Fundamental Analysis Report With Charting Trends – 11 July 2023
11 Jul 2023
Wall St Ends Up; Investors Digest Fed Official Comments.
In this market update, we’ll discuss the recent performance of Wall Street, highlighting the influence of Federal Reserve officials’ remarks on investor sentiment. We’ll also explore the happenings in the Asia session and analyze their potential impact on the Europe and US sessions. Furthermore, we’ll provide insights into the performance of major currencies like the Australian Dollar (AUD), Japanese Yen (JPY), and Pound (GBP). Lastly, we’ll cover the state of global markets, including Asian stock markets, European equities, and the US stock market, along with the latest news and data in the financial world.
Wall Street Bounces Back on Fed Official Comments
After experiencing losses the previous week, U.S. stocks rebounded and closed the day higher. The positive sentiment was driven by remarks from Federal Reserve officials, which suggested that the central bank may be approaching the end of its tightening cycle. The market cautiously awaited the release of the consumer price report and second-quarter results later in the week, leading to minor gains in the S&P 500 before the market closed. Many Fed members stated on Monday that the current cycle of tightening monetary policy is nearing its conclusion. However, they emphasized that additional interest rate hikes are still necessary to combat persistently high inflation.
Asia Session Highlights
The Australian dollar briefly reached 0.6695 before retreating, based on the NAB Business Confidence survey. The survey also indicated that while business conditions had remained mostly unchanged over the previous month, future prospects had slightly improved. These developments in the Asia session hold implications for the Europe and US sessions.
Europe & US Session Expectations
Considering the mounting pressure on the U.S. dollar, the pound has the potential to rise above 1.2900 if the latest employment statistics from the UK demonstrate strong results. Similarly, the euro could maintain its position above 1.1000 if the ZEW Economic Sentiment surveys reveal better-than-expected outcomes for both the Eurozone and Germany.
Australian Dollar (AUD): Key News Events Today
NAB Business Confidence Report
The NAB Business Confidence report indicates that while business conditions have remained largely consistent from the previous month, there has been a slight improvement in future expectations. Consequently, the Australian dollar is expected to remain strong as the sell-off of the DXY gains momentum.
Central Bank Notes:
- The RBA has increased the cash rate target by 25 basis points to 4.10%.
- Inflation in Australia has reached its peak but remains high at 7% and needs to return to the target range.
- Further tightening of monetary policy may be necessary.
- The next meeting is scheduled for July 4, 2023.
Next 24 Hours Bias: Weak Bullish
Japanese Yen (JPY): Key News Events Today
Japan’s machinery orders have displayed inconsistency throughout 2023, while PPI, which measures wholesale inflation, has seen a substantial decline on an annualized basis. Furthermore, demand for the Japanese yen has increased due to last week’s volatility in the U.S. markets and a disappointing US NFP reading.
Central Bank Notes:
- The Bank of Japan will continue with QQE with Yield Curve Control to achieve the price stability target of 2%.
- The Bank of Japan has implemented the following measures:
- Yield curve control: Negative interest rate of -0.1% on policy-rate balances and the purchase of Japanese government bonds to maintain 10-year JGB yields around 0%.
- Inflation is expected to temporarily decelerate but is projected to moderately accelerate later, supported by improvements in the output gap and inflation expectations.
- Japan’s economy is expected to recover gradually.
- The next meeting is scheduled for July 27, 2023.
Next 24 Hours Bias: Medium Bearish
Pound (GBP): Key News Events Today
Claimant Count Change
Average Earnings Index
Strong employment sector statistics are likely to further boost the pound, which is currently trading above 1.2860.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted to increase the Bank Rate by 0.5 percentage points to 5%.
- Two members preferred to maintain the Bank Rate at 4.5%.
- CPI inflation is expected to significantly decrease due to developments in energy prices.
- Updated projections indicate that CPI inflation is expected to slightly decline above 1% at the two and three-year horizons, remaining below the 2% target.
- The next meeting is scheduled for August 3, 2023.
