Let’s focus on the key highlight for this past week- the US CPI and its impact on different asset classes

CPI data which came out on Wednesday delivered a positive surprise where the print was lower than forecast by 0.2%, standing at 8.5% for July YoY. Core CPI, excluding food and energy, was the same as the prior month at 5.9%, but lower than the 6.1% anticipated. Inflationary pressures started to ease, but is it sufficient for the Fed to alter its hawkish stances? 

How did the market react?

Forex

EURUSD

EURUSD M30

The fiber broke out from its triangle formation before jumping as much as 127 pips after the CPI data. USD weakens across the currencies board as we see a similar reaction on GBPUSD, AUDUSD and USDJPY just to name a few. However, 1.0360 seems to be a tough resistance as the pair made equal highs here. 

Precious metals

Gold

XAUUSD M30

Gold prices jumped by 1% or approximately $17 in the 30 minutes following the CPI announcement. However, bullish momentum subsided rapidly which led to a formation of a triangle pattern The yellow metal failed to build up a rally like most other metals do. We also observed a risk-on market post CPI across equities for instance…

US Stocks Market

Nasdaq 100

USTEC H4 

The Nasdaq Composite posted gains of as much as 3.68 % in the next 24 hours following the CPI release as investors buy into risk assets, before undergoing a minor retracement. We can also observe bullish momentum is picking up steam as the slope of the upward trendline is getting steeper and thus the probability of a break above 13550 has increased significantly. Are we going to see the break later during the trading session or do we need to wait till next week?

What about the energy markets?

Energies

USOIL

USOIL H4 

Oil prices climbed and look set to end the week in gains while recouping more than half of the previous week’s losses. IEA bumped their outlook for global oil demand to 2.1 million bpd due to power generation switching from natural gas to oil, caused by rising gas prices. On the contrary, OPEC reduced its forecast for growth in global oil demand yesterday by 260k BPD this year, which may in turn cap further price rise. 

From a technical standpoint, USOIL broke out from our bearish channel and is flirting with $94 resistance as we speak. If the breakout is successful, we may be looking at $98.50 or even back to triple-digit oil prices. 

Cryptocurrencies

Bitcoin

BTCUSD M30 

The leader of cryptocurrencies also benefited from CPI’s pleasant surprise where it posted a gain of 4.73% in the hour following the release. The buyers then manage to maintain their strength which pushed the price further to a higher near $25000 before a healthy correction takes place. 

And if we zoom out and take a look at the bigger picture…

BTCUSD H4

Bitcoin is forming a rising wedge pattern while trading above the 50 and 200 period moving average, looking ready to trade higher. $25500 (that is from a previous swing low) will be acting as the immediate resistance for the buyers. There could be a potential opportunity to go long should the price retraces to the lower end of the rising wedge, or even as low as the $22400 support area. 

Welf

Trader, Technical Analyst

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Economic calendar

*Important events only

It is a light week in the market with only a few key events to watch out for including the CPI numbers and the UK’s GDP. NFP came out with a huge positive surprise, printing 528k new jobs in July which is more than double the expected figure. It is signalling a super solid labour market, which may prompt the Fed to make a more aggressive rate hike in the next meeting. CPI data on Wednesday is going to be equally, if not more important than the job’s numbers.

Let’s look at what happened to…

Precious Metal

Gold

XAUUSD H1 Chart

With a better-than-expected job number, the greenback got stronger which caused a shift drop in gold prices. Gold fell from $1788 to $1769 in the 30 minutes following the announcement which trailed our scenario 2. 

As it is now trading in a range between $1770 and $1785, we are waiting for a breakout on either side. Higher lows on the hourly chart make it seems like an upward trend is more likely. CPI is going to be the main mover for gold this week. 

Forex

EURUSD

EURUSD H1 Chart

The fiber is in a fresh triangle formation now, with NFP pushing the pair from the upper trendline to the lower trendline as marked by the arrow. As the trading range gets narrower, it may be signaling that EURUSD is on the verge of an impulsive breakout. CPI incoming. 

There is currently no directional bias, with both moving averages tangled together. 

