With the return of the US dollar from the Independence Day holiday, it completed the path of its sharp gains against the rest of the other major currencies, amid strong expectations of more US interest rate hikes throughout 2022. The share of the GBP/USD currency pair fell to the 1.1898 support level, the lowest for the currency pair since March 2020 and settled around the 1.1925 level, and there is no powder for an improvement in the currency pair’s performance so far. The dollar is awaiting the minutes of the last meeting of the Federal Reserve and the numbers of US jobs.

Sterling will continue to lose more value against the US dollar than current levels say forex analysts at JP Morgan. A new currency strategy note from the Bank of Wall Street found that “a strong US dollar is not declining” and therefore they maintain a “bearish” position for GBP/USD; Strategic selling position. To justify expectations of a weaker pound against the dollar, JPMorgan said Britain’s inflation remains the highest in the G10 while economic growth through 2023 will lag behind most of its peers.

“The domestic cyclical outlook will continue to dampen the outlook for sterling, even with the fiscal consolidation,” says Paul Megizzi, currency analyst at JPMorgan. And “In the meantime, it seems unlikely that the Bank of England will stem the downward pressure on sterling on its own.” UK inflation is not expected to peak until October, economists say, citing the timing of the upcoming energy cap hike from Ofgem.

JP Morgan expects UK CPI inflation to approach 11% y/y at this point, underlining that the cyclical outlook for the UK economy remains bleak – in fact, the project is the second lowest in the G10 based on cumulative growth. over the next six quarters to 2023.” “So, while the Bank of England has signaled its willingness to speed up rate hikes – perhaps in August by 50 basis points – it appears that the swaps that had up to this point called for a more gradual pace of hikes will continue, and as long as that is the case sterling should continue to hold Trade deprived of nominal politics”.

As for the US dollar outlook, the multi-month uptrend is far from over, says JP Morgan. “We have recommended a defensive and long-term stance on currencies throughout the year, given the combination of weak growth, high inflation and tight monetary policy,” says Mira Chandan, global FX analyst at JP Morgan in London. It also says: “Developments in the past month – even more hawkish central banks including the Federal Reserve, declining PMI and consumer confidence, and higher energy prices in Europe – all reinforce this position.”

As such, JP Morgan forecasts the GBP/USD exchange rate at 1.15 by the end of the year and 1.16 by the end of March 2023. For those looking to lock in current rates, Horizon Currency foreign exchange specialists say they are currently offering spot rates between 40 and 50 pips. away from the market. Deep in July, the Pound started in the red against the Dollar, falling back below 1.20 amid a significant drop in UK government bond yields. This drop is a sign that the market is lowering its expectations of future interest rate hikes by the Bank of England.

GBP/USD analysis

So far, the general trend of the GBP/USD currency pair is still bearish, taking into account that the currency pair’s move below the 1.2000 support level moves technical indicators towards strong oversold levels, so currency traders may consider catching long positions if factors stop the gains of the US dollar. This may happen if the US job numbers come in less than expectations, or the tone of the minutes of the last meeting of the US Federal Reserve comes less hawkish than the market expectations.

The closest support levels for GBP/USD today are: 1.1880, 1.1800 and 1.1710, respectively.

The closest resistance levels for GBP/USD today are: 1.2000, 1.2085 and 1.2235, respectively.

The trading of the last week of June was harsh for the price of the euro/dollar pair, as it fell to the 1.0365 support level and settled around the 1.0435 level at the beginning of this important week’s trading. This included announcing the contents of the minutes of the last meeting of the US Federal Reserve, ending with the announcement of US job numbers. The price of the euro was not very happy with the shift of the European Central Bank’s policy towards tightening. I mentioned before that the US Federal Reserve is still racing and strongly in the path of raising interest rates throughout 2022.

The recent Forum on Central Banking in Sintra, Portugal, provided insight into the thinking of the European Central Bank (ECB), Bank of England (BoE) and Federal Reserve (Fed) while providing clues on what will be important to them. The heads of the European Central Bank, the Bank of England and the Federal Reserve were joined on the last day of the ECB’s annual conference on central banks by BIS Managing Director Augustus Carstens and Bloomberg’s Francine Laqua for a discussion session last Wednesday.

Both were questioned about everything from expectations of economic growth and inflation to interest rates and the merits of current market expectations of the path of borrowing costs over the coming months as part of this policy panel. The biggest benefit to the markets was that neither European Central Bank President Christine Lagarde nor BoE Governor Andrew Bailey came close to endorsing current market expectations like Fed Chairman Jerome Powell.

For her part, ECB Governor Lagarde said, “Our reaction function is what matters, and as long as that is understood, the fact that we are on this path of normalization, that we will be gradual but optional, and the fact that we have made very clear what could happen in July. What is likely to happen in September? And the way we’re going, yes I think the markets have a full understanding and appreciation for what we’re doing.”

She added, “We need to look at how clear the uncertainty is looming, and I think in that regard what’s happening on the energy front, what’s happening on the war front unfortunately, what’s happening in terms of wage negotiations and how inflation expectations are.” Continuing to remain firmly established just as it has re-established are some of the elements that we will consider very carefully at the job we have to do.