Next 24 Hours Bias: Strong Bullish
Global Markets Overview
Asian Stock Markets
- Nikkei: Up 0.04%
- Shanghai Composite: Up 0.55%
- Hang Seng: Up 0.97%
- ASX: Up 1.50%
- DAX futures: Up 0.35%
- CAC 40: Up 0.61%
- FTSE: Down 0.09%
US Stock Market
- Dow Jones: Up 0.62%
- S&P 500: Up 0.24%
- Nasdaq 100: Up 0.18%
- Gold: $1931.56 (+0.34%)
- Silver: $23.21 (+0.41%)
- Brent Oil: $78.19 (+0.68%)
- WTI Oil: $73.53 (+0.74%)
Notable News & Data
- (GBP) BoE Gov Bailey Speaks at 00:30
- (GBP) Claimant Count Change (Jun) Actual 25.7K, Forecast –8.6K, Previous –13.6k at 11:30
- (EUR) German CPI (MoM) (Jun) Actual 0.3%, Forecast 0.3%, Previous –0.1% at 11:30
- (AUD) NAB Business Confidence (Jun) Actual 0, Forecast –1, Previous –4 at 11:30
- (USD) EIA Short-Term Energy Outlook at 22:30
GBPUSD: Anticipating Bullish Continuation with Strong Resistance Levels
In the foreign exchange market, the GBP/USD currency pair has shown promising signs for further upward movement. The price is currently positioned above a significant ascending trend line and the bullish Ichimoku cloud, suggesting the potential for additional upward momentum. This news article will delve into the key levels and projections that could drive the pair’s bullish continuation.
Ascending Trend Line and Bullish Ichimoku Cloud Support
First Support: Acting as Pullback Support
At 1.2859, we find the first support level, which acts as a pullback support. If the price bounces off this level, there is a possibility of it rising toward the first resistance.
First Resistance: Strengthened by Fibonacci Projections and Extensions
The first resistance level at 1.2906 confirms its status as a strong resistance level. It aligns with a 61.8% Fibonacci projection and a 127.2% Fibonacci extension, adding further weight to its significance. If the price successfully rebounds from the first support, it may rise to this level.
Second Resistance: A Potential Reversal Zone
Should the price surpass the first resistance, it might target the second resistance level at 1.2950. This retreat resistance level coincides with a 78.6% Fibonacci projection, making it a potential reversal zone.
Breakthrough Scenario: Support Turned Resistance
Conversely, if the price breaks below the first support level, it may continue its descent toward the second support level at 1.2817. This level, of strong overlap support, can act as a significant barrier to further downward movement.
Based on the analysis provided, a potential trade suggestion for GBP/USD is as follows:
- Trade: Buy
- Entry: 1.2892
- Take Profit: 1.2950
- Stop Loss: 1.2855
By following this trade suggestion, traders could take advantage of the anticipated bullish continuation in the GBP/USD currency pair.
EURUSD: Bearish Momentum Calls for Attention
The EUR/USD currency pair currently exhibits bearish momentum, signaling a potential decline toward the first support level. This section will explore the significant resistance and support levels that could influence the pair’s price action.
Bearish Reaction at First Resistance
First Resistance: Key Swing High Resistance
Situated at 1.1012, the first resistance level serves as a significant swing-high resistance at present. If the price reacts off this level, a decrease towards the first support becomes likely.
First Support: Designated as Pullback Support
The first support, designated at 1.1001, acts as a pullback support. Should the price react off the first resistance, it could decline towards this level.
Second Resistance: Overcoming the Obstacle
If the price successfully overcomes the first resistance, it may target the second resistance level at 1.1027. This remarkable multi-swing high resistance could serve as a significant hurdle for further bullish advancement.
Breakthrough Scenario: Testing Support
On the contrary, should the price break below the first support, it may continue its descent toward the second support level at 1.0986. This retreat support holds considerable importance and can provide a robust foundation for potential price stabilization.
Considering the above analysis, a possible trade suggestion for EUR/USD is as follows:
- Trade: Buy
- Entry: 1.1007
- Take Profit: 1.1029
- Stop Loss: 1.0989
Implementing this trade suggestion could enable traders to capitalize on the anticipated bearish reaction and subsequent bullish move in the EUR/USD currency pair.
AUDUSD: Bearish Continuation Potentially Ahead
The AUD/USD chart indicates current momentum favoring a bearish continuation toward the first support level. This section will examine the key support and resistance levels that could shape the pair’s future price movements.
First Support: Strong Overlap Support
At 0.6660, the first support level acts as a crucial overlap support, offering a sturdy foundation for potential price stability. Additionally, this level coincides with a 23.60% Fibonacci retracement level, further reinforcing its significance.
Second Support: Fibonacci Projection with Overlap Support
Located at 0.6627, the second support level also functions as an overlap support. It gains additional importance due to its alignment with a 100% Fibonacci projection level, indicating a compelling area of potential price support.
First Resistance: Overcoming the Barrier
An overlap resistance at 0.6688 serves as the first resistance level. This resistance is accompanied by a 127.20% Fibonacci extension level, highlighting its significance as a major roadblock to continued bullish momentum. If the price manages to surpass this resistance, it may target the second resistance level.
Second Resistance: Multifaceted Resistance
The second resistance level, situated at 0.6720, is defined by three Fibonacci levels—a 50% retracement, a 161.80% extension, and an overlap resistance. This confluence of resistance factors accentuates its importance as a significant hurdle for further bullish advancement.
