Forex Market Outlook: 2 August 2022

Updated August 2, 2022

Dollar pared recent gains and hovered at around 106, close to its lowest level in a month as traders scaled back on Fed rate hikes. Slowdown concerns and softer economic data are easing pressure on the Fed for more aggressive tightening going forward, following a slew of data which pointed to weaker consumer spending, declining confidence, and slower manufacturing growth.

US first and second quarter’s GDP data showed that the economy shrank by 1.6% and 0.9% respectively, following a sharp downward revision in consumer spending which is the biggest component of the US GDP. Meanwhile, US ISM Manufacturing PMI, a measure of manufacturing growth slumped to a two-year low as supply constraints and softer demand continue to cloud the economic outlook. On the other hand, price pressures continue to climb, as the US Core PCE Price Index, a Fed’s preferred measure of inflation rose 0.6% m/m in June, up from 0.3% in May. With rising price pressures and stagnant economic growth, we could see increasing risks of stagflation. In the coming week, investors will turn to the US jobs report data for further clues on the Fed’s moves going forward.

Elsewhere, Euro and Pound rallied higher against the greenback this week as both currencies benefited from the recent Dollar’s weakness and narrowing gap between the central banks and the Fed. With both the Eurozone and UK’s inflation data standing at decades high and showing no signs of peaking, it could pressure the ECB and BOE to raise rates more aggressively going ahead to rein in inflation. In the coming week, investors will be keeping a close watch on BOE’s monetary policy meeting on Thursday with markets anticipating a 50 basis points rate hike.

Commodity currencies also benefited from the recent Dollar’s weakness and hawkish central banks stance. In Australia, RBA’s latest monetary policy meeting minutes signalled further interest rates hike ahead. RBA Governor Philip Lowe noted that gradual interest rate hikes are necessary in the coming months while cautioning against upside risks to inflation, with markets anticipating a 50 bps hike later today, after the CPI data in the second quarter showed signs of easing.

GBPJPY H4: Bearish outlook seen, further downside below 166.20

On the H4 time frame, prices are approaching the resistance zone at 166.20 which coincides with the descending trend line and Fibonacci confluence levels. We could see a reversal below the resistance zone at 166.20 to the support target at 163.70, in line with the 78.6% Fibonacci retracement. Failure to hold below the 166.20 resistance zone could see a further push up to the next resistance zone at 167.00. Stochastic is seeing limited upside before it reaches resistance at 100.00 as well, in line with prices.

Before:


Coloured candles represent our projection


Source: TradingView. https://www.tradingview.com/chart/GBPJPY/XVHwEI4L-GBPJPY-H4-Bearish-outlook-seen-further-downside-below-166-20/

After:

GBPJPY H1: Bearish outlook seen, further downside below 165.20

On the daily time frame, prices are facing bearish pressure from its daily descending trend line and resistance zone at 166.20 where we could see further downside below this level. On the H1 time frame, a pullback to the resistance zone at 165.20, in line with the 38.2% Fibonacci retracement presents an opportunity to play the drop to the next support target at 163.60. Stochastic is testing resistance at 95.20 as well where we could see more downside, in line with prices.

Before:


Coloured candles represent our projection

Source: TradingView. https://www.tradingview.com/chart/GBPJPY/aKbZUwJY-GBPJPY-H1-Bearish-outlook-seen-further-downside-below-165-20/

After:

USDCAD M30: Bearish outlook seen, pullback to 1.2870 could see a reversal

On the M30 time frame, prices are holding below the descending channel where a pullback to the resistance zone at 1.2870, in line with the 61.8% Fibonacci retracement presents an opportunity to play the drop to the support target at 1.2780. This support zone lines up with the -27.2% Fibonacci retracement and descending channel’s support. Failure to hold below the 1.2870 resistance zone could see prices push higher to test the resistance zone at 1.2910. Prices are holding below the Ichimoku cloud as well, supporting the bearish bias.

Before:


Coloured candles represent our projection

Source: TradingView. https://www.tradingview.com/chart/USDCAD/EnRvO54y-USDCAD-M30-Bearish-outlook-seen-potential-reversal-on-pullback/

After:

Today’s trade ideas: 2 August 2022

EURUSD H4: Bullish outlook seen, further upside above 1.0230

On the H4 time frame, a pullback to the support zone at 1.0230 presents an opportunity to play the bounce to the resistance target at 1.0380. This resistance target coincides with the 50% Fibonacci retracement and the resistance-turned-support graphical level. Prices are also holding above the ascending channel and 30 EMA supporting the bullish bias.


Coloured candles represent our projection

Source: TradingView. https://www.tradingview.com/chart/EURUSD/QYuPFpd2-EURUSD-H4-Bullish-outlook-seen-further-upside-above-1-0230/

USDCAD H4: Bearish outlook seen, reversal below 1.2890

On the H4 time frame, prices are approaching the resistance zone at 1.2890, in line with the Fibonacci confluence levels where we could see further downside below this zone to the intermediate support target at 1.2780 which coincides with the graphical support. A break below the 1.2780 intermediate support target could provide the bearish acceleration to the support area at 1.2680. Prices are holding below the Ichimoku cloud indicator as well, supporting the bearish bias.


Coloured candles represent our projection

Source: TradingView. https://www.tradingview.com/chart/USDCAD/CXpgQ0vI-USDCAD-H4-Bearish-outlook-seen-reversal-below-1-2890/

XAUUSD H1: Bullish outlook seen, further upside above 1766.80

On the H1 time frame, a pullback to the support zone at 1766.80, in line with the Fibonacci confluence levels presents an opportunity to play the bounce to the resistance target at 1793.00. This resistance target coincides with the daily resistance level. Prices are also holding above the Ichimoku cloud indicator, supporting the bullish bias.


Coloured candles represent our projection

Source: TradingView. https://www.tradingview.com/chart/XAUUSD/ZIUzEf6M-XAUUSD-H1-Bullish-outlook-seen-further-upside-above-1766-80/

Past performance is no indication of future performance. This report is provided by Zeta Labs, a specialized Forex Fintech Consultant and Technical Advisor who provides white-label solutions for FX Market Analysis, trading insights and education webinars. The team has a wealth of industry experience, with our analyst being part of the team recognised by The Technical Analyst Awards as Finalist for the Best FX Research for 4 consecutive years (2019, 2020, 2021, 2022). 


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