The downward trend will likely continue as sellers target the next key support at 1.2700.

Bearish View

• Sell the USD/CAD pair and set a take-profit at 1.2700.
• Add a stop-loss at 1.2850.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.2850 and a take-profit at 1.2950.
• Add a stop-loss at 1.2750.

The USD/CAD price came under pressure on Monday morning as the US dollar weakness continued. The pair slipped to a low of 1.2800, which was the lowest level since June 13 of this year. It has fallen by about 3.15% below the highest point this year.

Canadian Dollar Comeback

The USD/CAD price had a mixed performance in July. The pair initially rose to a multi-year high of 1.3228 as the US dollar strength continued. It then made a major pullback as investors embraced a relatively risk-on sentiment.

In July, data from Canada revealed that the economy was going through some challenges. Inflation surged to the highest level in more than three decades because of the soaring oil and gas prices. At the same time, the labor market weakened in June as the economy lost over 30k jobs.

On a positive note, the unemployment rate dropped to about 4.7%. This was the first time it moved below the important 5% since the pandemic started. Further data revealed that the economic recovery is moderating.

According to Statistics Canada, output in June rose by just 0.1% after it stalled in May. As a result, the economy expanded by about 4.6% on a year-on-year basis. As such, analysts expect that Canada’s economy will start to moderate after it recorded substantial growth in the first half of the year. Analysts believe that the economy expanded by 2% in Q2.

There will be no economic data from Canada on Monday. As such, investors will focus on the latest manufacturing numbers from the United States. Economists expect data by S&P to show that the PMI slowed to 52.3 in July. The other reading by the Institute of Supply Management (ISM) is expected to have dropped from 53 to 52.0.

USD/CAD Forecast

The four-hour chart shows that the USD/CAD pair has been in a strong bearish trend in the past few days. As a result, the pair has formed a descending channel that is shown in purple. It has also moved below the 25-day and 50-day moving averages while the MACD remains below the neutral point.

The USD/CAD price has moved slightly below the 50% Fibonacci Retracement level. Therefore, the downward trend will likely continue as sellers target the next key support at 1.2700. A move above the resistance level at 1.2850 will invalidate the bearish view.

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Gold futures snapped a four-day losing streak and settled slightly higher at the end of last week’s trading, as the US dollar gave up some of its strength. Treasury yields fell amid a slight decline in inflation concerns. The price of gold XAU/USD today around the level of 1837 dollars an ounce and the selling operations last week pushed it towards the support level of 1817 dollars an ounce.

On the economic front, data from the Commerce Department showed a significant recovery in US new home sales in May. The report showed new home sales rose 10.7% to an annual rate of 696,000 in May after declining 12% to an upwardly revised 629,000 in April. The surprise rise surprised economists who had expected US new home sales to decline 0.5 percent to an annual rate of 588 thousand from 591 thousand originally reported for the previous month.

Meanwhile, a separate report from the University of Michigan showed that US consumer confidence fell slightly more than initially expected in June. The report showed that the Consumer Confidence Index for June was revised down to 50.0 from an initial reading of 50.2. The Consumer Confidence Index fell sharply from the final reading for May of 58.4, falling to an all-time low. The sharp decline in the headline index came as the current economic conditions index fell to 53.8 in June from 53.3 in May, while the consumer expectations index fell to 47.5 from 55.2.

Today’s XAU/USD Gold Forecast:

Despite today’s recovery, however, the price of gold is subjected to downward pressure, and I still prefer to buy XAU/USD gold from every bearish level. The ongoing and increasing global geopolitical tensions still support the opportunity to buy gold in the end. The closest buying levels most appropriate to the last performance are 1817, 1800 and 1785 dollars, respectively. On the other hand, the price of gold may come out of the control of the last bears if it returns to move towards the resistance levels of 1855 and 1877 dollars, respectively.