Taking into account the analysis above, a potential trade suggestion for AUD/USD is as follows:
- Trade: Sell
- Entry: 0.6661
- Take Profit: 0.6623
- Stop Loss: 0.6694
By following this trade suggestion, traders can potentially benefit from the projected bearish continuation in the AUD/USD currency pair.
USDJPY: Bearish Momentum Suggests Potential for a Decline
The USD/JPY currency pair currently exhibits bearish momentum, indicating the possibility of a bearish bounce off the first support level. This section will analyze the key support and resistance levels that could influence the pair’s price movement.
Bearish Bounce Scenario
First Support: Solid Retreat Support
Located at 140.31, the first support level is robust retreat support. It is reinforced by a 100% Fibonacci projection and a 61.8% Fibonacci retracement, further emphasizing its significance. If the price responds favorably to this level, it may advance toward the first resistance.
First Resistance: Substantial Retreat Resistance
At 141.33, the first resistance level serves as a substantial retreat resistance. This level aligns with the 78.6% Fibonacci retracement and acts as a notable obstacle to upward movement. If the price manages to surpass this level, it may increase toward the second resistance.
Second Resistance: Another Significant Retreat Resistance
Should the price overcome the first obstacle, it may target the second resistance level at 142.67. This resistance level also acts as a substantial retreat resistance, potentially posing a significant challenge for further bullish advancement.
Breakthrough Scenario: Support Turned Resistance
On the other hand, if the price breaks below the first support level, it has the potential to fall toward the second support level at 139.02. This level serves as an effective overlap support, capable of providing significant price stabilization.
Considering the analysis provided, a potential trade suggestion for USD/JPY is as follows:
- Trade: Sell
- Entry: 140.21
- Take Profit: 138.91
- Stop Loss: 141.42
By implementing this trade suggestion, traders can potentially capitalize on the projected bearish bounce and subsequent decline in the USD/JPY currency pair.
DOW JONES: Positive Trend Indicates Potential for Price Increase
The DJ30 (Dow Jones Industrial Average) chart currently displays a positive trend, suggesting that the price may continue to rise toward the first resistance level. This section will examine the significant support and resistance levels that could influence the index’s upward movement.
Support Levels Providing Strong Foundations
Initial Support: Multi-Swing Low Support
Situated at 33,645.92, the initial support level holds the status of multi-swing low support. Additionally, it aligns with a 50% Fibonacci retracement, further solidifying its position as a strong support level. Another support level can be found at 33,437.17, characterized as a swing low support and the 61.8% Fibonacci retracement.
Resistance Levels to Overcome
First Resistance: Overlapping with Fibonacci Retracement
Located at 34,281.36, the first resistance level coincides with the 78.6% Fibonacci retracement, marking it as a noteworthy resistance level. The fact that it overlaps with resistance adds further significance. Another resistance level at 34,503.92 is considered strong due to multiple swings, potentially impeding price increases.
Based on the analysis above, a possible trade suggestion for the Dow Jones index is as follows:
- Trade: Buy
- Entry: 33,954.86
- Take Profit: 34,179.07
- Stop Loss: 33,771.41
By following this trade suggestion, traders can potentially benefit from the projected price increase in the Dow Jones Industrial Average.
BRENT CRUDE OIL: Strong Momentum Suggests Potential Bullish Continuation
The Brent crude oil chart currently exhibits strong momentum, indicating the possibility of a bullish continuation toward the first resistance level. This section will explore the crucial support and resistance levels that could impact the commodity’s price movement.
Support Levels as Foundations for Price Stability
First Support: Significant Overlap Support
At 75.04, the first support level holds considerable importance as an overlap support. Additionally, it finds support from a 23.60% Fibonacci retracement level, strengthening the foundation for potential price stability. Another support level at 72.15 acts as an overlap support and aligns with a 50% Fibonacci retracement, further enhancing its significance.
Resistance Levels Impeding Bullish Momentum
First Resistance: Overlapping Resistance with Fibonacci Factors
The first resistance level, positioned at 78.11, serves as a crucial barrier for bullish continuation. It is an overlap resistance level and finds support from a 127.20% Fibonacci extension and a 78.60% Fibonacci projection. If the price successfully overcomes this resistance, it may target the second obstacle.
Second Resistance: Significant Overlap Resistance
The second resistance level, located at 80.91, holds notable significance as a strong resistance level with multiple swings. It represents a potential major roadblock for any upward price trend.
