BluetonaFX - Forex Weekly Recap
Hi Traders!
Forex Weekly Recap for 24–28 July, 2023:
Fundamentals
The Bank of Canada (BoC) released its minutes from the July meeting, and the key notes were:
They agreed that they were prepared to hike further if needed, but noted that they did not want to do more than they had to.
Core inflation measures suggest the return to their 2% inflation target will take longer than anticipated.
They agreed that household consumption should moderate as higher rates take effect.
They felt it was too early to tell if wage growth was easing.
The Federal Reserve hiked interest rates by 25 basis points to 5.50%, as expected. The FOMC statement was almost identical to the previous one; the statement noted that economic activity has been expanding at a moderate pace. At their press conference, Fed Chair Powell noted in the opening statement that the full effect of their tightening has yet to be felt and that without price stability, the economy doesn’t work for anyone. Powell also noted the strong pace of job growth in the US and that labour demand still "substantially" exceeds supply. He concluded that they are strongly committed to getting inflation back to target and that the process of reaching the 2% target still has a long way to go.
The European Central Bank (ECB) hiked interest rates by 25 basis points to 3.75%, as expected. In their statement, they noted that inflation continues to decline but is still expected to remain too high for too long. They also noted that they expect inflation to drop further over the remainder of the year, but it will stay above the 2% target for an extended period. At their press conference, President Lagarde noted that the near-term economic outlook for the eurozone has deteriorated due largely to weaker domestic demand and that momentum is slowing in the service sector, though it remains a sign of strength. She also interestingly noted that housing and business investment are showing signs of weakness due to decreases in demand. She concluded the press conference by noting that the only thing they know is that they definitely will not cut interest rates.
The Bank of Japan (BoJ) left its monetary policy unchanged with interest rates at -0.1%, the 10-year Japanese Government Bond (JGB) yield target around 0%, and the Yield Curve Control (YCC) band at -/+ 0.5%. The BoJ also raised its inflation forecast for this year to 3.2% vs. 2.5% in April and kept its 2024 and 2025 forecasts unchanged at 1.7% and 1.8%, respectively. There was a small adjustment to their YCC policy, though. The BoJ said that it will operate the yield curve control more flexibly to respond actively to upside and downside risks. At their press conference, Governor Ueda noted that uncertainty remains very high about the economy and prices and that there is still some distance to go to achieve the 2% inflation target.
Key Data
Monday was PMI day for many advanced economies.
Australia's Manufacturing PMI came in at 49.6 vs. 48.0 prior, while the Services PMI came in at 48 vs. 50.3 prior.
Japan's Manufacturing PMI came in at 49.4 vs. 49.8 prior, while the Services PMI came in at 53.9 vs. 54.0 prior.
France's Manufacturing PMI came in at 44.5 vs. 46.0 prior, while the Services PMI came in at 47.4 vs. 48.0 prior.
Germany's Manufacturing PMI came in at 38.8 vs. 40.6 prior, while the Services PMI came in at 52.0 vs. 54.1 prior.
The Eurozone Manufacturing PMI came in at 42.7 vs. 43.4 prior, while the Services PMI came in at 51.1 vs. 51.5 prior.
The UK Manufacturing PMI came in at 45.0 vs. 46.5 prior, while the Services PMI came in at 51.5 vs. 53.7 prior.
The US Manufacturing PMI came in at 49.0 vs. 46.2 prior, while the Services PMI came in at 52.4 vs. 54.4 prior.
The German IFO Business Climate Index came in worse at 87.3 vs. 88.0 expected.
The US Consumer Confidence came in at 117.0 vs. 111.8 expected and 109.7 prior.
The Australian Q2 Headline CPI Q/Q came in at 0.8% vs. 1.0% expected and 1.4% prior.
The US Q2 Advance GDP came in better at 2.4% vs. 1.8% expected.
US Jobless Claims came in better at 221K vs. 235K expected and 228K prior.
The Tokyo July CPI Y/Y came in at 2.9% vs. 2.8% expected and 3.1% prior.
The US June Core PCE Y/Y came in at 4.1% vs. 4.2% expected and 4.6% prior.
The US Employment Cost Index (Q2) printed at 1.0% vs. 1.1% expected and 1.2% prior.
Technicals
The US dollar rebounded strongly this week against its major counterparts.
AUDUSD 1W Chart
A bearish week for AUDUSD. There is bearish momentum in the market, though we are still in the long-term symmetrical triangle and are now heading towards the support level in the range zone.
USDJPY 1W Chart
USDJPY tested the support level at 137.915 due to some USD weakness, but the market held again at this level. After the market bounce near 137.915, we are now back above the 140 level.
EURUSD 1W Chart
EURUSD's retracement of the impulsive wave we have had over the past month and a half is continuing. The 1.10956 support level was broken, and the market continued back to the psychological 1.10000 level, which it bounced off. We are now trading around the 1.10200 level.
GBPUSD 1W Chart
GBPUSD broke below the ascending channel and is currently re-testing the channel break. There is a head and shoulders pattern forming, which could mean a reversal of the long-term bullish trend.
The key focus for the upcoming trading week will be:
Monday: Eurozone CPI.
Tuesday: RBA Policy Decision, Eurozone Unemployment Rate, ISM Manufacturing PMI, US Job Openings
Wednesday: NZ Jobs Report, US ADP
Thursday: BoE Policy Decision, US Jobless Claims, ISM Services PMI
Friday: US NFP, Canada Jobs Report
We will be back with another Forex Weekly Recap report next week.
Best of luck for the trading week ahead. Trade safely and responsibly.