The price of gold will be affected today by the price of the US dollar and the extent of investors’ appetite for risk or not, as well as the reaction from global central banks’ signals towards the future of tightening their monetary policy.

For five trading sessions in a row, the losses of the USD/JPY currency pair stopped at the support level 126.35 and settled around the 127.20 level at the time of writing the analysis. The recent profit-taking was normal after the dollar-yen pair gained 20-year highs during this month’s trading. Despite the recent performance, the US dollar still has strength factors, the most prominent of which is the future of raising US interest rates strongly during 2022 to contain US inflation, which reached its highest level in 40 years.

Tougher consumer spending and a decisive narrowing of the merchandise trade deficit show that the US economy is emerging in no time from a hole in the first quarter. Maintaining that momentum later this year is more of a question mark as manufacturing and housing weaken along with employment and wage growth. Inflation, while declining a bit, is still elevated and so the Fed will continue to press more aggressively on monetary policy.

In April, inflation-adjusted household purchases posted the strongest advance in three months and will help queue up a recovery in GDP this quarter. The goods trade deficit – a large contributor to the 1.5% annual decline in first-quarter gross domestic product – last month contracted by the most since 2009. While these developments are reasons for optimism about the US economy, regional manufacturing surveys have shown setbacks, while Capital equipment orders eased.

This week, the government is expected to report that US employment growth slowed in May, indicating that labor demand is starting to turn less hot. This may help ease wage pressures later this year, and eventually provide some relief for central bankers in their quest to bring down inflation. Consumer spending was solid in April, rising 0.7% based on the inflation rate. The savings rate has fallen to its lowest level since 2008, indicating that Americans are increasingly relying on savings as price pressures strain budgets.

The increase in spending was widespread, driven by goods and services. Economists had expected demand for services such as travel and entertainment to outpace merchandise expenditures as pandemic fears fade, but inflation-adjusted spending on goods rose 1% in April from the previous month and services rose 0.5%.

“The latest report shows that consumers continue to consume despite facing the highest rate of inflation in 40 years,” Wells Fargo & Co economists Tim Quinlan and Shannon Seery wrote in a note. “But we are approaching the end of the lollipop,” they added, noting the decline in the savings rate.

Meanwhile, while inflation is falling year-on-year, it is still running three times faster than the Fed’s 2% target and helps explain why central bank officials expect to implement half-point US interest rate increases in upcoming meetings. Wells Fargo economists also wrote that this could also lead to a decline in consumer spending over the next several quarters.

According to the technical analysis of the pair: So far, the bears are still controlling the performance of the USD/JPY currency pair. Breaking the last strong support 126.35 will be important for more bears’ control over the trend. The currency pair has already exited the ascending channel and will not return to it strongly without moving towards the resistance levels 128.75 and the psychological top 130.00 again. I expect quiet movements for the currency pair today in light of the American holiday, and the stronger interaction will be with the US jobs numbers later this week.

Last week’s trading was positive in general for the recovery of the gold price, which moved towards the resistance level of 1858 dollars an ounce at the beginning of this week’s trading.

This is shown on the daily chart below, where the rebound was good to break the last descending channel. It pushed the gold price to collapse towards the 1786 support level for an ounce. At that time, I recommended a lot to think about buying gold from every descending level, which I confirm now as well.

Despite the trend of global central banks in one path towards raising interest rates strongly during the year 2022, the gold market receives another stimulus from the continuation of the pandemic. This affects the second largest economy in the world, in addition to the continuation of global geopolitical tensions led by the Russian / Ukrainian war. Its most negative consequences on the future of the global economic recovery, is a good environment for gold, the traditional safe haven for investors in times of uncertainty.

The price of gold appears to be benefiting from the latest round of US data. Initial jobless claims for the week ending May 13 exceeded the expected number of claims at 200K with a tally above 218K, while continuing claims for the period ending May 6 outnumbered 1.32 million with the tally below 1.317 million. On the other hand, the Philadelphia Fed Manufacturing Survey disappointed with a reading of 2.6 compared to market expectations of 16.