TSLA
Tesla held its annual meeting last Thursday, and here are the key highlights

• Shareholders agreed to the proposed 3 for 1 stock split
  
• Tesla’s Full Self Driving has a new update available for beta testing

• 2- million units of production is the aim that Tesla wants to achieve by end of the year

• A new gigafactory will be announced before the year ends. Longer term goal is to have 10-12 gigafactories

• Cybertruck to begin production in 2023, though the price and specifications are going to differ from its initial announcement

• Elon Musk envisions Tesla to be the most valuable company in the world when self-driving robotaxis and Optimus Humanoid Robot are being rolled out 

TSLA Daily Chart

Following the annual meeting, TSLA shares declined on Friday trading by 6.63% despite all the positive announcements made in terms of new products, vision and future outlook, and not to forget the agreed stock split which is going to take effect on August 25. 

The 200-day moving average along with the $950 proved to be tough resistance for the bulls. The next support is at $770.

CTA

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Economic calendar -Week 31

*Only key events are listed

As the Fed raised their interest rates last week, it’s the turn for RBA (Australia) and BOE (UK) this week, with both of them expected to hike their interest rates by 50bps. NFP is also out on Friday and the numbers will be crucial as the Fed has been using the strong job numbers as one of the factors to back their interest rate hike. A weaker job number may deter the Fed from raising rates as aggressively in their September meeting. As for the energy sector, OPEC+ is going to hold a meeting on the 3rd of August, and investors should pay attention to their production plan and their outlook on the energy market, crude oil in particular.

Interest Rates Frenzy

A 50bps rate hike is expected from RBA on Tuesday to bring the cash rate to 1.85% with the main reason for cooling inflation. The inflation printed 6.1% YoY in Q2, which was lower than the expected 6.2%, which subsequently reduced the possibility of a 75 bps hike. 

AUDUSD

AUDUSD Daily Chart

AUDUSD has been edging higher for 2 weeks from its previous swing low at 0.6700. Currently testing 0.7060 resistance and the upper boundary of the channel, the chance of a breakout is fairly low as the market has most likely priced in a 50bps hike by the RBA later this week. However, a breakout might be imminent if RBA makes a surprise move to raise rates by more than the general forecast. 

GBPUSD

The BOE is expected to increase its interest rates to 1.75% (a 50bps hike) at its Thursday meeting. Inflation is way worse at 9.4% YoY in June compared to Australia’s. Referring back to what was been mentioned in the last meeting, it was stated that a more forceful action might be taken if it is necessary to keep inflation in check. Will the BOE announce a 75bps hike? A full point hike?

GBPUSD H4 Chart

The Cable has been trailing the path of our scenario 1 decently. It broke out from its bearish trendline, made a retest, picked up steam, and bounced away from the support. It was a very textbook trade. 

However, the pressing question now is whether the Pound can sustain its bullish momentum until the interest rate announcement on Thursday. Some supporting confluences for the bulls include the position of the Moving averages with a cross-over in sight. Also, the pair has been making higher lows as it moved away from the support at 1.1925.

1.2400 will be a key resistance area to determine if the pair can move into bullish territory.

Energies

WTI Crude

USOIL Daily Chart

US Crude breached the $100 mark briefly on Friday but the buyers couldn’t hold the price above that level and we observed a very clean wick above the $98.50 resistance level. To start the week, Oil traded lower during the Asia session, -0.8% at the time of writing. Trading volume may be lower today, affected by Canadian Bank Holiday and also the upcoming OPEC+ Meeting on Wednesday. We have discussed this before but I will mention it again, the President of the United States has recently visited Saudi Arabia to talk about oil production among other topics, and it could ease the strain on the oil supply and prevent oil prices from rallying too high in the short term. 

Precious Metals

Gold

XAUUSD H4 Chart

Gold steadies above $1750 and the .382 Fibonacci level after its rally from the FOMC announcement. Momentum is pausing briefly as it breaks through the trendline and tests the 1770 resistance. The 200-period moving average is also in the way of the buyers. Investors may be waiting on the sideline for the PMIs on Monday and Wednesday. But more importantly, we should eye for the NFP this Friday as the consensus is significantly lower than the previous month’s data. NFP is one of the biggest catalysts for gold prices.

