Preliminary PMIs to catch traders’ attention

The USD ended the week with some gains against its counterparts on Friday yet there seem to be still some bearish tendencies as attention turns towards the release of the Fed’s interest rate decision on Wednesday. It’s expected to be a busy week full of high-impact financial releases and monetary policy events yet US stockmarkets may continue to enjoy a substantial part of the market’s attention as the earnings season is in full swing. We expect the focus to turn towards big high-tech companies this week as we have the earnings releases of Microsoft (#MSFT), eBay (#EBAY), Meta Platforms (#META), Alphabet (#GOOG), Intel Corporation (#INTC) and Amazon (#AMZ) among others.

Today in the FX market, we highlight the preliminary July PMI figures of France, Germany and the Eurozone as a whole and should the readings show another contraction of economic activity in the manufacturing sector, especially Germany’s, our worries for the economic outlook of the Eurozone are to be intensified and could weaken the common currency. As for the UK we highlight the release of the preliminary services PMI figure, as the sector comprises a substantial part of the UK’s GDP figure.

On a technical level, we note that GBP/USD seems to have hit a floor on the 1.2845 (S1) support line. As the pair broke the downward trendline guiding it we switch our bearish outlook in favour of a sideways movement bias initially. Please note that the RSI indicator is slightly rising from the reading of 30, implying that the bearish sentiment may still be present yet seems to be fading away. Should the bears regain control over the pair, we may see it breaking the 1.2845 (S1) support line and aim for the 1.2660 (S2) support base. Should the bulls take over we may see cable testing if not breaking the 1.3070 (R1) resistance line.

EUR/USD on the other hand seems to have stabilised just below the 1.1175 (R1) resistance line. We maintain our bias for the sideways motion for the time being. Yet we note that the RSI indicator remains above but close to the reading of 30, implying that there are still some bearish tendencies in the market for the pair. Should a selling interest be expressed by the market, we may see EUR/USD aiming if not breaking the 1.1120 (S1) support line. On the flip side, should the pair find extensive buying orders along its path, we may see the pair breaking the 1.1175 (R1) resistance line and we set as the next possible target for the bulls the 1.1270 (R2) resistance base. Furthermore, we note that the Aussie remained rather stable during today’s Asian session despite Australia’s trade surplus narrowed, as China’s state planner unveiled further steps to reignite private investment.

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In tomorrow’s Asian session, we note the release of Japan’s Chain Store sales growth rate for June.

As for the rest of the week:

On Tuesday we note the release of Germany’s Ifo indicators for July, UK’s CBI trends for industrial orders and the US consumer confidence for July. On Wednesday we get Australia’s CPI rates for Q2 and highlight the Fed’s interest rate decision. On Thursday, we get Germany’s forward-looking Gfk Consumer sentiment for August, UK’s CBI distributive trades for July and from the US we highlight the release of the preliminary GDP advance rate for Q2 and note the release of June’s durable goods orders as well as the weekly initial jobless claims figure and on the monetary front we note ECB’s interest rate decision. On Friday we make a start with Japan’s Tokyo CPI rates for July, yet JPY traders are expected to focus on BoJ’s interest rate decision, while we also get Australia’s final retail sales for June, France’s preliminary GDP rate for Q2, France’s and Germany’s preliminary HICP rates for July, Switzerland’s KOF indicator for July, Canada’s GDP rate for May and from the US we note the release of June’s consumption rate and Core PCE price index as well as the final University of Michigan consumer sentiment for July.