Daily Market Analysis from ForexMart

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  1. #1121
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    Daily Market Analysis from ForexMart
    GBP/USD: How deep could GBP fall?

    The pound encountered support after the release of better-than-expected data. The fact that the British economy is not in its best state ahead of the winter season is clear. There are great risks of a recession in the country as monetary tightening along with high energy prices are posing a threat to the economy.

    Meanwhile, Pantheon Macroeconomics sees Q4 GDP rising by 0.3% from the previous period.

    "A winter recession can't be ruled out, given that the rise in Ofgem's energy price cap in October will boost CPI inflation—and hence reduce real incomes—by nearly four percentage points. But with fiscal support likely to be scaled up considerably by the next PM and high income households still possessing substantial savings, we think that GDP will flatline through the winter, rather than fall," economists at Pantheon Macroeconomics said.

    In the second quarter, the British economy contracted by 0.1%, below the expected 0.2%. Overall, the economy expanded by 2.9% year-on-year, above the market forecast of 2.8%.

    The pound saw an increase in volatility, but traders made no attempts to trade in any direction. In light of a rise in the dollar, however, a sell-off occurred. At the beginning of the trading week, the pair is trying to consolidate. Demand for the pound is decreasing and the currency is edging down amid gloomy forecasts made by the Bank of England.

    On Monday, bearish pressure on the pound increased, and the price fell below 1.2100. So, GBP/USD was unable to rise on better-than-expected macro data.

    At the same time, the dollar does not show steady growth either. Traders are now uncertain about the Federal Reserve's further monetary stance. The hawkish comments of some policymakers hint that the regulator will remain aggressive. Yet, there are still questions. The situation will get clearer when the FOMC Minutes are released this week. Should the Federal Reserve stay aggressive, the greenback's rally will extend.

    Therefore, the dollar is unlikely to be bearish at the beginning of the trading week although its growth potential will be limited. So, GBP/USD may recover eventually.

    Weekly outlook for GBP

    This week, the focus will be on the retail sales report scheduled for Wednesday as well as US weekly jobless claims and the FOMC Minutes.

    "Next week's FOMC minutes will contain some discussion of the FOMC's apparent desire to slow the pace of hikes soon. But we do not expect it to be a lasting relief," Goldman Sachs said.

    Analysts now see a 50 basis-point hike as the unlikely outcome at the September meeting.

    US macro data will surely be of great importance to the GBP/USD quotes. Still, macro results in the United Kingdom could affect the Bank of England's interest rate forecast.

    On Tuesday, traders will see the release of data on the UK labor market report, which will influence the Bank of England's monetary policy stance.

    Meanwhile, the inflation report published on Wednesday will be of primary importance as it will affect both the BoE's monetary policy and the pound's short-term potential. At this point, it is unclear how the market could react to a possible increase or decrease in rate hikes.

    Therefore, in light of a busy trading week, the pound is likely to trade in a trend in the coming days after consolidation.On Monday, bullish demand for the pound is falling. In the short-term, the pair is expected to be bearish, with targets at 1.2050 and 1.2000 (psychological level).

    Resistance is seen at 1.2200, 1.2265, and 1.2315. Support stands at 1.2080, 1.2030, and 1.1965.
    Regards, PR-Manager ForexMart

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    Tips for beginner traders in EUR/USD and GBP/USD on August 16, 2022

    Details of the economic calendar for August 15

    Monday was traditionally accompanied by an empty macroeconomic calendar. Important statistics in Europe, the United Kingdom, and the United States were not released.

    In this regard, traders focused on the information flow, and practiced technical analysis.

    Analysis of trading charts from August 15

    The EURUSD currency pair, during an intense downward movement from the resistance level of 1.0350, reached the lower limit of the previously passed flat of 1.0150/1.0270. As a result, there was a local reduction in the volume of short positions in the market, which led to a slowdown.

    The GBPUSD currency pair accelerated its decline after breaking through a number of variable levels. As a result, the quote came close to the important psychological level of 1.2000, where it formed a small stagnation.