US Stocks Market

Nasdaq 100 

USTEC Daily Chart

Earnings season is coming through with most companies posting better than expected gains in Q2 including AAPL, GOOG, and AMZN which sent USTEC higher. Currently faced with 12900 resistance, it is very likely for it to break through it,  considering the strong bullish candles for last week. The next level that we aim for is 13550. The downside is firmly supported by the bullish trendline and the 50-day moving average. 

Welf

Trader, Technical Analyst

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Economic Calendar

FOMC statement will be the key highlight for this coming week as investors are waiting for the impending rate hike from the Fed. We are going to discuss USD related pairs in this week ahead analysis to prepare you for the event. 

Precious Metals

Gold

Gold Daily Chart

The yellow metal has had a decent recovery towards the end of last week as we see a near $60 bounce from the key support of $1680, which shows that the demand is still strong at that level.

Currently, it is trading above $1722 minor resistance and it seems like the recovery may continue for a little while, with the next target at $1760. If the Fed do not make any surprise move this Wednesday we may see gold following through on its bearish momentum and test $1680 again.

Forex

EURUSD

EURUSD Daily Chart

EURUSD has been stuck in the 1.0150- 1.0250 range for a couple of days now. Investors are indecisive on where the pair should go amid Fed policy statement. We have mapped out two scenarios on where the price can potentially move, but the probability of a down move is greater provided that the pair is currently in a downtrend.

1.0350 is our primary target in the short term, but the larger picture may still be highly dependent on the FOMC meeting in two days.

Energies

Crude oil

USOIL H4 Chart

Apparently, US crude did a fake out to our scenario one and instead followed the trajectory of scenario 2. 

It extended its losses as investors are worried that an increase in interest rates by the Fed may negatively impact oil demand by restricting economic activities. Some other bearish fundamental developments include a tweak in Russian sanctions that allows them to trade with third countries and Libya scheduled to increase oil production to 1.2M bpd in the next two weeks. 

US oil is trading on the support at $94 but the level seems brittle. $90 will be the next target level to look for a potential bounce and recovery. 

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XAUUSD research

Looking at a daily chart, we are still seeing gold showing extreme weakness due to rising inflation, a strong USD, and a hawkish Fed that is still poised to raise interest rates further this year.  From a technical perspective, XAUUSD is poised to test the 38.2% Fibonacci retracement of 1680.58 which could hold as strong support as gold has not broken below this level over the past 2 years plus.   With that being said, there are still many hurdles for XAUUSD as the pair did have a death cross early this month where the 50-period moving average broke below the 200-period moving average.  

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Economic Calendar

GBPUSD

GBPUSD Daily

BOE’s current main goal is to fight inflation and governor Bailey’s speech may drop some hints about the next monetary policy moves.

GBP is doing great with GBPUSD rose by more than 56 pips since the market opened this morning. It is now testing 1.1925 resistance which coincides with the bearish trendline. We are waiting to see if the price can break and close successfully above this level.

First scenario: If it breaks, we will have a buy opportunity when price retest the resistance-turned-support at 1.1925.

Second scenario: If the trendline and resistance level remain intact, price may fall to 1.1760 previous swing low. If that breaks too, we are looking at a downside continuation towards 1.1500 daily timeframe key support. 

EURUSD

EURUSD Daily Chart

At the time of writing, EURUSD has bounced 140 pips away from parity which shows some demand at 1.0000. The question is whether this up move is a knee-jerk reaction (minor retracement), or is it a long term reversal in the making.

The next level of interest is 1.0350 (if the price goes there) as this is where the trendline and the horizontal resistance level will most likely meet.

First scenario: A reversal takes place in the market and EURUSD broke above the trendline, we are targeting 1.0650 although this may not happen so soon

Second scenario: Bearish momentum continues and EURUSD test parity again. If it does happen, our view is that the sellers are much stronger and may be able to push prices further below, targeting 0.9900.

Precious Metals

XAUUSD

XAUUSD H4 Chart

Gold might be calmer this week as there are no major events that are gold/ USD related. It is approaching the upper trendline and we are waiting for reactions. 

Scenario 1: Trendline is broken and gold tests 1745. Depending on market expectations, it could then break higher above 1745 or retrace back down.

Scenario 2: Trendline remains intact and gold proceeds to glide lower until 1700 support and possibly testing 1680. 

