Euro’s Morning Plunge Halts at Support Level, GDP, and Industrial Production Awaited.

In a recent market update, the US stock market experienced a notable decline of 1.2% in the S&P index due to escalating worries about potential interest rate hikes. This downturn came after the release of unexpectedly robust Core Retail Sales data, which highlighted ongoing challenges for the Federal Reserve in its mission to manage inflation. The Core Retail Sales figures surpassed expectations, with a growth of 1% compared to the projected 0.4%. Adding to market unease, news circulated that Fitch was evaluating the credit ratings of several banks. As a result, the Dow Jones index fell by 1.02%, the Nasdaq dropped by 1.14%, and the S&P decreased by 1.16%, contributing to a broad-based decline in benchmark indices. While the response of the US dollar was relatively subdued, it remained resilient against major currencies. Treasury yields exhibited mixed performance throughout the trading day.

Focus on the Federal Reserve’s Role

The recent robust data releases have refocused market attention on the Federal Reserve and its potential future rate actions. With 35 days remaining until the next Federal Reserve meeting, the strong economic indicators, including last week’s Consumer Price Index (CPI) and recent Core Retail Sales data, have reignited discussions about further interest rate increases or an extended period of elevated rates. However, there are growing concerns among investors about stock market valuations under the current circumstances, with apprehensions regarding the possibility of more significant downside corrections. The foreign exchange (FX) market has showcased the dollar’s strength against major currencies for several weeks, while US treasury yields displayed mixed dynamics.

Asia Session Highlights

During the Asian trading session, the Reserve Bank of New Zealand (RBNZ) opted to maintain its official cash rate (OCR) at 5.5%. The RBNZ’s decision was based on its commitment to maintaining restrictive OCR levels in order to align the headline Consumer Price Index (CPI) with the target range of 1% to 3%. Despite a decrease in headline inflation and inflation expectations, core inflation remained elevated due to pressure on export prices from weakened global economic growth and sluggish domestic business activity. The Kiwi dollar experienced fluctuation, trading between 0.5940 and 0.5965 against other major currencies.

European and US Session Ahead

In the upcoming European and US sessions, the United Kingdom is set to release its consumer inflation data for July. Predictions anticipate a decline in the headline Consumer Price Index (CPI) from 7.9% YoY in June to 6.7% YoY, while the core CPI is projected to marginally decrease from 6.9% YoY to 6.8% YoY. Softening inflation figures could exert pressure on the pound sterling. Additionally, the Federal Reserve’s release of minutes from the July Federal Open Market Committee (FOMC) meeting is expected to influence demand for the US dollar, possibly leading to an impact on the Dollar Index (DXY), which is currently trading around 103.20.

Kiwi Dollar (NZD) Outlook

Anticipating the Reserve Bank of New Zealand’s monetary policy statement, it is likely that the official cash rate will remain unchanged at 5.5%, maintaining the pause observed over the last three meetings. This decision could exert additional downward pressure on the Kiwi dollar due to ongoing domestic inflation decreases and a subdued global growth outlook. The Monetary Policy Committee’s stance is centered on gradually achieving target inflation while supporting maximum sustainable employment.

Euro (EUR) Insights

In the Eurozone, the release of second-quarter 2023’s flash GDP estimates, which is projected at 0.6% YoY, and a predicted 0.1% MoM contraction in industrial production for June could influence the euro’s performance. The Euro experienced a decline to 1.0900 but managed to find support near this level.

Pound (GBP) Expectations

As the United Kingdom publishes its inflation data, both headline, and core CPI is expected to register decreased figures. While the core CPI is projected to experience a slight decrease from 6.9% YoY to 6.8% YoY, the headline CPI for July is anticipated to decrease from 7.9% YoY in June to 6.7% YoY. Weaker-than-expected inflation data could create downward pressure on the pound sterling.

Global Market Overview

In the global market scene, Asian stocks faced declines, with the Nikkei down 1.46%, Shanghai Composite down 0.60%, Hang Seng down 1.50%, and ASX down 1.49%. European equities also took a hit, with DAX futures down 0.86%, CAC 40 down 1.10%, and FTSE down 1.57%. In the US stock market, the Dow Jones index decreased by 1.02%, the S&P 500 was down 1.16%, and the Nasdaq 100 experienced a decline of 1.14%.

Commodities Update

Commodity prices displayed mixed movements, with gold up 0.19% at $1904.85, silver rising 0.39% to $22.59, Brent Oil falling by 0.46% to $84.52, and WTI Oil declining by 0.43% to $80.63.

Upcoming News and Data Releases

Key news events and data releases include the RBNZ Interest Rate Decision and Rate Statement for the NZD, Eurozone GDP (YoY) (Q2) forecast, Eurozone Industrial Production (MoM) (Jun) forecast, CAD Wholesale Sales (MoM) (Jun) forecast, USD Building Permits (Jul) forecast, and the release of FOMC Meeting Minutes for the USD.

GBPUSD: Buy

• Moving Averages: Favorable (Buy)
• RSI: Positive (Buy)
• Stochastic: Positive (Buy)
• Resistance: 1.2746, Support: 1.2653
• Trade: Buy around 1.2776, Take Profit: 1.2896, Stop Loss: 1.2695

EURUSD: Sell

• Moving Averages: Mixed (Sell)
• RSI: Neutral
• Stochastic: Neutral
• Resistance: 1.0942, Support: 1.0891
• Trade: Sell near 1.0865, Take Profit: 1.0802, Stop Loss: 1.0915

AUDUSD: Sell

• Moving Averages: Mixed (Sell)
• RSI: Negative (Sell)
• Stochastic: Neutral
• Resistance: 0.6507, Support: 0.6406
• Trade: Sell around 0.6379, Take Profit: 0.6264, Stop Loss: 0.6465

USDJPY: Buy

• Moving Averages: Favorable (Buy)
• RSI: Positive (Buy)
• Stochastic: Neutral
• Resistance: 145.84, Support: 144.83
• Trade: Buy near 146.48, Take Profit: 147.75, Stop Loss: 145.61

NASDAQ 100: Sell

• Moving Averages: Mixed (Sell)
• RSI: Neutral
• Stochastic: Negative (Sell)
• Resistance: 15214.26, Support: 15089.22
• Trade: Sell around 15029.99, Take Profit: 14872.04, Stop Loss: 15141.87

WTI Crude Oil: Sell

• Moving Averages: Mixed (Sell)
• RSI: Neutral
• Stochastic: Neutral
• Resistance: 80.69, Support: 79.97
• Trade: Sell near 79.63, Take Profit: 78.63, Stop Loss: 80.48

Gold: Sell

• Moving Averages: Mixed (Sell)
• RSI: Negative (Sell)
• Stochastic: Neutral
• Resistance: 1905.98, Support: 1899.42
• Trade: Sell around 1895.05, Take Profit: 1881.49, Stop Loss: 1904.67

Bitcoin: Sell

• Moving Averages: Mixed (Sell)
• RSI: Sell
• Stochastic: Negative (Sell)
• Resistance: 29493.84, Support: 29155.96
• Trade: Sell around 28978.13, Take Profit: 28195.67, Stop Loss: 29476.06