Olivia

Key highlights EUR/USD is facing a major hurdle near 1.0225. A key bearish trend line is forming with resistance near 1.0230 on the 4-hours chart. EUR/USD technical analysis Looking at the 4-hours chart, the pair was able to recover losses and climbed above the 1.0100 and 1.0150 resistance levels. The bulls pushed the pair above the 38.2% Fib retracement level of the downward move from the 1.0614 swing high to 0.9951 low. However, the pair is now facing hurdles near 1.0225 and the 100 simple moving average (red, 4-hours). There is also a key bearish trend line forming with resistance near 1.0230 on the same chart. The next major resistance is near the 1.0280 level. It is near the 50% Fib retracement level of the downward move from the 1.0614 swing high to 0.9951 low. A close above the 1.0280 level could open the doors for a steady increase. The next major resistance could be near the 1.0360 level, above which the pair could rise to 1.0420. If there is no upside break, the pair could correct lower and dip below 1.0180. The next major support is 1.0150, below which the pair could resume its decline. In the stated case,… Read More »EUR/USD faces breakout zone, oil price slides

This month has dragged on and seems to be lasting forever. One reason could be that it is my last full month as a keyboard warrior, toiling as the voice of reason as I try to make sense of the nonsense in the financial markets. The second, and more likely, is that the US FOMC policy meetings falls at the end of the month, instead of its usual mid-month slot. But as the last week of July arrives, so does the FOMC policy meeting, with the results due out in the early hours of Thursday morning Singapore time. For what its worth, I am in Team Taylor, and going for 75 basis points, with 100 being a bridge to far. Last Friday’s price action may have softened the ardour of the 100 basis point hikes on the committee as well. Equity markets finished sharply lower, ostensibly because of soft social media earnings, but given Wall Street’s schizophrenic nature of late, it was just as likely to be recession fears, booking some short-term profits, and cutting exposure ahead of the weekend and any potential risks that emerged over it. Currency markets had a noisy day but finished not far from unchanged… Read More »FOMC week finally

This month has dragged on and seems to be lasting forever. One reason could be that it is my last full month as a keyboard warrior, toiling as the voice of reason as I try to make sense of the nonsense in the financial markets. The second, and more likely, is that the US FOMC policy meetings falls at the end of the month, instead of its usual mid-month slot. But as the last week of July arrives, so does the FOMC policy meeting, with the results due out in the early hours of Thursday morning Singapore time. For what its worth, I am in Team Taylor, and going for 75 basis points, with 100 being a bridge to far. Last Friday’s price action may have softened the ardour of the 100 basis point hikes on the committee as well. Equity markets finished sharply lower, ostensibly because of soft social media earnings, but given Wall Street’s schizophrenic nature of late, it was just as likely to be recession fears, booking some short-term profits, and cutting exposure ahead of the weekend and any potential risks that emerged over it. Currency markets had a noisy day but finished not far from unchanged… Read More »FOMC week finally

Next week, the FOMC, the Fed's monetary policy-making body, meets. We expect a 75 basis point (bp) hike in key interest rates, in line with the market. At the last meeting, Fed Chairman Powell announced that there would be a decision on a 50bp or 75bp hike in July. The crucial economic data released since then clearly favor the stronger hike. The inflation rate for June showed a further increase, reaching 9.1%. Energy and food prices are the decisive factors for the continuous increases that have been seen for months. In the remaining areas (core inflation), the inflation rate has declined in recent months, but only very slowly. Although sharp price increases from the previous year have dropped out of the calculation, at the same time, current inflationary pressures have been high since last fall and show no signs of abating. The labor market data for June published earlier showed a continued robust development. The number of newly created jobs has been stable at a high level for months. The unemployment rate has remained near record lows. Finally, retail sales showed solid growth in private consumer demand. Notably, the sharp rise in inflation also fueled short-term expectations of a 100bp… Read More »Another 75 basis points from US Fed

Next week, the FOMC, the Fed's monetary policy-making body, meets. We expect a 75 basis point (bp) hike in key interest rates, in line with the market. At the last meeting, Fed Chairman Powell announced that there would be a decision on a 50bp or 75bp hike in July. The crucial economic data released since then clearly favor the stronger hike. The inflation rate for June showed a further increase, reaching 9.1%. Energy and food prices are the decisive factors for the continuous increases that have been seen for months. In the remaining areas (core inflation), the inflation rate has declined in recent months, but only very slowly. Although sharp price increases from the previous year have dropped out of the calculation, at the same time, current inflationary pressures have been high since last fall and show no signs of abating. The labor market data for June published earlier showed a continued robust development. The number of newly created jobs has been stable at a high level for months. The unemployment rate has remained near record lows. Finally, retail sales showed solid growth in private consumer demand. Notably, the sharp rise in inflation also fueled short-term expectations of a 100bp… Read More »Another 75 basis points from US Fed