US Stocks Market

SP500

SP500 Daily

The S&P500 had a not-so-bad week last week after a decent recovery on Friday. The outlook for the stock markets is still highly dependent on interest rates expectations and  recessionary concerns.

From a technical standpoint, SP500 is trading just under the bearish trendline. 

Scenario 1: SP500 breaks through the trendline and head towards 4150

Scenario 2: The trendline is respected and the index continues to trade lower, testing first support at 3750. 

Energies

USOIL

USOIL H4 Chart

WTI crude has had a decent recovery since Thursday last week, trading back at triple digits.

This could be due to a softer USD as we saw on EURUSD and GBPUSD also. Let’s see if the concern of tight supplies will outweigh fear of recession in the coming days. 

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Economic Calendar

Here are some of the key highlights for this week 

Twitter and Musk

Surprise? To be honest, not so much. Elon Musk just a few days ago decided to pull out and terminate his deal to buy Twitter which led to him being sued by the company in question. You might be curious on why he decided to walk away from the deal. Musk claimed in a filing to SEC that the social media company failed to meet its contractual obligations and did not provide information requested by Musk earlier in regards to fake and spam accounts. 

What is Twitter doing?

Obviously they are suing Musk in the court. Twitter board Chair Bret Taylor also tweeted that they are still committed to ensure that the transaction goes through based on the terms and price agreed upon and legal actions will be pursued in order to enforce the deal.

The deadline of the deal falls on 24th of October and the parties will have another half a year to close it should the transaction still pending approval from regulatory bodies at that time. 

Impact on twitter

There is a theory that Musk decided to walk away because of poor stock’s performance since his official announcement to purchase Twitter

TWTR Daily Chart

The shares have seen a loss of almost 40% of its value since the deal was first made public. Although Musk said the purchase of Twitter was not for financial gains, it is billions of dollars at stake. What would you do?

We have seen some recovery after the price bounced from $32 support level but is still trading below the 14 EMA.  The future outlook for Twitter will be highly dependent on the progress in the court.  But I supposed there will be no winner from this except the short sellers.

Tug of War between EUR and USD – Parity

EURUSD H4 Chart

The dollar with its humongous strength pushed EURUSD down to a low of 0.9952 during yesterday’s trading session.The Euro was able to fight to ensure the pair closed above 1.0000 and the pair is still flirting with the parity level. I wouldn’t be surprised if there is a huge move to either side to end the week as this is the most widely traded pair and it is at a pivotal level that hasn’t been seen in 2 decades.

Our outlook remains tilted to the downside until the market structure and chart patterns suggest otherwise. If 1.0000 fail to hold, 0.99 will be the next psychological level to refer to.  The 50 day moving average will be the dynamic resistance capping the pair.

Energy Crisis or not?

USOIL / WTI  H4 Chart

If we are just analyzing from a technical point of view, the prices were forming lower highs and lower lows. These are textbook formations with a high chance of price following through. In terms of momentum, it is apparent that the bears are way stronger just by looking at the relative size of the candles and speed of the price swings. 

Yesterday, WTI oil broke below $94 key support which we have paid attention to for quite some time, although it managed to end the session above the level . The low for yesterday, $90.54 was the price for crude before the Russian-Ukraine war. What does this tell us?

It is most likely conveying that tight supply concerns are not solid enough to support oil prices. On the other hand, recessionary concerns amidst record inflation level and fast-rising global interest rate is putting a gigantic amount of pressure on oil.

If $94 breaks, $90 will be the next psychological support to watch out for. We remain bearish on our outlook until price manages to invalidate the bearish trendline.

Canadian Surprise

We can also draw confluence from the Interest Rate decision by the Bank of Canada on Wednesday.

They surprised the market by rocking a full point hike in interest rate. This means they are very far behind and are trying to do more now to keep inflation in check (hopefully).

But what is interesting was what happened to USDCAD.

USDCAD Daily Chart

On Wednesday, the rate hike was announced. But USDCAD stayed still,for a few hours. The market only started to pick up steam and rocketed 250 pips after more than 12 hours from the event. 

The Bank of Canada made a surprise move to raise their rates by 100 bps versus the expected 75 bps, but the CAD got weaker against the dollar? IS USD really that strong?

Not to forget that CAD is also a commodity currency. CAD is related to oil price as Canada is one of the largest oil producers and exporters in the world. If CAD is depreciating, what does that mean for the outlook on oil?