    Economic calendar for August 16

    At the opening of the European session, the UK labor market data was released, where unemployment remained at the same level of 3.8%. At the same time, employment in the country increased by 160,000 against 296,000 in the previous reporting period. Forecasts assumed that employment would grow by 256,000. At the same time, the change in the number of applications for unemployment benefits in July decreased by 10,500, which is good, but forecasts assumed -32,000.

    Statistics for the UK stand out only by the unemployment rate, since everything is ambiguous on other indicators. The pound sterling was standing still at that time.

    During the American trading session, data on the construction sector in the United States will be published. The number of issued building permits and the volume of new housing starts is assumed to decrease.

    Subsequently, data on the volume of industrial production will be published, which is assumed to decline from 4.2% to 4.0% YoY and grow by 0.3% MoM.

    Time targeting:

    U.S. Building Permits Issued – 12:30 UTC (prev. 1.696M; prog. 1.65M)

    US Housing Starts – 12:30 UTC (prev. 1.55 M; prog. 1.54 M)

    US Industrial Production – 13:15 UTC

    Trading plan for EUR/USD on August 16

    Presumably, the 1.0150 area will put pressure on sellers, which may lead to a gradual slowdown in the downward cycle, resulting in a technical pullback in the market.

    Traders will consider a prolonged downward cycle if the price stays below 1.0100. In this case, the quote will rush towards the parity level.

    Trading plan for GBP/USD on August 16

    In this situation, the area of the control level puts pressure on sellers, negatively affecting the volume of short positions. In view of the local signal about the oversold pound sterling, we can assume the formation of a pullback.

    Traders will consider the next downward move if the price holds below 1.1950. Under this scenario, a resumption of the medium-term downward trend is possible.
    Regards, PR-Manager ForexMart

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    Tips for beginner traders in EUR/USD and GBP/USD on August 17, 2022

    Details of the economic calendar for August 16

    The UK's Office for National Statistics (ONS) report on the labor market yesterday showed unemployment rate stabilized at around 3.8%. Employment in the country increased by 160,000 against 296,000 in the previous reporting period. Forecasts predicted that employment would grow by 256,000. At the same time, the change in the number of applications for unemployment benefits in July decreased by 10,500, which is good, but they predicted -32,000.

    Statistics for the UK stand out only by the unemployment rate, since everything is ambiguous on other indicators. The pound sterling stood still at the time of publication.

    During the American trading session, data on the construction sector in the United States were published, which recorded a widespread decline in performance.


    U.S. Building Permits Issued – Prev. 1.696M; Fact. 1.674M.

    U.S. Housing Starts – Prev. 1.599M; Fact. 1.446M.

    Subsequently, data on the volume of industrial production were published, which recorded a slowdown from 4.02% to 3.9% YoY, and increased by 0.6% MoM.


    Data on the US came out negatively; the dollar was under pressure from sellers.

    Analysis of trading charts from August 16

    The EURUSD currency pair overcame the support level of 1.0150 locally during an intense downward movement, but the sellers failed to stay below the reference value of 1.0100. As a result, there was a pullback in the market above the support level.

    The GBPUSD currency pair rebounded from the psychological level of 1.2000 with surgical precision. As a result, there was an increase in the volume of long positions, strengthening the pound sterling by about 100 points.

    Economic calendar for August 17

    At the opening of the European session, data on UK inflation was published, which recorded an increase from 9.4% to 10.1%. Such a high level of inflation is likely to lead to an even stronger increase in the interest rates of the Bank of England.

    In Europe, the second estimate of GDP for the second quarter will be published, where no reaction is expected since it should coincide with the first estimate, which is already included in the current quotes.

    During the American trading session, traders expect retail sales data in the United States, the growth rate of which is likely to slow down from 8.4% to 8.1%. Even with a possible slowdown, retail sales are still at a high level. However, the very fact of a slowdown amid fears of a recession will be a catalyst for fear among investors. Thus, the US dollar may be under pressure.