President Lagarde chose no bones with European interest rate expectations while saying nothing that would encourage financial markets to go further than they already did when he bet recently that the deposit rate in Europe is likely to rise from -0.50% to 1%. before the end of the year. She also reminded on two occasions, in what may be pertinent remarks, of the “option” that the ECB is seeking on the timing and size of any changes in interest rates after the 0.25% rise in July which was already announced as part of a policy decision June.

However, there were no details, and few comments on the widely awaited and eagerly anticipated plans for a new instrument aimed at staving off instability in southern European government bond markets, as European Central Bank interest rates rose for the first time since the sovereign debt crisis in the eurozone.

EUR/USD forecast today

The contrast between the future of policy tightening for both the European Central Bank and the Federal Reserve continues to be a strong reason for the EUR/USD pair’s decline throughout 2022. The general trend of the Euro-dollar is bearish, and stability will remain below the 1.0500 support, which will continue to support the bears’ continuous and stronger control of the trend for the time being. The most important support levels for the trend will be 1.0410, 1.0380 and 1.0290, respectively, which are sufficient to push the technical indicators towards oversold levels.

On the upside, any attempts to rebound will not be strong, and if they occur, selling will occur again. The closest resistance levels for the euro are $1.0485, 1.0550 and 1.0630, respectively.

The price of Sterling came under severe and widespread pressure as global stock and bond markets plunged. This occurred while events in Westminster sparked incorrect speculation about the UK-EU trade relationship, creating a perfect storm for sterling assets in the process. According to the performance in the forex market, the British pound tumbled, and its biggest losses were at the hands of the Indonesian rupiah, the South African rand, the Indian rupee, and the Korean won, but with the US dollar and the euro closely behind them in this exact order. In the case of the GBP/USD currency pair, it fell to the 1.1933 support level, its lowest in years, and is settling around the 1.2000 level at the time of writing the analysis.

Returning to our recent technical analyzes for this pair, we mentioned that the chance of falling to the psychological support level 1.2000 is very likely if it breaches the 1.2165 support, which happened more than we expected.

The losses came alongside declines in the stock and bond markets but were also sharp and broad enough to indicate the domestic impact in action on sterling. “But with the Federal Reserve seemingly close to announcing a massive 75 basis point rise tonight, and after the pound has already weakened to $1.22, we are sticking with our expectations for a 50 point increase,” said Paul Dills, chief UK economist at Capital Economics. basis from 1.00% to 1.50%.”

Sterling’s losses started early when figures from the Office for National Statistics (ONS) indicated that the UK labor market may cool down faster than the Bank of England and other forecasters had forecast. According to the official announcement, the country’s unemployment rates rose from a multi-decade low of 3.7% in March to 3.8% in April, while the National Statistics Office’s measures of wage and salary growth came in less than what economists had expected, barely a day after other data that indicated that Britain’s economic growth may slow faster than many expected.

These numbers followed other figures released in May which showed UK inflation rose to 9% in April, the highest level in several decades for price growth, but also below the Bank of England’s forecast of 9.1%, which finds the same Now in lag. This is a critical situation ahead of Thursday’s interest rate decision by the Bank of England.

All the latest data from the UK suggests economic demand is waning, and there is a risk that the Bank of England will feel tempted to raise rates by just 0.25% on Thursday, which goes against more recent market expectations. Inclined towards a greater movement of 0.50%. The above is an important reason behind the poor performance of the pound in the market, although it is appropriate that these losses come in the wake of the government putting in place domestic legislation to address the Northern Ireland Protocol and the risks it poses to stability in the province.

This protocol device was previously known as the “Northern Irish Backstop” something that was widely misreported as well as misunderstood in the media and across financial markets, meaning it could have been a contributing driver to the pound’s losses on Tuesday. This is a reasonable and practical solution to the problems facing Northern Ireland. It will protect the EU’s single market and ensure that there is no hard border on the island of Ireland. We are ready to achieve this through talks with the European Union. Foreign Secretary Liz Truss said: “But we can only make progress through negotiations if the EU is willing to change the protocol itself – at the moment they are not.”

The UK government has embarked on changes to the Northern Ireland Protocol under Article 16 after 18 months of fruitless discussions with the European Commission and members of the EU bloc.

According to the technical analysis of the pair: There is no doubt that the collapse in the price of the GBP/USD currency pair below the psychological support confirms the strength and control of the bears on the trend. Despite the movement of technical indicators towards strong and sharp saturation levels, forex investors will not think In the demand for buying, except until the reaction from the announcement of the US Federal Reserve today, and the Bank of England tomorrow. The path of raising interest rates from the two banks, in addition to the performance of global stock markets, are important factors to determine the continuation of the current collapse or rebound, even if temporarily.

The closest support levels for the Sterling dollar today are 1.1945 and 1.1830, respectively. According to the performance on the daily chart, it will be important to break the resistance levels 1.2520 and 1.2700 to change the current bearish outlook.

