Market Analysis
EURUSD
Prediction: Decrease
Fundamental Analysis:
The EUR/USD currency pair saw limited movement on Monday, with the US dollar initially strengthening before retreating. Mixed economic data influenced the market, with German business sentiment coming in weaker than expected, while the Dallas Fed Manufacturing Index showed a slight improvement. With no major headlines impacting the market, the pair's movement mirrored stock market trends. The economic calendar for the week is relatively light, featuring US housing data and consumer confidence figures. Investors are also anticipating the FOMC meeting minutes and the US PCE inflation data due later in the week. Overall, the pair remained in a narrow trading range, indicating a cautious market sentiment.
Technical Analysis:
From a technical perspective, the EUR/USD pair's recent recovery appears to be a corrective movement. On the daily chart, the pair is trading below its moving averages, with the bearish 20-day Simple Moving Average (SMA) crossing below the directionless 100 and 200-day SMAs in the 1.0780/90 price range. While technical indicators are moving slightly higher, they remain below their midlines. In the short term, buyers seem to be gaining traction, as the pair trades above the 20-day SMA, though the longer-term moving averages continue to show bearish slopes above the current level. Technical indicators are pointing upward but are still struggling to surpass their midlines. For the pair to confirm positive momentum and aim for the 1.0810 price range, it would need to break above 1.0760.
GBPUSD
Prediction: Increase
Fundamental Analysis:
The Pound Sterling has been gaining strength against the US Dollar, bouncing back from a previous significant decline. This recovery is primarily due to a temporary halt in the US Dollar's upward trend. However, the outlook for the US Dollar has improved following June's PMI data, which indicated a quicker-than-expected expansion in both the manufacturing and service sectors. This has boosted the Federal Reserve's confidence, as it suggests cooling price pressures and alignment with their 2% inflation target.
Despite these gains for the Pound, the Bank of England is anticipated to begin cutting interest rates in August, as hinted by a slightly dovish policy statement. Additionally, investors are wary of the UK's economic prospects, given the unexpected slowdown in service sector activity in June, even though manufacturing saw faster growth.
Technical Analysis:
Last Friday, the GBP/USD pair dipped below the 100-day Simple Moving Average (SMA) at 1.2640 but ended the week above this level, indicating reluctance from sellers. The Relative Strength Index (RSI) on the 4-hour chart has moved towards 50, signaling a potential upward movement. On the upside, immediate resistance is found at the 200-period SMA on the 4-hour chart at 1.2700 and 1.2800 (psychological level, static level). Conversely, if the GBP/USD falls below 1.2640 and starts treating that level as resistance, the next bearish targets could be 1.2600 (psychological level, static level).
XAUUSD
Prediction: Increase
Fundamental Analysis:
Gold prices are climbing, nearing $2,315, as US bond yields decrease. Investors are speculating on two Federal Reserve (Fed) rate cuts this year. Diminishing inflationary pressures in the US have bolstered these expectations, as reflected in the May CPI and June PMI reports, which show signs of moderating prices. The CME FedWatch tool indicates a 66% chance of a rate cut in September, with the 30-day Federal Funds futures data suggesting the Fed will begin easing its policy in September, followed by another cut in either November or December. However, the Fed's projections suggest only one rate cut this year, as policymakers prefer to see sustained declines in inflation before shifting towards policy normalization.
Technical Analysis:
Gold prices have been consolidating within the range of $2,277 to $2,450 for over two months. The 50-day Exponential Moving Average (EMA) around $2,318 is providing support for the bulls. The 14-day Relative Strength Index (RSI) is fluctuating between 40 and 60, indicating market indecision. A drop below the May 3 low of $2,277 could lead to further downward pressure, potentially targeting the March 21 high of $2,223. On the other hand, a break above the May 20 high of $2,450 could push gold into new highs. Overall, the gold market is in a consolidation phase, awaiting a clear directional breakout.
USDJPY
Prediction: Increase
Fundamental Analysis:
The Japanese Yen (JPY) is maintaining its stability, possibly due to verbal interventions by Japanese authorities. Japan's leading currency diplomat, Masato Kanda, has indicated the possibility of taking appropriate measures to mitigate excessive fluctuations in the exchange rate, which could negatively impact the economy. Concurrently, the Dollar Index has slightly decreased, influenced by falling US Treasury bond yields. However, this decline may be limited, as a stronger-than-expected US Purchasing Managers Index (PMI) has led to speculation that the first interest rate cut this year might be postponed. The CME FedWatch Tool now shows a 66% probability of a rate cut in September, down from 70.2% the previous week.
Technical Analysis:
The USD/JPY pair is trading around 159.50 with a bullish inclination on the daily chart. The pair is testing the upper boundary of an ascending channel pattern, and the 14-day Relative Strength Index (RSI) is above 50, indicating upward momentum. If the pair breaks above the upper channel threshold, it could target the 160.32 level, a significant resistance point. On the downside, immediate support is at the nine-day Exponential Moving Average (EMA) at 158.42. A break below this level could increase downward pressure, possibly pushing the pair toward the lower channel boundary around 155.60 and further down to the throwback support around 152.80. Overall, the USD/JPY pair is displaying a bullish bias, with the potential to either reach new highs or retrace to key support levels.
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