    Near the closing of the European session, and when Western traders will be in the active phase, the FOMC minutes will be published.

    Time targeting:

    EU GDP – 09:00 UTC

    US Retail Sales – 12:30 UTC

    FOMC protocol – 18:00 UTC

    Trading plan for EUR/USD on August 17

    Presumably, the area of the level of 1.0150 is still putting pressure on sellers. For this reason, one of the possible scenarios for the price development is a rebound towards 1.0240.

    As for the prolongation of the downward cycle, this scenario will be relevant only after holding the price below 1.0100 for at least a four-hour period. In this case, the quote will rush towards the parity level.

    The pullback stage may well slow down the move around 1.2120/1.2150. In this case, there will be a gradual increase in the volume of short positions, returning the quote to the psychological level of 1.2000.

    Prolonging the current pullback will be considered if the price holds above the value of 1.2160 in a four-hour period.
    Regards, PR-Manager ForexMart

  4. #1124
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    Dollar - period. USD again trumps on all fronts

    The FOMC minutes, published on Wednesday, became another springboard for the dollar. Today, the US currency, inspired by the hawkish mood of the Federal Reserve officials, is growing in all directions.

    Temporary weakness
    Yesterday investors focused on the minutes of the FOMC meeting. Immediately after its release, the dollar was defeated, but a little later the market interpreted the report in favor of the greenback.

    Short-term pressure on the USD came from Fed officials' concerns about a recession. During the meeting, it was noted more than once that sectors of the economy that are sensitive to higher interest rates have already begun to show signs of slowing down.

    Some Fed members fear that as part of their commitment to bring inflation under control, the central bank may tighten policy more than is necessary to restore price stability. In this case, the American economy is unlikely to survive.

    The rhetoric of the FOMC meeting participants initially seemed dovish to the market. After the release of the minutes, the probability of a rate hike by 75 bps fell to 40% in September, while earlier traders estimated it at 52%.

    Against this background, the yield of US government bonds began to decline, which provoked a fall in the dollar index. The greenback's low from yesterday was the 106.39 mark.

    The euro won the most from the short-term rebound of the greenback. After the release of the July minutes, the EUR/USD pair rose by almost 50 points and reached the level of 1.0202.

    This helped the euro to close the day with a slight increase (+0.13%), while other major currencies, on the contrary, sank in tandem with the USD.

    Invincible Hulk
    Despite short-term weakness, the dollar index finished Wednesday's session with growth. The revaluation of the FOMC minutes by the market helped it recover.

    When the first emotions subsided, the main thing came to the fore: the Fed still intends to fight inflation, which implies further aggression towards interest rates.

    At the July meeting, absolutely all of its participants agreed to raise rates by 75 bps. Moreover, many of them supported the view that the Fed will continue to move at the same pace if necessary.

    Of course, by "necessary" we mean the persistence of inflationary pressures. At this stage, Fed members do not see convincing signs of a decrease in price growth, so they do not exclude that even more efforts will be needed to resolve the situation.

    As for the economy, politicians said they would closely monitor its adaptation to the new monetary rate and take all necessary measures to prevent a recession.

    In the ranks of the Fed, they do not deny a possible slowdown in economic growth, but at the same time officials manage to remain optimistic. Many of them believe that thanks to a strong labor market, US GDP could grow in the third quarter.

    The data on retail sales in America, which were published on Wednesday, also helped reduce fears of a recession.

    The US Department of Commerce said that in July the indicator rose by 10.3% year on year, which is higher than the forecast estimate (8.3%) and more than the previous month's value (8.5%).

    A positive retail sales report coupled with hawkish FOMC minutes provided strong support for the dollar. Yesterday, the US currency managed to strengthen against its competitors by almost 0.1%.

    The most important outsider was the Australian dollar. It plunged 1.23% against the greenback. The aussie's appeal has also been eroded by heightened concerns about Chinese demand for commodities, including iron ore.

    The greenback soared 0.98% against the New Zealand dollar, negating the earlier growth of the NZD. Recall that on Wednesday the Reserve Bank of New Zealand increased interest rates by 50 bps to 3%, and signaled the continuation of the aggressive rate in the coming months. This triggered the rise of the kiwi.