We expect the lira to continue to decline, especially as long as it continues trading above the bullish trend line, as every dip on the pair represents an opportunity to buy back.

Today’s recommendation on the lira against the dollar

– Risk 0.50%.

– Yesterday’s buy deal was activated and half of the contracts were closed at profits and a stop loss point was provided.

Best selling entry points

Entering a short position with a pending order from 17.11 levels

– Set a stop-loss point to close the lowest support levels 17.26.

– 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 long position with a pending order from 16.58 levels

– The best points for setting the stop loss are closing the highest levels of 16.32.

– 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 17.00

The Turkish lira continued to record sharp losses, approaching its lowest levels against the US dollar, as the lira approached its lowest levels during the past year. The bets of selling the lira against the dollar increased after the Turkish President’s statements yesterday, in which he insisted on reducing the interest rate in a counter to the monetary tightening policies pursued by central banks around the world. Analysts believe that the lack of tools from the Turkish Central Bank may contribute to increasing pressures on the Turkish currency, especially with the shrinking of the size of the cash reserves in the country and the expansion of inflation to its highest level in 24 years. On the political front, investors followed the statements of Turkish Defense Minister Hulusi Akar on Tuesday that his country is ready to contribute to the safe export of grain from the ports of Ukraine. Attention was also paid to the measures that could be taken for the safe transportation of grain, sunflower and other agricultural products. Turkey is committed to providing support in this field and renewed its readiness to play its role to achieve peace in the region.

On the technical front, the Turkish lira fell against the dollar to continue recording new lows this year. During today’s trading, the lira approached the main resistance levels at 17.00. The pair maintained its trading above the bullish trend shown on the chart. The pair also continued trading above the moving averages 50, 100 and 200, respectively, on the four-hour time frame as well as on the 60-minute time frame. Referring to the general upward trend. At the same time, the pair is trading the highest support levels, which are concentrated at 16.50 and 16.40 levels, respectively. On the other hand, the lira is trading below the resistance levels at 17.11 and 17.40, respectively. We expect the lira to continue to decline, especially as long as it continues trading above the bullish trend line, as every dip on the pair represents an opportunity to buy back. Please adhere to the numbers in the recommendation with the need to maintain capital management.

With more than 300 pips, the price of the USD/JPY currency pair moved upwards from 122.00 to the resistance level 125.10, the highest in six years. This came in light of the Japanese economy’s faltering recovery from the effects of the epidemic and the consequences of the Russian-Ukrainian war. The USD/JPY currency pair has returned to stabilize around the 123.30 level at the time of writing the analysis. Yesterday, the Bank of Japan offered to buy an unlimited amount of 10 year JGBs after yields rose to the upper end of their target range.

In a statement on Monday, the BoJ said it will buy an unlimited amount of 10-year Japanese government bonds at 0.25 percent for three consecutive days beginning on March 29. Earlier, the Bank of Japan made unlimited purchases of Japanese government bonds by 0.25 percent on February 14.

Despite the intervention, yields on government bonds continued to rise against the hawkish stance of the US Federal Reserve. The 10-year Japanese government bond yield rose to 0.24% on Monday and the Japanese yen fell to a six-year low against the US dollar.

Japanese Prime Minister Fumio Kishida has called for measures to mitigate the impact of higher energy prices, which are amplified by the depreciation of the Japanese yen, as he looks to maintain popular support ahead of the summer elections. Finance Minister Shunichi Suzuki said that Kishida ordered the compilation of moves at a cabinet meeting on Tuesday. While the prime minister’s approval ratings remain in good shape despite Japan’s worst wave of virus infections, growing discontent over the fastest-rising fuel and electricity bills in 41 years threatens to change the optics over the coming months.

Unwilling to join a long list of Japanese leaders in the short term, Kishida is eager to show he is taking action. It also needs to strike a delicate balance to ensure real relief for households and businesses when needed, without giving the impression of a dispersal of spending. Kishida has already floated 360 billion yen ($3 billion) in measures to offset the surge in crude prices in March. Under the current aid, the government is currently paying oil refiners a subsidy of 18.6 yen (15 cents) per liter of gasoline, up from a previous 5 yen subsidy introduced since January.

While oil prices are down from the highs seen earlier in the war in Ukraine, volatility remains high and a sharp slide in the yen will keep upward pressure on imported fuel costs. The yen briefly crossed the 125 dollar barrier on Monday for the first time in seven years.

According to the technical analysis of the pair: The gains of the USD/JPY currency pair stopped, but it did not take it out of the upside trend, which is still valid. As mentioned before, and according to the performance on the daily chart, there will be no exit for the pair from its current channel without the bears moving towards the 118.50 support level. The stability is above the resistance psychological 120.00 motivates the bulls to move further higher. At the same time, it must be taken into consideration that the recent gains were a catalyst for the technical indicators to move towards strong overbought levels, and if the pair did not gain momentum, it may be exposed to profit-taking at any time.

The dollar yen currency pair will continue to interact with the market’s expectations regarding the future of raising US interest rates and the extent to which investors take risks or not, and today it will interact with the US consumer confidence reading.