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US Dollar, EUR/USD, AUD/USD Price Action: Fed, Q2 GDP and CPI In Focus


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US Dollar, EUR/USD, AUD/USD Price Action: Fed, Q2 GDP and CPI In Focus

2022-07-25 | DailyFX
Justin McQueen, Strategist

USD, EUR/USD, AUD/USD ANALYSIS AND TALKING POINTS

  • US Dollar Extends Pullback
  • Euro Lifted By ECB and Kremlin Comments
  • AUD/USD Awaits Local CPI Data

USD: The USD remains on the backfoot following last week’s surprise contraction in the most recent US PMI report. As such, while this has fuelled an unwind of the US Dollar’s recent strength, it is thus far a case of a tactical pullback as opposed to a meaningful pullback. Despite the ECB’s surprise with a 50bps hike to end the era of negative interest rates, the current narrative surrounding Europe remains bleak. For now, the growth story trumps the normalisation outlook, meaning that preference for Euro exposure is on the short side.

This week, we will get a first look at the US Q2 GDP report, consensus looks for a tepid rise of 0.4%. However, there is a heightened risk according to the Atlanta Fed GDP Now Model that the figure could show a contraction, which if realised would mark a technical recession following the 1.6% drop in Q1. Over the weekend, US Treasury Secretary Yellen weighed in on the upcoming GDP report, stating that even if the number is negative, the US is not in a recession now, referencing the fact that the labour market is “extremely strong”. I think this is noteworthy coming from a former Fed Chair, as this gives some insight into perhaps the thinking among the FOMC. Suggesting that the Fed will remain steadfast in tightening policy aggressively as they lean against the strength of the labour market.

The trend is the US Dollar has generally been defined by the 21 and 55DMA. While softer yields and a pick-up in risk sentiment have also weighed on the greenback, the latter is likely a bear market rally as the path of least resistance remains lower in the current backdrop.

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    • As the banking crisis seems to abate and the price of gold is coming off, AUD/USD is expected to resume its descent from its February highs. We would thus like to short AUD/USD at $0.6665 with a stop-loss at $0.6760 and a downside target at $0.6175.   Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Monday 27 March 2023           
    • EUR/USD, EUR/GBP and GBP/USD volatility is on the wane Outlook on EUR/USD, EUR/GBP and GBP/USD likely to calm down following last week’s volatility.  Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Monday 27 March 2023  EUR/USD hovers above support EUR/USD’s sharp decline from last week’s $1.0929 high amid worries surrounding Deutsche Bank’s double-digit fall in its share price, leading to flight-to-quality flows into the US dollar, pushed the cross to Friday’s low at $1.0714, to marginally below the 55-day simple moving average (SMA) at $1.0736, before closing above it late last week. On Monday morning the currency pair is trying to remain above the moving average and the March tentative trendline at $1.0742. While this is the case, the mid-February high at $1.0804 may be revisited. Minor resistance above $1.0804 can be spotted between Thursday’s low at $1.0825 and Friday’s intraday high at $1.0837. Where a drop through Friday’s low at $1.0714 to be seen, however, the early March high at $1.0695 would be eyed. Source: IT-Finance.com EUR/GBP’s slide from last week’s £0.8865 high shows no sign of stopping just yet EUR/GBP’s rally to Thursday’s £0.8865 high has been followed by the last few days descent to Friday’s low at £0.8777 as the euro weakened due to the banking crisis surrounding Germany’s largest bank Deutsch Bank. A fall through £0.8777 would likely engage the February low at £0.8755. Resistance can be found at Thursday’s £0.8814 low and also comes in along the 55-day SMA at £0.8834 and at the 15 March high at £0.8843. Source: IT-Finance.com GBP/USD hovers below last week’s high at $1.2343 GBP/USD’s advance stalled at Thursday’s $1.2343 high with it dropping to $1.2191 before stabilising. Provided that this low underpins, the 24 January low and mid-February high at $1.2263 to $1.227 may be revisited, a rise above which would lead to the $1.2343 high seen last week being back in the frame. Only and advance above Thursday’s high at $1.2343 would push the December and January highs at $1.2446 to $1.2448 to the fore. Below Friday’s low at $1.2191 meanders the 55-day SMA at $1.2154 which may act as support, were it to be revisited. Source: IT-Finance.com
    • Charting the Markets: 27 March With the weekend having a restorative effect on market sentiment, the FTSE 100, DAX 40 and Nasdaq 100 may be on track for a second positive week in a row. Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Monday 27 March 2023  Meanwhile EUR/USD and GBP/USD trade in lower volatility and EUR/GBP continues to slide. With the banking crisis abating, the price of gold drops alongside that of crude oil and copper.             This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.
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