    The US dollar jumped 0.55% against the Japanese yen to 134.97. Such significant dynamics is a completely logical reaction of the USD/JPY pair to another increase in the gap between the yields of US and Japanese government bonds.

    The greenback edged up 0.34% against the pound. The pound's weakening on Wednesday was also facilitated by the release of July statistics on inflation in the UK.

    The report showed that consumer prices in the peninsula hit 10.1% last month, the highest in 40 years.

    Double-digit inflation has heightened investor fears that the Bank of England will have to be even more aggressive on rates. This raises the already high risk of a recession in Britain.

    Brilliant outlook for USD
    "Now the overall picture for the dollar looks very positive. It is in a strong upward trend across the board," notes analyst Matt Simpson.

    On Thursday morning, under the pressure of the greenback, the euro, the only currency from the group of 10, which showed growth yesterday in tandem with the USD, could not resist.

    EUR/USD fell to 1.0150 amid growing recession risks. Recall that yesterday Eurostat presented the second estimate of the eurozone GDP for the second quarter. The indicator was revised downward.

    Also, the euro is under strong pressure from the energy crisis flaring up in the eurozone, which is aggravated by abnormal heat.

    Record high temperatures and a lack of rainfall caused the Rhine to dry up in Germany. Since the water level in the river has fallen below the critical level of 40 cm, the transport of coal, food and other goods has been significantly reduced.

    Also, the appetite for the euro is now declining amid anti-risk sentiment among investors. The safe dollar is in high demand due to another escalation in geopolitical tensions between the US and China. Washington just announced official trade talks with Taiwan earlier this fall.

    As you can see, the EUR/USD pair has fallen into a "perfect storm". According to analysts' forecasts, the dollar will continue to strengthen against the euro in the foreseeable future. Its growth is also expected in other directions.
    Regards, PR-Manager ForexMart

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    Tips for beginner traders in EUR/USD and GBP/USD on August 19, 2022

    Details of the economic calendar for August 18

    The annual inflation rate in the euro area accelerated to 8.9% in July from 8.6% a month earlier, eventually updating the historical record. The market ignored the data since it completely coincided with the preliminary estimate. Nevertheless, rising inflation in the EU points to further steps by the ECB to raise interest rates.

    During the American trading session, weekly data on jobless claims in the United States were published, where, despite the divergence of forecasts, we still saw an increase in their volume.

    Statistics details:

    Continuing claims for benefits increased from 1.430 million to 1.437 million.

    Initial claims for benefits decreased from 252,000 to 250,000.

    Analysis of trading charts from August 18

    The EURUSD currency pair, after a short stagnation within the 1.0150 level, managed to regroup trading forces. As a result, traders managed to properly increase the volume of dollar positions. This step led to a breakdown of the reference value of 1.0100.

    On the trading chart of the daily period, there is an attempt to prolong the medium-term downward trend. The recovery of the dollar relative to the recent correction is 72%.

    The GBPUSD currency pair noticeably accelerated the decline, which led to the breakdown of the psychological level of 1.2000. Typical speculative interest has accelerated the sale of the pound by more than 140 points, placing the quote below 1.1900.

    On the trading chart of the daily period, there is also an attempt to resume the medium-term downward trend. The recovery of dollar positions relative to the recent correction is 72%.

    Thus, based on the daily charts, it can be seen that EURUSD and GBPUSD are moving after, actively restoring the downward trend.

    Economic calendar for August 19

    At the opening of the European session, UK retail sales data were published, its rate of decline slowed down from -6.2% to -3.0%. And let's talk about the decline in sales. The very fact of slowing down this process is important.

    Important statistics in Europe and the US are not expected.

    Trading plan for EUR/USD on August 19

    Despite the local signal of oversold euro in the short term, the market remains in a downward interest. Thus, the subsequent price retention below the 1.0100 mark may push the quote towards parity.

