Forex Market Outlook: 23 August 2022

Updated August 23, 2022

The Dollar index extended its rally above 109, reaching the highest level in 20 years as markets anticipate more hawkish Fed moves ahead to rein in inflation. Investors will be keeping a close watch on the annual Jackson Hole symposium this Friday for more clues on the extent of the interest rates hike in September as markets weigh between a 50 and 75 bps hike.

Elsewhere, Euro suffered against a stronger greenback, with Euro crossing below parity against the Dollar, weighed down by recession fears amid a deepening energy crisis as natural gas prices climb. With the Eurozone heavily reliant on energy gas imports, higher prices exacerbated by supply shortages and higher demand could cloud the region’s growth outlook. Russia’s energy exporter Gazprom planned to halt flows of the Nord Stream natural-gas pipeline to Germany to undergo a 3 days maintenance while demand is expected to increase as the region seeks to replenish supply ahead of the winter season. On the data front, Germany’s Manufacturing and Services PMI data should point to a slowdown in the region. Investors will also be keeping a close watch on the ECB monetary policy meeting accounts on Thursday with expectations for the ECB to remain hawkish to curb soaring inflation.

Commodity currencies suffered against the stronger Dollar as well, though the effects are not as pronounced as compared to the Euro and Pound as they benefited from higher commodity prices. The New Zealand Dollar remains supported by hawkish RBNZ’s comments as Deputy Governor Christian Hawkesby indicated that policymakers want rates to be “comfortably above neutral” to fight higher inflation. The RBNZ delivered seven consecutive interest rates hike and signalled plans to hike rates to 4.00% by mid-2023. That said, the Kiwi Dollar is still vulnerable to market risk sentiment where slowdown fears could dampen the appeal of the currency.

Trade ideas that played out last Tuesday: 18 August 2022

AUDUSD H4: Bearish outlook seen, further downside below 0.7000

On the H4 time frame, a pullback to the resistance zone at 0.7000 which coincides with the Fibonacci confluence levels could see a reversal below this zone to the support zone at 0.6860. Failure to hold below the resistance zone at 0.7000 could see prices push higher to the next resistance zone at 0.7080. Prices are holding below the 50 EMA as well, supporting the bearish bias.

Before:

Coloured candles represent our projection

Source: TradingView. https://www.tradingview.com/chart/AUDUSD/1a5m2RkZ-AUDUSD-H4-Bearish-outlook-seen-further-downside-below-0-7000/

After:

Today’s trade ideas: 23 August 2022

USDCHF H1: Bearish outlook seen, further downside below 0.9690

On the H1 time frame, prices are approaching the resistance zone at 0.9690 which lines up with the 61.8% Fibonacci retracement level. We could see a reversal below the 0.9690 resistance zone to our support zone at 0.9600 which is also the graphical support zone and 23.6% Fibonacci retracement. Stochastics is testing resistance at 98.11 as well with a bearish divergence seen as highlighted in red, supporting the bearish bias.

Coloured candles represent our projection

Source: TradingView. https://www.tradingview.com/chart/USDCHF/6D9TppbI-USDCHF-H1-Bearish-outlook-seen-further-downside-below-0-9690/

CADJPY H1: Bearish outlook seen, further downside below 105.50

On the H1 time frame, prices are testing the resistance zone at 105.50 in line with the graphical resistance where a break below the downside confirmation level at 104.80 could provide the bearish acceleration for further downside moves to the support zone at 103.50. This support zone lines up with the 78.6% Fibonacci retracement. Stochastics is testing resistance and seeing bearish divergence as well as highlighted in red where we could see further downside in prices.

Coloured candles represent our projection

Source: TradingView. https://www.tradingview.com/chart/CADJPY/8JXdjcTM-CADJPY-H1-Bearish-outlook-seen-further-downside-below-105-50/

XAUUSD H4: Bearish outlook seen, further downside below 1759.80

On the H4 time frame, a pullback to the resistance zone at 1759.80, in line with the Fibonacci confluence levels and graphical support-turned-resistance zone presents an opportunity to play the drop to the support zone at 1713.50. Prices are holding below the Ichimoku cloud as well showing signs of bearish pressure. Failure to hold below the resistance zone at 1759.80 could see prices push higher to the next resistance zone at 1782.80.

Coloured candles represent our projection

Source: TradingView. https://www.tradingview.com/chart/XAUUSD/IcJFd6jP-XAUUSD-H4-Bearish-outlook-seen-further-downside-below-1759-80/  

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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