US Existing Home Sales for the month of April missed expectations at 5.65M with a decrease of 5.61M (MoM). The change in existing home sales also came in less than the expected change of -0.7% with a change of -2.4% (MoM). Earlier in the week, US housing starts for April missed expectations, while building permits came in better than expected. The price of the yellow metal is also affected by the fragile situation in Europe amid Russia’s invasion of Ukraine, where Western economies have imposed sanctions to stifle Putin’s economy.

According to the technical analysis of gold prices: In the near term and according to the performance on the hourly chart, it appears that the price of gold is swinging within the formation of a gently ascending channel. This indicates a slight short-term bullish bias in market sentiment. Therefore, the bulls will target extended gains at around $1,854 or higher at $1,864 an ounce. On the other hand, the bears will look to make profits at around $1,835 or lower at $1,823 an ounce.

In the long term and according to the performance on the daily chart, it appears that the price of gold rebounded recently after completing the bearish XABCD reversal pattern. This indicates that the bulls are trying to control the price of gold. Therefore, they will look to extend the current retracement towards $1,885 an ounce or higher to $1,934. On the other hand, the bears will target long-term profits around $1813 an ounce or lower at the $1764 support level.

The only thing you can count on is volatility, and that is going to be true with all stock markets, so be cautious about your position sizing.

The FTSE 100 gapped lower to kick off Tuesday but found enough strength near the 50-day EMA to turn around and close at the very highs of the day. This has been a very strong move, but at this point, it is obvious that we do not have an uptrend to deal with, as we recently had pulled back quite significantly from the 7600 level. That being said, we still have a lot of noise just above that will come into the picture, so I think it is going to be difficult to break above there.

The 50-day EMA underneath is sitting at the 7447 handle, and it looks as if it is trying to rise from there. The 50-day EMA could offer a bit of dynamic support, so pay close attention to that. If we do break down below there, then I think the 7300 level underneath could be targeted next. The 200-day EMA is in that general vicinity, so it will be interesting to see how that plays out. Given enough time, this is a market that I think will have to come to terms with whether or not the bullish pressure can continue, but quite frankly we may have just formed a massive double top. On the other hand, if we were to break above the 7600 level, it could show this market going much higher, as it would be a “busted double top.”

Sometimes, when a pattern like this fails, that ends up being a much bigger signal. Ultimately, if we can break above there, then it is likely that we will enter more of a “buy-and-hold” type of situation. On the other hand, if we were to break down below the 7300 level underneath, and by extension the 200-day EMA, the market is likely to fall apart and perhaps reach down to the 7000 handle. The 7000 handle has a certain amount of psychology attached to it, and I think a lot of people will be paying close attention to it.

The only thing you can count on is volatility, and that is going to be true with all stock markets, so be cautious about your position sizing. However, we do have a couple of levels mentioned previously that we could pay close attention to, so wait for your signal to appear.

Investors still prefer to buy the US dollar due to strong expectations for the future of US interest rate hikes. Accordingly, the price of the GBP/USD currency pair settles around its recent losses, which reached the 1.2411 support level. This is its lowest since July 2020, and settled around the 1.2520 level at the time of writing the analysis. This is a time when the sterling is looking for strength factors to recover and compensate for its recent losses. The currency pair is on an important date this week, as the US Federal Reserve and the Bank of England will announce an update of their monetary policy amid expectations of an interest rate hike.

In general, interest rate expectations are important for currencies, especially in a world where global central banks are racing to raise interest rates in the face of rising inflation. The best example of how this affects currencies is with regards to the US dollar, which has risen sharply in recent months thanks to the high number of interest rate increases likely to be introduced by the US Federal Reserve. The market expects 240 basis points of hikes from the Fed through the remainder of 2022 and 145 basis points from the Bank of England. Its price is expected to rise more than 80 points from the European Central Bank.