    Traders will consider an alternative scenario if the price returns above 1.0100 in a four-hour period.

    Trading plan for GBP/USD on August 19

    The current price change suggests a recovery of the downward trend relative to the recent correction. Keeping the price below the 1.1880 mark may well prolong the set inertial move in the direction of the local low of the medium-term trend at 1.1750.

    It is worth considering that the signal about the oversold of the pound sterling is already taking place in the short-term and intraday periods. Thus, a technical pullback in the market cannot be ruled out.
    Regards, PR-Manager ForexMart

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    Asian markets close mixed on Monday

    Asian stock markets were mixed on Monday. The Shanghai Composite and the Shenzhen Composite gained 0.57% and 0.64% respectively, while the Hang Seng Index went up by 0.12%. The Nikkei 225 decreased by 0.55%, the S&P/ASX 200 fell by 0.96%, and the KOSPI lost 1.15%.

    Investors are awaiting new information from Fed chairman Jerome Powell regarding the further monetary policy course of the US central bank. Powell is set to give a speech this week.

    Furthermore, market players took note of the Chinese central bank decreasing two of its key interest rates. The People's Bank of China cut its one-year loan prime rate to 3.65% from 3.7%. The five-year rate was cut to 4.3% from 4.45%. The move was not unexpected – earlier, the PBoC decreased its medium-term lending facility loan rate by 10 basis points to 2.75%.

    The Chinese central bank's rate cuts are aimed at boosting the country's economic growth, which has slowed down due to rising energy prices, weak property market, and COVID-19 lockdowns.

    On the Hang Seng Index, the biggest movers were Agile Group Holdings, Ltd. (+6%), CIFI Holdings (Group), Co. (+7%), Country Garden Holdings, Co., Ltd. (+3%), and China Resources Land, Ltd. (+2%)

    Shares of Sinopec Engineering (Group), Co. gained 4% after the company reported that its net profit increased by 0.6% in the first half of 2022.

    In Japan, the worst-performing stocks on the Nikkei 225 were Hino Motors, Ltd. (-3.5%), CyberAgent, Inc. (-3.1%), and Nippon Sheet Glass Co., Ltd. (-2,9%).

    The share price of Ai Holdings, Corp. advanced by 5%, thanks to the company's net profit jumping by 32% in the previous fiscal year.

    In South Korea, Samsung Electronics, Co. and Hyundai Motor, Co. lost 1.6% and 0.5% respectively.

    In Australia, BHP shed 0.2%, while Rio Tinto declined by 0.53%.

    Shares of NIB, Ltd. gained 6.6% thanks to the company's operating profit exceeding market expectations.
    Regards, PR-Manager ForexMart

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    Technical analysis recommendations on EUR/USD and GBP/USD for August 23, 2022​​​​​​​


    Higher timeframes

    Last week's sentiment retained its strength and predominance, which contributed to the continuation of the decline. Bears managed to close the last day below the indicated reference points of psychological support (1.0000) and the minimum extremum (0.9952). If bulls recover their positions, the passed levels of 1.0000 and 0.9952 can exert attraction and resistance. Reliable consolidation below 1.0000 and 0.9952 will restore the downward trend of the higher timeframes. The reference points for a further decline in the current situation can be the psychological level (0.9000) and the minimum extremum of 2000 (0.8225).

    H4 – H1

    Bears currently have the advantage on the lower timeframes. They are now testing the first support for the classic pivot points (0.9896). Further reference points for the decline within the day are two other supports of the classic pivot points—0.9851 (S2) and 0.9775 (S3). With the correction developing, bulls will need to focus on passing the key levels, which are now the resistance levels 0.9972 (central pivot point of the day) and 1.0088 (weekly long-term trend). Intermediate resistance can be noted at 1.0017 (R1).


    Higher timeframes

    Yesterday, bears updated the minimum extremum and tested its support (1.1759). Soon, the result of interaction with the level will form. As the downward trend movement continues, the next reference point will be the minimum extremum of 2020, fixed at 1.1411.

