Last week, the Euro has been hammered with negative news and its price versus the US Dollar touching parity levels. The pair started the week badly when the Nord Stream, the largest pipeline delivering Russian gas to Germany, was closed for maintenance. Countries like France have already started shifting to oil in preparation for a possible cutoff. US inflation also weighed on the pair as it came in higher than investors had expected. Markets expected a 100 basis point rate hike at the next Fed meeting, which saw the dollar rising.
Next week, traders will focus on three types of events. First, the flash July PMI reports will be released. The preliminary estimates do a good job anticipating the final readings. The tougher financial conditions and the cost-of-living squeeze translate into weaker economic environment.
- On Monday Japanese banks will be closed in observance of Marine Day. Early the New Zealand quarterly CPI will be released
- Early Tuesday the Reserve Bank of Australia will release its Monetary Policy Meeting Minutes.
- Wednesday the UK and Canadian CPIs will be released and later on the US Existing Home Sales.
- Thursday the Japanese Monetary Policy Statement and the the EU Main Refinancing Rate number will be announced.
- On Friday, the Europe PMIs will be released but also the UK and Canadas Retail sales.
Major Currencies Performance and Signals
EUR/USD
The Eurozone is facing a possible energy crisis. The US dollar rally is set to continue after the high inflation reading. Investors expect a 25bps rate hike from the ECB. We are still bearish on the EURUSD pair.
FORECAST: SELL
Resistance: 1.0100, 1.0150, 1.0200
Support: 1.0050, 1.0000, 0.0950
GBP/USD
The British pound also plummeted a bit during the week, testing the 1.1800 level and we expect this trend to continue through next week.
FORECAST: SELL
Resistance: 1.1900, 1.1950, 1.2000
Support: 1.1850, 1.1800, 1.1750
AUD/USD
The Australian dollar has also fallen during the week but has also found support near the 0.67 region. At this point in time, I think the market will continue to try to recover, but the 0.70 level should be a massive resistance barrier that will be difficult to overcome anytime soon.
FORECAST: SELL
Resistance: 0.6800, 0.6850, 0.6900
Support: 0.6750, 0.6700, 0.6650
USD/JPY
Japan’s government has raised concern over the yen’s sharp decline. BOJ is expected to hold rates at -0.1%. Japan’s inflation remains low compared to other developed economies. We continue to be bullish on the pair.
FORECAST: BUY
Resistance: 139.00, 139.50, 140.00,
Support: 138.50, 138.00, 137.50
USD/CAD
USD/CAD had a rollercoaster week after the Bank of Canada (BoC) surprised markets by hiking rates by 100bps. Hawkish Fed re-pricing weighs on CAD. Demand destruction leaves crude oil muted. Depressed crude oil prices remain with the Chinese economy showing signs of slowing despite fundamental supply data under strain.
FORECAST: BUY
Resistance: 1.3050, 1.3100, 1.3150
Support: 1.3000 1.2950, 1.2900
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