 5.93 million in February to about 5.73 million in March. This 2.7% decline happened as other data showed that the 30-year mortgage rate rose to 5.2%. The next key catalyst will be the upcoming speech by Jerome Powell.

GBP/USD Forecast

The GBP/USD pair has gone nowhere in the past few days. It has risen to a high of 1.3055, which was slightly above last week’s low of 1.2971. The pair is hovering along the 25-period and 50-period moving averages while the MACD has moved slightly above the neutral level. It is also below the descending trendline shown in black.

Therefore, the pair will likely resume the bearish trend as sellers target the horizontal line shown in purple at 1.300.

The pair will likely keep rising as bulls target the next key resistance at 43,000.

Bullish View

• Buy the BTC/USD pair and set a take-profit at 43,000.
• Add a stop-loss at 39,000.
• Timeline: 1 day.

Bearish View

• Set a sell-stop at 39,000 and a take-profit at 37,000.
• Add a stop-loss at 42,000.

The BTC/USD pair rebounded sharply as sentiment in the crypto industry improved. The pair rose to over 41,000 a day after it crashed to a monthly low of 38,700. Other digital coins like Ethereum, Solana, and Polkadot also jumped, with the total market cap of digital currencies soaring to over $1.9 trillion.

Crypto Sentiment Improves

The BTC/USD pair rose even as concerns about the bond market continued. US bond yields rose to their highest levels in years, with the 30-year crossing the 3.0% level for the first time since 2018. Therefore, there are concerns that the Federal Reserve will continue tightening in the coming months.

The pair also rose as American shares continued their bullish trend. The Dow Jones rose by 400 points while the Nasdaq 100 and S&P 500 indices rose by 265 and 60 points, respectively. This strength happened as more American companies published their quarterly earnings.

The earning season has been a bit weak, with most companies warning about the rising cost of doing business. In the past few months, there has been a close correlation between Bitcoin and American stocks.

The BTC/USD pair also rebounded as Russia continued to study the role of cryptocurrencies in its economy. The government is said to be finalizing a bill on digital coins in the country. Analysts expect that the country will be more open to digital coins now that its access to the foreign market is a bit limited.

The ongoing tax season in the US is also having an impact on Bitcoin prices. Most people are now filing their taxes for their holdings in 2021. Historically, cryptocurrency prices tend to show some weakness during this period.

BTC/USD Forecast

The four-hour chart shows that the BTC/USD pair has been in a strong bullish trend in the past two days. The pair rose to 41700, which was the highest level since April 11th. On the four-hour chart, it managed to move above the 25-day moving average. It also seems like it formed a double-bottom pattern while the MACD has been rising.

Therefore, the pair will likely keep rising as bulls target the next key resistance at 43,000. A drop below the support at 40,000 will invalidate the bullish view.