    H4 – H1

    The pair continues to decline, there is a downward trend, and the main advantage in the lower timeframes belongs to the bears. The reference points for the decline within the day are the support of the classic pivot points (1.1725 – 1.1685 – 1.1630). A corrective rise, consolidation above the key levels of 1.1780 (central pivot point of the day) – 1.1936 (weekly long-term trend) and a reversal of the moving average will help change the current balance of power. Intermediate resistance on this path can be provided by the resistance of the classical pivot points (1.1820 – 1.1875 – 1.1915).
    Regards, PR-Manager ForexMart

  8. #1128
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    USD/JPY: sadness, melancholy, sorrow...

    After a multi-day rally on Tuesday, the USD/JPY pair reversed sharply to the downside and bounced down hard. This morning, the bulls are struggling to regain the advantage, but the bears are gaining.

    Who brought down the dollar?
    Yesterday, nothing foreshadowed a catastrophe of this magnitude. Ahead of the release of the next batch of US economic data, the dollar index reached a multi-year high of 109.27.

    In the first half of the day, the greenback felt the strong support of the Federal Reserve's hawks, which helped it strengthen against the yen to a 5-week peak of 137.70.

    However, US statistics turned out to be worse than forecasts and traders were disappointed, as a result of which the USD/JPY pair abruptly changed direction and shot down to the level of 135.80.

    Literally overnight, the dollar plunged against the Japanese currency by 100 points, or 0.7%. The key pressure on it was increased concerns about the slowdown in the American economy.

    The risk of recession has increased due to the pessimistic data provided by S&P Global. The agency reported that in August, the composite purchasing managers' index fell from the July value of 47.7 to the level of 45, which is the lowest since February 2021.

    The PMI in the services sector showed an even more significant drop this month. The indicator dropped from 47.3 to 44.1, while economists, on the contrary, expected an increase to 49.2.Fresh statistics on the US real estate market, which was published on Tuesday, also added fuel to the fire. New home sales in the US fell by more than 12% in July, to the lowest level in six years (from 585,000 to 511,000).

    In addition, the dynamics of the index of manufacturing activity from the Richmond Fed, which was also published yesterday, turned out to be negative. The index fell to -8.0 in August from the previous reading of 0.0.

    Taken together, all of these data pointed to signs of a slowdown in US economic growth. Now the markets are once again fearing that the Fed may loosen its hawkish grip on inflation with the looming recession.

    The resumption of speculation about a less aggressive rate hike has awakened the dollar bears. They increased their pressure on the USD, even though in the coming days Fed Chairman Jerome Powell may trample on the root of all doubts about the US central bank's decisiveness.

    Caution: High volatility!
    Most analysts predict that in the short term, the USD/JPY pair will continue to storm strongly. The high volatility of the asset will be associated with the continuing uncertainty about the Fed's future course.

    Now traders expect that Powell's speech on Friday at the 3-day Fed symposium in Jackson Hole will bring clarity to this issue.

    Many experts are betting that Powell will remain true to the current monetary rate despite the increasing risks of recession.

    This opinion is supported by recent hawkish comments by members of the Fed. So, yesterday, the president of the Federal Reserve Bank of Minneapolis Neil Kashkari said that the central bank will have to act more aggressively for a longer time if inflation turns out to be much more stable than expected.

    According to analysts, any hint by the head of the Fed to further tightening at a given pace can inspire the dollar to new highs. And most of all, in this case, the yen will suffer again.

    Recall that this year, the JPY plunged more than other currencies from the group of 10 against the dollar due to the divergence in the monetary policy of the Fed and the Bank of Japan.

    According to forecasts, after Jackson Hole, bulls can push the USD/JPY pair to the psychologically important 140 mark.

    However, let's not force things, especially since today we are expecting a new batch of important economic data from the United States.

    Statistics on basic orders for durable goods will be published on Wednesday. According to economists, the indicator will be 0.2% against the previous value of 0.4%.

    If the forecast is justified and the volume of orders falls, this will indicate a decrease in the activity of manufacturers, which will be another blow to the gut for the dollar.

