USD tends to regain some ground

The USD reversed some of its losses made in the previous days against its counterparts, as the week drew to a close. It seems that the market was able to reposition itself and stabilise somewhat the USD, after the release of US data showing a slow-down of inflationary pressures in the US economy over June, both on a consumer as well as on a producer level. For the time being the market seems to expect the bank to hike rates once more in its next meeting before remaining on hold and proceeding with its first rate cut in Q1 2024. The week is expected to be interesting in the sense that there is a lower number of high-impact financial releases scheduled from the US while Fed policymakers are to be silenced due to the two-week statement moratorium before the bank’s meeting on the 26^th of July and the earnings season in US stockmarkets is on. Please note that on Friday we had the release of earnings report of JP Morgan, Wells Fargo and City group. All three had better than expected results both on a revenue as well as on an EPS level, implying a relative resilience of the US Banking sector, but also of the US economy in general. Yet we have to note that the bar of expectations may have been low and not so hard to surpass. In this week we note Morgan Stanley (#MS) on Tuesday and Goldman Sachs (#GS) , Tesla (#TSLA), Netflix (#NFLX) on Wednesday, among others during the week.

On a technical level, we are to examine the behaviour of the USD against a commodity currency and a safe haven today. Starting with the Aussie, AUD/USD after hitting a ceiling at the 0.6900 (R1) resistance line, started to drop and broke the 0.6835 (R1) support line, now turned to resistance. We expect the downward motion to continue, yet we would prefer the RSI indicator to drop below the reading of the 50 and start aiming for 30, verifying the bearish sentiment of the market. Should the bears maintain control over the pair we may see it breaking the 0.6770 (S1) support line and aim for the 0.6700 (S2) support level. Should the bulls take over, we may see the pair reversing course, breaking the 0.6835 (R1) resistance line and aim for the 0.6900 (R2) resistance level.

The USD tended to have some gains against the JPY as well yet more limited. USD/JPY reversed its downward motion bouncing on the 137.45 (S1) support line yet respected the 138.80 (R1) resistance level. As the pair has broken the downward trendline guiding it yet remained below the 138.80 (R1) resistance line, we tend to switch our bearish outlook in favour of a sideways motion bias for now. Should the pair find extensive fresh buying orders along its path, we may see USD/JPY breaking the 138.80 (R1) resistance level, with the next possible target for the bulls being the 140.80 (R2) resistance base. Should the bears take over, we may see the pair breaking the 137.45 (S1) support line and aim for the 135.70 (S2) support level.

Other highlights for the day:

In a rather ease going Monday, we note in the American session, the release from the US of the NY Fed manufacturing Index for July and from Canada the wholesale trade growth rate for May. During tomorrow’s Asian session, please note the release from Australia of RBA’s July meeting minutes.

As for the rest of the week:

On Tuesday we get the US retail sales growth rates, Canada’s CPI rates and the US industrial production growth rate all being for June. On Wednesday we note the release of New Zealand’s CPI rates for Q2 and UK’s CPI rates for June. On Thursday we note the release of Japan’s trade data for June, Australia’s employment data for the same month and from the US the weekly initial jobless claims figure, July’s Philly Fed Business index and Eurozone’s preliminary consumer confidence also for July while on the monetary front we note from Turkey CBT’s interest rate decision. Finally on Friday, we note the release of Japan’s CPI rates for June, UK’s retail sales for the same month and Canada’s retail sales for May.

AUD/USD H4 Chart

Support: 0.6770 (S1), 0.6700 (S2), 0.6595 (S3)

Resistance: 0.6835 (R1), 0.6900 (R2), 0.6975 (R3)

USD/JPY H4 Chart

Support: 137.45 (S1), 135.70 (S2), 133.75 (S3)

Resistance: 138.80 (R1), 140.80 (R2), 142.30 (R3)

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