On the outlook: Analysts at ABN AMRO said they cut their forecast for the British pound on the belief that the Bank of England is nearing completion of its rate hike. The outlook from the Dutch global investment bank and lender comes just days before the Bank of England monetary policy meeting in May when interest rates are expected to rise by another 25 basis points.

According to the technical analysis of the currency pair: On the daily chart below, it seems clear that the bears continue to dominate the movements and performance of the GBP/USD currency pair, and stability below the 1.2500 support may push the currency pair towards stronger bearish levels, and the closest to it after that are 1.2395 and 1.2200, respectively. These levels are sufficient to push the technical indicators towards oversold levels. On the other hand, the psychological resistance 1.3000 must be broken to break the current trend.

The sterling dollar currency pair will interact today with the performance of global financial markets and the reaction from the announcement of the British Industrial PMI reading, then the announcement of US job opportunities and factory orders.

Looking at this chart, we are in a small consolidation area of 150 points, something that we need to pay close attention to in order to trade in whichever direction we are ready to go in.

The S&P 500 gapped lower to kick off the trading session in the futures market on Friday but then turned around to fill that gap. After that, the market then fell rather significantly. The 4150 level underneath continues to offer support underneath, extending all the way down to the 4100 level. Keep in mind that the futures market had to deal with options expiration, but it also has been quite a bit of noisy behavior just waiting to happen.

Looking at this chart, if we were to break down below the 4100 level, then it is likely that we will continue to go down to the 4000 level, maybe even lower than that. This is a market that has been noisy as of late, but the 4300 level above has offered a bit of a ceiling. You should keep in mind that if we were to break above there, it would be a very bullish sign, perhaps opening up the possibility of a move to the 200-day EMA.

Speaking of the 200-day EMA, the 50-day EMA is sitting just above it and looking likely to break down through it. After all, the market would then kick off what is known as a “death cross.” This is a very negative signal, and longer-term traders do tend to look at it as a sell signal. That being said, it is normally a bit late, but this time it does have the added benefit of sitting just above the massive support that is so obvious in this chart. Because of this, I think it is probably only a matter of time before everybody would pile in.

The market is currently worried about the Federal Reserve and whether or not it will stay hawkish, which it probably will due to inflation. However, we have seen a lot of noise due to the fact that GDP numbers have been negative. Although we know that there are interest rate hikes coming soon, the question is how aggressive will the Federal Reserve end up being? Looking at this chart, we are in a small consolidation area of 150 points, something that we need to pay close attention to in order to trade in whichever direction we are ready to go in. The candlestick for the Friday session does look rather negative though.

The British pound is on track to record a third consecutive monthly decline against the euro and the fourth consecutive monthly decline against the US dollar as investors continue to abandon the British currency. 

In the case of the GBP/USD currency pair, it has fallen to the 1.2500 psychological support level, the lowest for the currency pair since July 2020, and is settling around the 1.2540 level at the time of writing the analysis. This is amid the continued strength of the US dollar with expectations of raising US interest rates.

The latest move in the British pound comes amid a significant drop in global stock markets, indicating that investors are increasingly pessimistic about the implications for the forex foreign exchange markets. “Currency traders are running for the hills,” says Jeremy Bolton, Reuters market analyst. “The dollar is rising as liquidity is heading towards safe assets… Previously, demand currencies weakened significantly.”

The British pound is one of these “previously in demand currencies”.

The British currency is under severe pressure and not only depreciates against the euro, dollar and other traditional “safe haven” currencies such as the franc and the yen; Worryingly, it is declining against most major currencies.

The question now is: Why is the price of the pound declining?