    In the near future, the USD/JPY pair risks being far down again. The technical picture also gives hope to intraday bears: a pullback of the RSI (14) and bearish MACD signals.
    Regards, PR-Manager ForexMart

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    Powell vs dollar: will he support or let it float freely?

    At the start of the symposium in Jackson Hole, the intrigue about the succeeding dynamics of the dollar increases. Market participants are tensely waiting for what Federal Reserve Chairman Jerome Powell will say and how his speech will affect the current monetary policy and the prospects of the greenback.

    At previous symposiums, Powell paid attention to very important issues. In 2020, he announced monetary stimulus for the American economy affected by the COVID-19 pandemic. Last year, the key moment was the statement about the temporary nature of inflation and the curtailment of incentives. Powell's mistake. His stance on inflation has cost the world and American economies dearly, although this situation is fixable.

    In 2022, the theme of the event is a reassessment of the current constraints in the economy, namely a large-scale price increase and ways to combat off-scale inflation. Experts are considering two scenarios of Powell's speeches:

    1) Basic

    The head of the Fed will once again pay attention to extremely high inflation, stressing that the monetary authorities will fight it. The US central bank will do everything possible to maintain economic growth in the United States.

    2) Negative

    Powell will confirm that the Fed is following the chosen course and is ready to aggressively raise rates to combat inflation. Against this background, the US economy will experience strong pressure. In addition, there may be an increase in yields and a correction in the markets. However, there are no prerequisites for the implementation of the second scenario.

    According to experts, Powell's actions will determine the further dynamics of the greenback. Market participants expect that Powell's speech will clarify the immediate prospects of monetary policy. According to analysts, Powell "will try to manage market expectations" while maintaining the hawkish position of the Fed. On Thursday, August 25, at the symposium that began in Jackson Hole, representatives of the Fed confirmed their intention to raise rates and keep them at a high level until inflation weakens. At the same time, investors remain optimistic about the US currency and cautious with a negative bias towards the European one.

    The dollar showed confidence this week, gaining momentum after the release of positive macroeconomic data. As a result, in the second quarter of 2022, the US GDP growth rate was revised upward (from -0.9% to -0.6%). At the same time, the number of applications for unemployment benefits decreased more than expected. After the statistics were released, profitability in the US peaked, but then retreated slightly from high levels.

    Experts have recorded a steady growth of the greenback over the current year (by 13.5% against a basket of key currencies). The US currency has risen to its highest level in 20 years, while the euro has fallen by about 12% to below parity, which has not been the case for two decades. At the moment, there are many USD bulls on the market betting on its rise. Traders and investors are confident that the dollar has the strength to continue growing thanks to the hawkish attitude of the Fed and inspiring economic indicators in the United States.

    Against this background, the European currency is noticeably losing to its American competitor. The energy crisis in Europe and the European Central Bank's unstable stance on raising rates add fuel to the fire. At the same time, most representatives of the central bank support an interest rate hike by 50 bps. However, many investors are deterred by the deteriorating economic prospects of the eurozone and constantly rising inflation. Against this background, the inflationary situation in the United States looks much more stable than on the other side of the ocean.

    According to analysts, double-digit inflation in the eurozone is due to the long-term Russian-Ukrainian conflict, which provoked the energy crisis. Economists fear that the euro bloc countries will fall into the so-called "downward spiral of wage and price growth", from which it is difficult to get out. Against this background, long positions on the euro sharply plunged, which was under pressure.

    The failures of the European currency play into the hands of the American one, experts emphasize. According to JPMorgan analysts, the greenback was supported not only by "encouraging economic data" on inflation and employment in the United States, but also by the "growing vulnerability" of the European economy. Recall that in July, the consumer price index in the United States rose by 8.5% in annual terms. At the same time, the unexpected increase in the number of jobs reduced market fears about the onset of a recession.