Looking at the chart, USDCAD broke out of the channel and also the resistance zone marked in blue and therefore a higher chance of it climbing to the next key area at 1.3350. 

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Economic calendar

There is NFP today to end the trading week, with a forecasted slowdown in new jobs added at 260k versus 390k for the previous month’s reading. Even with jobs growth slowing down, is it sufficient to tame the strong USD down?

Forex

EURUSD

EURUSD Daily Chart

The pair faced little to no resistance on its way down in the past couple of days, and it is exactly 100 pips away from reaching parity at the time of writing. There is a high chance that NFP is going to provide the volatility needed for a quick test at parity. Please be aware as there could be a strong fakeout and whipsaws in prices while everybody is flocking into the markets at this key time. 

One interesting thing to note is this:

Daily Chart of EURUSD on cTrader

Notice how 77% of retail traders are buying into this bearish trend? Since most retail traders are wrong most of the time, this sentiment tool can be used as a great confluence for our trading. 

From the chart we can also see that Trading Central’s Technical Views is giving their preference of going short with a target at 0.9950 area. The next important question to ask is whether the buyers can hold their grounds at 1.0000.

Precious Metals

Gold

Gold Daily Chart

The death cross that we were looking at earlier solidified and gold tumbled. Although it was relatively quiet yesterday, it lost about $70 on Tuesday and Wednesday collectively. The next support is near at $1720 but really the key zone that we are eyeing for is 1680 as we the previous bounces from that key area is quiet obvious. We are more inclined towards the bearish side as there is significant downside momentum going on. 

Energies

USOIL

USOIL H4 Chart

Technical-wise, US crude is currently in a solid bearish channel with $105 as its resistance and $96 as the support. Lower highs and lower lows reflect the lack of investors’ confidence in global oil demand with increased recessionary concerns amid rapid interest rate hikes across major central banks. We expect the price to test the upper boundary of the channel and that is when the bears may take over and keep the price trading within the channel.

US Stock Market

SP500 Daily Chart

Similar to Crude oil, SP500 has also been trading in a bearish channel. It has had a decent week up till now, and we shall see how NFP affects the market later. Recessionary concerns will be the main factor that limits further upside movements in the stock markets in the short term. Resistance and support levels are marked at 3950 and 3750 respectively.

Cryptocurrencies

Bitcoin

BTCUSD Daily Chart

Still no significant moves on Bitcoin, but it has bagged some decent gains over the past week  (+12.9%).

The range of 22910 and 17620 remains intact until further breakout.

Welf

Trader, Technical Analyst

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Economic Calendar

*Only key events are listed

AUD: More rate hikes

The RBA is expected to raise rates for the third consecutive meeting on Tuesday to combat inflation.

Source: Trading Central – Economic Insight

Looking at the past data provided by Trading Central’s Economic Insight, RBA has surprised the markets in the past 2 announcements by raising its cash rate greater than forecasted. Since the last meeting, Governor Lowe has turned more hawkish stating that Inflation could hit 7% by Christmas and will only begin to slow down in early next year. Not only that but Lowe also suggested that a reasonable cash rate would be 2.5%. 25bps/ 50 bps hike at this next meeting was also expected, Lowe noted.

AUDUSD

AUDUSD Daily Chart

The Aussie has been trading lower against the greenback since a death cross occurred towards the end of May. A descending triangle also foreshadowed the break at the 0.6850 support level. Currently trading at 0.6800, we may see the momentum carry on until the key level of 0.6700 before we see some sort of reaction. Although a climbing cash rate would make the AUD stronger, the Fed is raising its interest rates too. It is now a question of which currency has a more bullish expectation moving forward.

FOMC Minutes for June 2022

The fed said in its last meeting that an ongoing rate hike would be appropriate and that they are strongly committed to returning inflation to its target level of 2% over time. Fed Mester said, “debate in July is between 50 bps and 75 bps rate hike.” and she would prefer the latter. The updated economic projections forecasted rates rising to 3.25-3.50% by the end of this year;

EURUSD Daily Chart

If the USD continues to strengthen against other currencies, and specifically the Euro, in this case, 1.0350 would be broken easily. Underneath that level is a price territory that the fiber has not visited for the past 19 years with 1.0190 as the next support level. If that level is breached further, the question then becomes will EURUSD reach parity.

