TRESORFX Europe Fundamental Forecast | 29 August 2024
Overview of the Asia Session: Market Movements and Key Trends
In the latest Asia session, the Dollar Index (DXY) dipped below the crucial 101-level, reflecting a softer dollar environment. Meanwhile, spot gold prices edged higher, moving towards $2,520 per ounce. This rise in gold is indicative of cautious sentiment among traders as they brace for critical economic data from the U.S. The focus now shifts to the upcoming U.S. session, where the release of the preliminary GDP results for Q2 2024 and the latest unemployment claims are expected to stir market activity.
Key Economic Events Impacting Europe and the U.S. Sessions
- Germany’s CPI Data: After a 0.3% MoM increase in July, expectations are set for a flat CPI in August. A decline in prices could negatively impact the Euro, potentially reversing some of its recent gains.
- SNB Chairman Thomas Jordan’s Speech: Set to speak in Basel, Jordan may provide insights into the Swiss National Bank’s (SNB) upcoming monetary policy meeting on 26th September. The market is watching closely for any hints of a third rate cut, which could pressure the Swiss Franc.
The Dollar Index (DXY): Key Insights and Expectations
Key News Events Today
- GDP Data (12:30 pm GMT)
- Unemployment Claims (12:30 pm GMT)
What to Expect from DXY Today
The preliminary GDP figures for Q2 2024 are anticipated to hold steady at 2.8% YoY, matching prior estimates. This suggests a robust rebound from the 1.4% growth in Q1, hinting at a ‘goldilocks’ economy that is neither too hot nor too cold. Concurrently, unemployment claims have shown a downward trend over the past three weeks, with expectations of further stabilization. If unemployment claims continue to decline and GDP remains stable, the Dollar Index could gain further momentum.
Central Bank Notes on U.S. Economic Outlook
- The Federal Reserve has maintained the Federal Funds Rate at 5.25%-5.50% for the eighth consecutive meeting.
- The Committee aims for maximum employment and a stable inflation rate of 2% over the long run, balancing risks to both employment and inflation goals.
- Economic indicators suggest steady growth, albeit with moderated job gains and a slight uptick in the unemployment rate.
- The Fed remains vigilant in monitoring economic data and risks, signaling no immediate rate cuts until there is stronger confidence in reaching inflation targets sustainably.
Gold (XAU): Market Analysis and Predictions
Key News Events Today
- GDP Data (12:30 pm GMT)
- Unemployment Claims (12:30 pm GMT)
Gold Outlook: What Lies Ahead?
With GDP figures expected to remain unchanged and unemployment claims trending lower, gold prices may face downward pressure as a stronger dollar emerges. If the economic data supports continued stabilization in the U.S. economy, we could see limited upside for gold, potentially ending the day with a weak bearish bias.
Regional Currency Analysis: Key Insights
The Australian Dollar (AUD)
Despite no major economic news impacting the Australian Dollar today, the AUD/USD saw movements overnight, pulling back towards 0.6765 before attempting a push above 0.6800.
- Support: 0.6750
- Resistance: 0.6860
Central Bank Notes
- The Reserve Bank of Australia (RBA) has held the cash rate steady at 4.35% for the sixth straight meeting, citing persistent inflation above the target range despite falling substantially since its peak in 2022.
- Inflation is projected to return to the 2-3% target range by late 2025, suggesting a prolonged period of elevated interest rates.
The Kiwi Dollar (NZD)
The New Zealand Dollar (NZD/USD) was relatively stable under 0.6250 but showed signs of strength moving towards 0.6300 during the Asia session.
- Support: 0.6200
- Resistance: 0.6300
Central Bank Notes
- The Reserve Bank of New Zealand (RBNZ) recently lowered the OCR by 25 basis points to 5.25% in response to declining inflationary pressures.
- The RBNZ remains vigilant, watching for further signs of economic slowdown and potential impacts on the inflation outlook.
The Japanese Yen (JPY)
The USD/JPY saw a slight increase, briefly rising above the 145-level, before retreating to around 144.20.
- Support: 142.00
- Resistance: 147.00
Central Bank Notes
- The Bank of Japan (BoJ) continues its ultra-loose monetary policy, maintaining an interest rate of around 0.25%.
- Inflation is projected to stabilize around 2% over the medium term, aligning with the BoJ’s price stability goals.
The Euro (EUR)
With the German CPI data release pending, the Euro faces potential volatility. Any downside surprise in inflation figures could limit the Euro’s recent gains.
Central Bank Notes
- The European Central Bank (ECB) kept interest rates unchanged in July, following a 25 basis points cut in June. The ECB remains committed to controlling inflation, which is expected to remain above target into next year.
The Swiss Franc (CHF)
The Swiss Franc could experience pressure if SNB Chairman Thomas Jordan signals another potential rate cut during his speech.
Central Bank Notes
- The SNB has reduced its policy rate twice this year and is monitoring inflation closely, which remains low but slightly higher than previous assessments.
The British Pound (GBP)
The GBP/USD was pushed below the 1.3200 mark due to greenback strength but found some stability around 1.3170.
- Support: 1.3180
- Resistance: 1.3300
Central Bank Notes
- The Bank of England (BoE) recently cut rates by 25 basis points to 5.00%, signaling a slightly less restrictive monetary stance while remaining cautious about persistent inflation risks.
The Canadian Dollar (CAD)
The USD/CAD showed mild upward movement but remained within a tight range, reflecting subdued demand for the Loonie.
- Support: 1.3380
- Resistance: 1.3490
Central Bank Notes
- The Bank of Canada (BoC) has continued its policy of gradual rate cuts while focusing on reducing inflation toward the 2% target.
Oil Market Dynamics
Despite a smaller-than-expected draw in crude inventories, oil prices continued to face downward pressure due to ongoing geopolitical uncertainties in the Middle East. WTI crude oil is trading near $75.20 per barrel, showing a medium bearish bias.
Conclusion: Next 24 Hours Bias and Market Sentiment
Overall, today’s market sentiment leans towards a mixed bias across various assets:
- Dollar Index (DXY): Medium Bullish
- Gold (XAU): Weak Bearish
- AUD, NZD, JPY, EUR, CHF, GBP, CAD: Varying degrees of weak bearish to bullish biases depending on individual economic conditions and central bank policies.
Traders should closely monitor key economic releases and central bank communications to navigate the day’s trading landscape effectively.