BluetonaFX
Forex Weekly Recap for 24–28 July, 2023:
Fundamentals
The Bank of Canada (BoC) released its minutes from the July meeting, and the key notes were:
They agreed that they were prepared to hike further if needed, but noted that they did not want to do more than they had to.
Core inflation measures suggest the return to their 2% inflation target will take longer than anticipated.
They agreed that household consumption should moderate as higher rates take effect.
They felt it was too early to tell if wage growth was easing.
The Federal Reserve hiked interest rates by 25 basis points to 5.50%, as expected. The FOMC statement was almost identical to the previous one; the statement noted that economic activity has been expanding at a moderate pace. At their press conference, Fed Chair Powell noted in the opening statement that the full effect of their tightening has yet to be felt and that without price stability, the economy doesn’t work for anyone. Powell also noted the strong pace of job growth in the US and that labour demand still "substantially" exceeds supply. He concluded that they are strongly committed to getting inflation back to target and that the process of reaching the 2% target still has a long way to go.
The European Central Bank (ECB) hiked interest rates by 25 basis points to 3.75%, as expected. In their statement, they noted that inflation continues to decline but is still expected to remain too high for too long. They also noted that they expect inflation to drop further over the remainder of the year, but it will stay above the 2% target for an extended period. At their press conference, President Lagarde noted that the near-term economic outlook for the eurozone has deteriorated due largely to weaker domestic demand and that momentum is slowing in the service sector, though it remains a sign of strength. She also interestingly noted that housing and business investment are showing signs of weakness due to decreases in demand. She concluded the press conference by noting that the only thing they know is that they definitely will not cut interest rates.
The Bank of Japan (BoJ) left its monetary policy unchanged with interest rates at -0.1%, the 10-year Japanese Government Bond (JGB) yield target around 0%, and the Yield Curve Control (YCC) band at -/+ 0.5%. The BoJ also raised its inflation forecast for this year to 3.2% vs. 2.5% in April and kept its 2024 and 2025 forecasts unchanged at 1.7% and 1.8%, respectively. There was a small adjustment to their YCC policy, though. The BoJ said that it will operate the yield curve control more flexibly to respond actively to upside and downside risks. At their press conference, Governor Ueda noted that uncertainty remains very high about the economy and prices and that there is still some distance to go to achieve the 2% inflation target.
Key Data
Monday was PMI day for many advanced economies.
Australia's Manufacturing PMI came in at 49.6 vs. 48.0 prior, while the Services PMI came in at 48 vs. 50.3 prior.
Japan's Manufacturing PMI came in at 49.4 vs. 49.8 prior, while the Services PMI came in at 53.9 vs. 54.0 prior.
France's Manufacturing PMI came in at 44.5 vs. 46.0 prior, while the Services PMI came in at 47.4 vs. 48.0 prior.
Germany's Manufacturing PMI came in at 38.8 vs. 40.6 prior, while the Services PMI came in at 52.0 vs. 54.1 prior.
The Eurozone Manufacturing PMI came in at 42.7 vs. 43.4 prior, while the Services PMI came in at 51.1 vs. 51.5 prior.
The UK Manufacturing PMI came in at 45.0 vs. 46.5 prior, while the Services PMI came in at 51.5 vs. 53.7 prior.
The US Manufacturing PMI came in at 49.0 vs. 46.2 prior, while the Services PMI came in at 52.4 vs. 54.4 prior.
The German IFO Business Climate Index came in worse at 87.3 vs. 88.0 expected.
The US Consumer Confidence came in at 117.0 vs. 111.8 expected and 109.7 prior.
The Australian Q2 Headline CPI Q/Q came in at 0.8% vs. 1.0% expected and 1.4% prior.
The US Q2 Advance GDP came in better at 2.4% vs. 1.8% expected.
US Jobless Claims came in better at 221K vs. 235K expected and 228K prior.
The Tokyo July CPI Y/Y came in at 2.9% vs. 2.8% expected and 3.1% prior.
The US June Core PCE Y/Y came in at 4.1% vs. 4.2% expected and 4.6% prior.
The US Employment Cost Index (Q2) printed at 1.0% vs. 1.1% expected and 1.2% prior.
Technicals
The US dollar rebounded strongly this week against its major counterparts.
AUDUSD 1W Chart
A bearish week for AUDUSD. There is bearish momentum in the market, though we are still in the long-term symmetrical triangle and are now heading towards the support level in the range zone.
USDJPY 1W Chart
USDJPY tested the support level at 137.915 due to some USD weakness, but the market held again at this level. After the market bounce near 137.915, we are now back above the 140 level.
EURUSD 1W Chart
EURUSD's retracement of the impulsive wave we have had over the past month and a half is continuing. The 1.10956 support level was broken, and the market continued back to the psychological 1.10000 level, which it bounced off. We are now trading around the 1.10200 level.
GBPUSD 1W Chart
GBPUSD broke below the ascending channel and is currently re-testing the channel break. There is a head and shoulders pattern forming, which could mean a reversal of the long-term bullish trend.
The key focus for the upcoming trading week will be:
Monday: Eurozone CPI.
Tuesday: RBA Policy Decision, Eurozone Unemployment Rate, ISM Manufacturing PMI, US Job Openings
Wednesday: NZ Jobs Report, US ADP
Thursday: BoE Policy Decision, US Jobless Claims, ISM Services PMI
Friday: US NFP, Canada Jobs Report
We will be back with another Forex Weekly Recap report next week.
Best of luck for the trading week ahead. Trade safely and responsibly.
BluetonaFX
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