Considering the analysis provided, a potential trade suggestion for Brent crude oil is as follows:
- Trade: Buy
- Entry: 78.07
- Take Profit: 80.10
- Stop Loss: 76.43
By following this trade suggestion, traders can potentially benefit from the projected bullish continuation in Brent crude oil.
SILVER: Neutral Momentum Indicates Range-Bound Fluctuations
The current silver chart displays neutral momentum, suggesting a lack of market direction. During this period, price fluctuations within a specific range, defined by the initial support and first resistance levels, are expected. This section will explore the significant support and resistance levels that may influence silver’s price movements.
Support Levels Enhancing Price Foundation
Initial Support: Overlapping with Fibonacci Levels
The initial support level at 22.49 coincides with the 61.80% and 38.20% Fibonacci retracement levels, as well as the 61.8% Fibonacci projection level. This combination of factors highlights the significance of the support level, enhancing its potential to serve as a robust foundation for price movements. The second support level, at 21.97, aligns with the 78.6% Fibonacci retracement level and acts as an additional support level.
Resistance Levels as Potential Market Barriers
Initial Resistance: Overlapping Resistance
At 23.19, an overlap resistance level is discovered, indicating potential resistance in the market. The second resistance level, located at 24.19, is viewed as extra overlap resistance, further reinforcing the significance of potential barriers.
Based on the analysis above, a possible trade suggestion for silver is as follows:
- Trade: Buy
- Entry: 23.28
- Take Profit: 23.75
- Stop Loss: 22.88
By implementing this trade suggestion, traders can potentially capitalize on the range-bound fluctuations within the specified support and resistance levels in the silver market.
BITCOIN: Neutral Momentum Presents Range-Bound Potential
The overall momentum of the BTC/USD instrument is currently neutral, indicating the possibility of price fluctuations between the first support and first resistance levels. This section will delve into the significant support and resistance levels that could shape Bitcoin’s price movements.
Support Levels Providing Strength
First Support: Strong Overlap Support
The first support level, located at 30,249, is regarded as strong due to its overlap support and a 23.60% Fibonacci retracement. This combination enhances the level’s significance, making it a substantial support level for potential price stabilization.
Second Support: Strengthened by Overlap Support and Fibonacci Retracement
Situated at 29,467, the second support level also benefits from overlap support and a 50% Fibonacci retracement. Like the first support, it is considered strong and capable of providing significant price support.
Resistance Levels Impeding Price Advancement
First Resistance: Multi-Swing High Resistance with Fibonacci Factors
At 30,919, the first resistance level is considered significant as a multi-swing high resistance and a 61.80% Fibonacci retracement. This level presents an obstacle to upward price trends, adding notable resistance in the market.
Second Resistance: Noteworthy Swing High Barrier
The second resistance level, positioned at 31,887, is notable for its role as a swing-high barrier. It has the potential to act as a significant roadblock for any upward price trend.
Considering the analysis provided, a potential trade suggestion for Bitcoin is as follows:
- Trade: Buy
- Entry: 30,480
- Take Profit: 30,871
- Stop Loss: 30,153
By implementing this trade suggestion, traders can potentially benefit from the range-bound potential between the specified support and resistance levels in the BTC/USD instrument.
In conclusion, the market witnessed a positive turnaround on Wall Street following remarks from Federal Reserve officials, indicating the potential end of the tightening cycle. The Asia session provided insights into the Australian dollar’s performance, while the Europe and US sessions may be influenced by employment statistics and economic sentiment surveys. Furthermore, the AUD, JPY, and GBP exhibited distinct biases based on key news events. Global markets displayed mixed performance, with Asian stock markets mostly in the green, European equities showing positive trends, and the US stock market indicating upward movement.
1. What is the purpose of the Federal Reserve’s tightening cycle?
The Federal Reserve’s tightening cycle aims to control inflation and maintain price stability by gradually increasing interest rates.
2. Why are additional interest rate hikes necessary despite the nearing conclusion of the tightening cycle?
Additional interest rate hikes are required to address persistently high inflation levels that still need to be lowered.
3. How do business conditions and future prospects impact the Australian dollar (AUD)?
While business conditions remained relatively unchanged, improved future expectations contribute to the strength of the Australian dollar, especially as the DXY sell-off gains momentum.
4. What measures has the Bank of Japan implemented to achieve price stability?
The Bank of Japan has implemented the Yield Curve Control policy, including a negative interest rate of -0.1% on policy-rate balances and the purchase of Japanese government bonds to maintain 10-year JGB yields of around 0%.
5. How does the performance of Japan’s machinery orders and wholesale inflation affect the Japanese yen (JPY)?
Inconsistent machinery orders and declining wholesale inflation have contributed to an increased demand for the Japanese yen, influenced by recent volatility in the US markets and a disappointing US NFP reading.