There are two prominent reasons:

1) Sterling tends to struggle when markets are down, and sentiment is as it is now. This dynamic was clearly demonstrated during the Great Financial Crisis when the exchange rate of the pound to the euro fell to an all-time low, and it was highlighted again during the Covid crisis:

With Britain running a large current account deficit, the value of sterling depends heavily on global investor inflows: when times are good, and investors take advantage of sterling as capital flows into the UK.

When investors liquidate their positions, money flows in again, weighing on the pound. This dynamic is certainly true in 2022 when the country’s current account deficit remains as wide as ever.

If global markets and investor sentiment remain under pressure, so will sterling. Currently, investors are concerned that the Chinese economy is about to come to a halt which will negatively impact global growth rates and thus hurt investor sentiment

Beijing could be the next mega-city to go into lockdown, which isn’t good for global investor sentiment. Meanwhile, the war continues in Ukraine, where the news that Russia has cut off gas supplies to Poland has not been well received by the markets.

Currently, concerns are growing about the future of the British economy and this may explain why the British Pound is currently one of the worst performing currencies in the world. Accordingly, analysts comment, “The pound has been hovering around its lowest level in more than a year and a half against the US currency, as consistent evidence of a slowing UK economy suggests that the Bank of England is raising interest rates to fight the highest rate of inflation in decades.”

Economists at Deutsche Bank warned yesterday that recession risks in the UK are rising as the cost of living rises and households shrink. “Recession warnings are flaring up further,” says Sanjay Raja, chief economist at Deutsche Bank, in a new research note released on April 26. Deutsche Bank now expects inflation (CPI) to reach the highest 9% year-on-year in April and October this year, “significantly hitting purchasing power”.

Moreover, tax increases from April will affect household budgets and consumer confidence has already fallen to stagnation levels according to Raja. Meanwhile, real wages are expected to shrink 4% in 2022 in what amounts to one of the worst real-term cuts to packet pay since World War II.

Business confidence is waning amid rising cost pressures and lower operating margins. The set of “recession models” used by Deutsche Bank all point to one thing Raja says: “The probability of a recession is increasing.” In contrast. There is still demand for the dollar, and its rise accelerated amid a broad deterioration in global investor sentiment, which sent the pound exchange rate against the dollar to its lowest level in 21 months.

According to the technical analysis of the pair: On the daily chart, the price of the GBP/USD currency pair moved towards the 1.2500 psychological support level, confirming the bears’ strong and continuous control over the trend for a while. The sterling is looking for factors to stop its losses, and we see that any indications from the Bank of England of the future of a strong tightening of its monetary policy, coinciding with the direction of the Federal Reserve, may provide support for the pair in rebounding higher.

The GBP/USD is testing stronger support levels and the closest ones are currently 1.2475 and 1.2300, respectively. On the other hand, the currency pair may need to break the psychological resistance 1.3000 to have an opportunity to break the current bearish outlook.

It certainly seems as if there are a lot of buyers right here where we are right now.

The Canadian dollar shot higher in value against almost everything during the trading session on Wednesday as the market has shown itself to be very pro-Canadian in the short term. After all, the CPI numbers in several other inflation numbers came out stronger than anticipated during the trading session, and therefore people are starting to bet on the Bank of Canada becoming a bit more aggressive than what they had stated previously.

That being said, the US dollar has crashed into the 1.25 level, an area that has been supported more than once. The 1.25 level has been the bottom of a larger consolidation area, so it is very important to see this area hold. So far, it has, and one has to wonder whether or not we are going to continue to see any momentum, or if we have simply fallen back to the bottom of the same range before we turn around and show signs of buying again.

The 200 Day EMA is at the top of the candlestick and therefore it is likely that it will continue to offer a significant amount of resistance, just above the 1.26 handle. Quite frankly, this is a market that I think continues to see a lot of noisy behavior in this general vicinity, and therefore it is going to be difficult to figure out our directionality until we get yet another impulsive candlestick.