Precious Metals

Gold

XAUUSD Daily Chart

Trading volume on gold today will likely be flat today as it is a bank holiday in the US. Investors are being cautious ahead of this week’s key events including the FOMC minutes, NFP, and ADP report.

From a technical point of view, all eyes are on the impending death cross. Although gold has had a decent bounce from its recent swing low at $1788, the bearish trendline is still intact. Trading at $1813, the important things to look out for are whether the death cross is going to solidify and if the bearish trendline is going to keep gold price in check.

Energies

US Crude

USOIL Daily Chart

WTI is still trading under the broken trendline which limits upside movement. The primary factor for the current bearish sentiment is the recessionary fears which dampen fuel demand, although the supply for oil remains tight as sanctions on Russian oil remain in place and a lower OPEC output. Growing USD strength also weakens the commodity markets as the purchasing power of the USD increases.

Cryptocurrencies

Bitcoin

BTCUSD Daily Chart

Bitcoin is probably sleeping. Volume dies down as capital flees from risk assets amid recessionary fears. investors also have to decide between taking on a humongous amount of risk while holding Bitcoin, or putting their money in the Bank or some other higher interest-bearing assets that are relatively stable. Similar to commodities, Bitcoin is mostly quoted in USD and a stronger dollar means a lower value for Bitcoin since the purchasing power of USD is now greater. We are still waiting for Bitcoin to break either side of the trading range between 22910 and 17621, and the latter seems more likely considering the current macroeconomic conditions.

Welf

Trader, Technical Analyst

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Economic calendar

Forex

EURUSD

EURUSD Daily Chart

The pair traded lower before the London session begins. The red 50-day moving average acted as a decent resistance where the price did not manage to break past 3 days ago. We are just 100 pips away from the next major support level at 1.0350 while investors are waiting on the sidelines for the release of ISM Manufacturing PMI later tonight.

USDJPY

USDJPY H4 Chart

USDJPY has made a double top formation on the 4 hour chart and also closed below the 50 period moving average. 134.50 is the first line of support to keep the price near decades high. However, there might be a correction soon as the bullish momentum starts to fade (the slope of upward movement is getting less steep). From the chart, 136,56 seems like a strong resistance to keep the bulls in check.

Precious Metals

XAUUSD

XAUUSD H4 Chart

Gold declined by 1.7% or $31 since the beginning of the week. From a technical perspective, gold made consecutive lower highs and lower lows, which foreshadowed the continuation of a downward trend. The moving averages are also trailing gold prices nicely, and the next key area to watch out for is the recent swing low at $1788. We are currently less than $10 away from that area with PMI data coming out tonight. It is also worth mentioning that today is the first trading day of Q3 so we are expecting some higher volatility to end the week.

Energies

USOIL

USOIL H4 Chart

WTI crude climbed to as high as 114 earlier this week, but the heavy selling pressure came about when the price met the 200-period moving average on the 4-hour chart and turned the tables quickly. At the time of writing, WTI is down almost 2% for the week

The plunge in crude oil prices is said to be caused by the fears and concerns of a global economic slowdown due to widespread inflation and central banks fighting hard to contain them with contractionary policies.

Investors are currently eyeing the $102 key support area. If this breaks, we may see crude trades back to 2-digits. On the other hand, bulls will face significant resistance at the broken bullish trendline and the 200 period moving average.

Cryptocurrencies

BTCUSD

Bitcoin Daily Chart

The situation is looking dire for Bitcoin and Cryptocurrency in general. Bitcoin hasn’t traded past $23k for more than 2 weeks and if we look closer, you can notice the volatility started to die down shortly after the breakout from the blue consolidation zone. Trading at sub $20k, the next support is at the recent low of $17620. If it breaks, we have another support near $16220.

US Stocks

SP500

SP500 Daily Chart

The stock market hasn’t been great for the investors. Today may very well be the fifth consecutive losing day for SP500 should the bears continue to be in charge for the rest of today’s session.

The only mild support that SP500 is getting is from the $3750 area. The bearish channel formation remains solid and we need a break to the upside to signify any trend change.

Welf

Trader, Technical Analyst

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