    The US currency has received strong support thanks to the Fed's aggressive rate hike. According to investment analysts at U.S. Bank Wealth Management, this trend will continue in the near future. Against this background, the EUR/USD pair maintains a bearish trend, and the euro still looks vulnerable. Experts note the growing downside risks in relation to the euro.

    In the short term, the EUR/USD pair is able to test the parity level again. The euro is still showing weakening, having failed to hold the 1.0000 mark. According to experts, the recovery above the level of 1.0030 will support the single currency. However, now it is rapidly sinking. The EUR/USD pair was near 0.9963 on the morning of Friday, August 26. Currently, experts consider the 0.9950 mark to be the support line, the breakdown of which will pull the pair to the low level of 0.9900.

    Earlier, currency strategists at Capital Economics announced a prolonged period of the euro's weakness amid deteriorating economic conditions in the eurozone. Against this background, the dollar has every chance of rising, as markets expect the Fed to raise rates again in September. The implementation of such a scenario will increase pressure on the euro. However, any signals from the head of the central bank that the Fed recognizes the stabilization of the inflation rate will allow the markets to interpret what has been said in favor of easing the monetary policy. Misinterpretation of Powell's statements can shake the dollar's position and help the short-term recovery of the EUR/USD pair, experts believe.
    Regards, PR-Manager ForexMart

  10. #1130
    Senior Member KostiaForexMart's Avatar
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    Mar 2019
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    in ro ham eslah kon:
    JPY is not a tenant. Powell and Kuroda signed the yen's death sentence

    The Japanese currency is flying down at the start of the new week. The reason for the next peak of the JPY is still the same – the divergence in the monetary policy of the Federal Reserve and the Bank of Japan, which intensified after Jackson Hole.

    The main event of last week was the annual Fed symposium in Jackson Hole, and its climax was the speech of the chairman of the US central bank.

    As expected, Fed Chairman Jerome Powell stressed his firm intention to fight inflation by further raising interest rates.

    – The restoration of price stability will take some time and will require the "decisive" use of the central bank's tools, – the official said during his speech at the forum.

    The market interpreted this comment as hawkish, which provoked a sharp jump in the yield of US government bonds and, as a result, a large-scale rally of the dollar.

    The DXY index updated its 20-year high on Monday morning, jumping to the level of 109.4.

    The Japanese currency suffered the most from the strong greenback. In just a couple of hours, the Japanese fell by almost 0.6% and reached a 5-week low of 138.60.

    The current weakness of the JPY is also dictated by the dovish tone of the head of the BOJ. Like his American counterpart, BOJ Governor Haruhiko Kuroda did not present any surprise at the Jackson Hole symposium.

    Earlier, Kuroda repeatedly stated that the normalization of monetary policy could cause serious damage to the Japanese economy, which has not yet recovered after the COVID-19 pandemic.

    Last Saturday, Kuroda again made it clear that he remains faithful to the ultra-soft course and will continue to adhere to it until "wages and prices will not grow in a stable and sustainable manner."

    According to experts, this comment by the head of the BOJ was the last nail in the coffin of the Japanese currency.

    In the near future, the yen will not only continue to fall, but also, most likely, will reach another record low against the dollar.

    At the time of release, the USD/JPY pair rose above the 139 level and was aimed at the psychologically important 140 mark.

    Most currency strategists believe that in the short term, the asset will be able to cross the key barrier that proved impregnable last month.

    The probability of such a scenario developing is now very high. In the light of recent speeches by Powell. The markets expect that the wide difference in interest rates between Japan and the United States will remain longer than predicted.

    This significantly strengthens the bulls' positions on the USD/JPY pair. According to experts, the upward trend of the asset will continue until at least one of the central banks signals a change in its current monetary rate.

    We also draw your attention to the fact that this week the US dollar may receive another strong growth momentum. On Friday, traders expect the release of the US employment report for August.

    We also draw your attention to the fact that this week the US dollar may receive another strong growth momentum. On Friday, traders expect the release of the US employment report for August.

    If the data from the labor market turns out to be strong, it will push the greenback to new heights and send the yen even deeper to the bottom.
    Regards, PR-Manager ForexMart

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