If you look at the hammer from a couple of weeks ago, breaking down below that level could signify quite a bit of selling pressure. That is near the 1.24 handle, as it is an area where we had seen the market come in and start buying again. Breaking down below that level would open up a huge move lower, perhaps even dropping the dollar down to the 1.20 area. That obviously would be a big deal, so be interesting to see how that plays out. Ultimately, if we were to turn around and take out the 1.2650 level, then that could open up the possibility of a move to the 1.29 level eventually. Ultimately, this is a market that I think continues to see a lot of choppiness, but it certainly seems as if there are a lot of buyers right here where we are right now. In general, the next day or two should tell us a lot.

At the beginning of this week’s trading, the price of an ounce of gold moved towards the resistance level of 1969 dollars, the highest for the gold market in nearly a month. The recovery of the US dollar returned the price of gold to stability around the level of 1950 dollars an ounce at the time of writing the analysis. The price of gold stabilized, as investors prepared for the critical US inflation report on Tuesday. In general, the price of the yellow metal has stabilized during the past month, while maintaining its gains since the start of the year 2022 to date, as they are.

Overall, the price of gold is retreating from weekly gains of about 0.8%, adding to its 2022 annual gains to date by about 7%.

In the same way, prices of silver, the sister commodity to gold, rose again above the $ 25 level in the beginning of this week’s trading, although it rose as much as $ 25.60 in pre-market trading. The white metal enjoyed a 2% rise last week, bringing its year-to-date rally close to 8%. Despite the strong dollar and rising Treasury yields, investors are flocking to buy metallic commodities ahead of Tuesday’s inflation report.

In this regard, economists expect the annual US inflation rate to reach 8.5% for the month of March, up from 7.9% in February. There are expectations that inflation may have peaked amid falling energy prices. At the moment, it is quite certain that the US Consumer Price Index (CPI) will cross 8% last month. However, market analysts stress that the technical situation is improving for gold prices, says Carlo Alberto de Casa, market analyst at Kinesis Money. “The new week started with the gold price jumping above the key resistance of $1,950 an ounce and trying to leave the sideways trading range between $1,890 and $1,950 for the past few sessions,” he wrote in a note.

The analyst added, “This positive move confirms the increasing bullish pressure already seen in the past few trading sessions, when the price of gold approached the $1.950 threshold without being able to stay above it at the end of the day. Therefore, this move can be read as an improvement in momentum and a clear breach of the $1,950 level could open the way for further recovery, confirming the upside.”

Meanwhile, the US Dollar Index (DXY), which measures the performance of the US currency against a basket of major currencies, rose to 99.94, from an opening at 99.80. Overall, the index rose 0.9% over the past week, bringing its rise in 2022 to above 4%. And over the past 12 months, the index has risen nearly 9%.

Overall, a strong profit is bad for dollar-denominated commodities because it makes them more expensive to buy for foreign investors.

US Treasury yields rose across the board, with the 10-year bond yield rising to 2.744%. One-year bond yields increased to 1.8%, while 30-year bond yields increased to 2.977%. Gold is usually sensitive to a high interest rate environment because it raises the opportunity cost of holding non-yielding bullion. As for other metals markets, copper futures fell to $4.6625 a pound. Platinum futures rose to $981.50 an ounce. Palladium futures rose to $2,469.50 an ounce.

According to gold technical analysis: Despite the trend of global central banks, led by the US Federal Reserve, towards raising interest rates to face record inflation around the world, which was caused by the pandemic and the Russian war. However, the gold market is receiving momentum from the last factor in maintaining a bullish outlook. As mentioned before, stability will remain above the resistance of 1900 dollars an ounce, motivating the bulls to stick to the performance currently, their closest targets are the resistance levels 1965 and 1980, then the historical psychological top of 2000 dollars an ounce.

On the downside, there won’t be a turn in the general trend without breaking the $1880 support and I still prefer buying gold from every bearish level. Global geopolitical tensions and continuing fears of an epidemic are important factors for gold bulls.