Next week, the FOMC, the Fed's monetary policy-making body, meets. We expect a 75 basis point (bp) hike in key interest rates, in line with the market. At the last meeting, Fed Chairman Powell announced that there would be a decision on a 50bp or 75bp hike in July. The crucial economic data released since then clearly favor the stronger hike. The inflation rate for June showed a further increase, reaching 9.1%. Energy and food prices are the decisive factors for the continuous increases that have been seen for months. In the remaining areas (core inflation), the inflation rate has declined in recent months, but only very slowly. Although sharp price increases from the previous year have dropped out of the calculation, at the same time, current inflationary pressures have been high since last fall and show no signs of abating. The labor market data for June published earlier showed a continued robust development. The number of newly created jobs has been stable at a high level for months. The unemployment rate has remained near record lows. Finally, retail sales showed solid growth in private consumer demand. Notably, the sharp rise in inflation also fueled short-term expectations of a 100bp… Read More »Another 75 basis points from US Fed

Eurozone PMI data is off to a bad start with weak French data, which could take a further toll on EUR sentiment. With the ECB meeting out of the way, the focus can go back to fundamentals, Italian elections in September, the energy crisis and recession risk.  Germany's PMIs are even worse than the French data. Both manufacturing and services printed at 49.2, well below expectations and both in contractionary territory. The composite flash is a dismal 48.0. These gnarly PMI readouts could be an open window to sell the Euro on a policy mistake premise.  Though the knee-jerk spike has moderated somewhat, bunds had a more substantial initial reaction to the German PMI print than the French one. The futures gained roughly half a point on each bad print, with the German 10y yield down 12bp on the day.  USDCHF topped against the .9730/40 resistance level several times on Thursday; since then, the softer US data prints and, as a result, lower US yields have been weighing on the USD. The widening of peripheral spreads post ECB has been weighing on EURCHF, where the market has been taking back some shorts recently and now seems eager to re-instate

GBP/USD Cable extends directionless mode into fourth straight day, trading between 10DMA (1.1923) which offers solid support and strong barriers at 1.20 zone (psychological / falling 20DMA / Fibo 38.2% of 1.2406/1.1760 bear-leg. Pound benefited from stronger than expected UK PMI data, but remains weighed by weaker Euro on downbeat EU PMI’s and also by a new legal procedure the European commission launched against Britain over some rules governing post-Brexit trading arrangements for Northern Ireland. Technical studies on daily chart remain bearishly aligned and maintain pressure, with weekly close below 1.20 barrier to add to negative signals, though only sustained break below 10DMA would confirm recovery stall and shift near-term focus lower.  Res: 1.2000; 1.2007; 1.2045; 1.2083. Sup: 1.1923; 1.1890; 1.1861; 1.1804. Interested in GBP/USD technicals? Check out the key levels

There is one forsaken instrument on the market, and it could be this week’s winner, especially over the last two days. That instrument is gold. Gold has had a real rollercoaster ride this year. From long-term highs, above the 2000 USD/oz, to yearly lows, on 1680 USD/oz, in just a few months. The reason gold can shine again is that we finally see some demand here. On the chart you have weekly candles, and where we’re about to see the first bullish week since the beginning of June. That is something, especially since the bounce isn’t happening in some random place. No, XAUUSD is bouncing off 1680 USD/oz (green) an absolutely crucial horizontal support which has been helping lift the price since the middle of 2020. Also, the way the price bounces in and of itself isn’t random. Gold’s created a candle with a long tail and a bullish body on top – a hammer! Taking all that into consideration, our view on gold is positive, and for the first time in weeks. Previously, we were strongly bearish, mostly because of this yellow pattern, the head and shoulders (H&S) formation. However, as it meets and bounces off the 1680 USD/oz… Read More »Gold meets the mother of all supports and uses her wisely

European central bank and President Lagarde surprised the market but the euro reaped only temporary gains. In a European economy that is in doubt and facing significant and fundamental problems an aggressive move of 50 basis points increase in key interest rates is definitely a decision with some risk. Today's announcement of the shrinking private sector in Germany confirms these concerns and has put the European currency in an environment of new pressures. The clouds of the possibility of stagflation in the European economy remain with the risk that the European Central Bank's attempt to control high inflation could endanger the development path of the European economy. In this environment, the European common currency made some gains in the wake of the announcement but failed to break the critical resistance levels of 1,0280-1.0300. International stock markets are showing signs of fatigue after recent bullish sessions leading to re-positions for the dollar as a safe haven currency. Although the decisions of the European Central Bank surprised us and were not in accordance with our basic scenario, the difficulty of the Euro to maintain the gains was quite expected as we noted in yesterday's report. Despite a strong upward reaction of almost 300… Read More »EUR/USD : What’s next after the ECB’s 50 basis point hike