Hi Traders!
Forex Weekly Recap for 07–11 August, 2023:
Fundamentals
The Bank of Japan (BoJ) released its latest Summary of Opinions from their last monetary policy meeting on July 27th and 28th. The key notes were:
One member said there is still a significantly long way to go before revising the negative interest rate policy, and the framework of yield curve control needs to be maintained.
One member said the BOJ needs to patiently continue with monetary easing towards achieving the price stability target.
One member said determining whether wage hikes will continue next year will be a key issue.
One member said the achievement of 2% inflation in a sustainable and stable manner seems to have clearly come into sight.
The Bank of England's (BoE) Chief Economist, Huw Pill, warned that prices in UK supermarkets may never fall back from their high levels despite the plunge in international commodity markets. He also noted:
Monetary policy is a 'powerful' but 'blunt' tool to fight inflation.
There are also risks that the UK hasn't raised rates enough.
There are risks on both sides of UK inflation.
Food inflation is longer-lasting than past spikes.
Food price inflation will fall to 10% this year.
The Federal Reserve's Harker noted that barring any abrupt change in the direction of recent economic data, the Federal Reserve may be at the stage where it can leave interest rates where they are. He also noted:
The latest Personal Consumption Expenditures (PCE) report showed continued disinflation.
Sees core PCE falling just below 4% by year end, below 3% in 2024, and at target in 2025.
Expects unemployment to "tick up slightly".
They will probably start cutting rates sometime next year.
They do not want to overdo it on rates.
Reserve Bank of Australia (RBA) Governor Lowe noted that they had made progress in controlling inflation but may have to tighten monetary policy further. He also noted:
They expect employment to continue to grow, but below the rate of growth in the labour force.
The Australian economy is currently experiencing a period of below-trend growth, and this is expected to continue for a while yet.
The Board is seeking to establish a credible path back to the inflation target over the next couple of years.
The Board wants to have reasonable confidence that inflation will return to target over the current forecast period.
Key Data
The US CPI report showed further disinflation.
CPI Y/Y came in worse at 3.2% vs. 3.3% expected and 3.0% prior.
CPI M/M came in at 0.2% vs. 0.2% expected and 0.2% prior.
Core CPI Y/Y came in worse at 4.7% vs. 4.8% expected and 4.8% prior.
Core M/M came in at 0.2% (0.16% unrounded), vs. 0.2% expected and 0.2% prior.
The US Initial Jobless Claims came in worse at 248K vs. 230K expected and 227K prior.
UK Q2 Preliminary GDP came in strong across the board:
GDP Q/Q came in better at 0.2% vs. 0.0% expected and 0.1% prior.
GDP Y/Y came in better at 0.4% vs. 0.2% expected and 0.2% prior.
The US PPI came in better across the board:
PPI Y/Y came in better at 0.8% vs. 0.7% expected and 0.2% prior (revised from 0.1%).
PPI M/M came in better at 0.3% vs. 0.2% expected and 0.0% prior (revised from 0.1%).
Core PPI Y/Y came in better at 2.4% vs. 2.3% expected and 2.4% prior.
Core PPI M/M came in better at 0.3% vs. 0.2% expected and -0.1% prior (revised from 0.1%).
The University of Michigan Consumer Sentiment Index came in better across the board:
Consumer Sentiment came in better at 71.2 vs. 71.0 expected and 71.6 prior.
Current conditions came in better at 77.4 vs. 76.9 expected and 76.6 prior.
Expectations came in better at 67.3 vs. 68.1 expected and 68.3 prior.
1-year inflation came in better at 3.3% vs. 3.4% prior.
5–10-year inflation came in better at 2.9% vs. 3.0% prior.
Technicals
The US dollar had gained some ground against its major counterparts across the board this week.
AUDUSD 1W Chart
A bearish week for AUDUSD. The market is very close to its 2023 low of 0.64583. After a big price rejection at the 0.66170 level, the market looks to be bearish; however, if the support level of 0.64583 holds, there may be a possible reversal of the bearish trend.
USDJPY 1W Chart
After a very strong week for USDJPY, the market is trading with momentum and is still trying to break the 145.073 resistance level. If 145.073 is broken with momentum, then the psychological 150 level is the next expected target, and above 150 is our Apex level at 151.946.
EURUSD 1W Chart
EURUSD has developed a rising wedge pattern, which is a reversal pattern. We are currently on the 20 EMA support; if we get a break below the 20 EMA, then we will be looking for a break below the wedge support line.
GBPUSD 1W Chart
GBPUSD's potential head and shoulders pattern is still forming on the 1W chart; the head and left shoulder have been formed, waiting for a possible right shoulder to now form. Though the 20 EMA support has been strong, the market is strongly approaching it, which may suggest that the reversal of the bullish trend may come quicker than expected. 1.26800 support has not had a close under it for 2 months, so for the potential reversal to occur, there must be a break and close under 1.26800.
The key focus for the upcoming trading week will be:
Tuesday: Australia Wage Price Index, UK Jobs Report, German ZEW, US Retail Sales
Wednesday: Reserve Bank of New Zealand Policy Decision, UK CPI, FOMC Meeting Minutes
Thursday: Australia's Jobs Report, US Jobless Claims
Friday: Japan CPI, UK Retail Sales
We will be back with another Forex Weekly Recap report next week.
Best of luck for the upcoming trading week ahead. Trade safely and responsibly.
BluetonaFX
Forex Weekly Recap for 07–11 August, 2023:
Fundamentals
The Bank of Japan (BoJ) released its latest Summary of Opinions from their last monetary policy meeting on July 27th and 28th. The key notes were:
One member said there is still a significantly long way to go before revising the negative interest rate policy, and the framework of yield curve control needs to be maintained.
One member said the BOJ needs to patiently continue with monetary easing towards achieving the price stability target.
One member said determining whether wage hikes will continue next year will be a key issue.
One member said the achievement of 2% inflation in a sustainable and stable manner seems to have clearly come into sight.
The Bank of England's (BoE) Chief Economist, Huw Pill, warned that prices in UK supermarkets may never fall back from their high levels despite the plunge in international commodity markets. He also noted:
Monetary policy is a 'powerful' but 'blunt' tool to fight inflation.
There are also risks that the UK hasn't raised rates enough.
There are risks on both sides of UK inflation.
Food inflation is longer-lasting than past spikes.
Food price inflation will fall to 10% this year.
The Federal Reserve's Harker noted that barring any abrupt change in the direction of recent economic data, the Federal Reserve may be at the stage where it can leave interest rates where they are. He also noted:
The latest Personal Consumption Expenditures (PCE) report showed continued disinflation.
Sees core PCE falling just below 4% by year end, below 3% in 2024, and at target in 2025.
Expects unemployment to "tick up slightly".
They will probably start cutting rates sometime next year.
They do not want to overdo it on rates.
Reserve Bank of Australia (RBA) Governor Lowe noted that they had made progress in controlling inflation but may have to tighten monetary policy further. He also noted:
They expect employment to continue to grow, but below the rate of growth in the labour force.
The Australian economy is currently experiencing a period of below-trend growth, and this is expected to continue for a while yet.
The Board is seeking to establish a credible path back to the inflation target over the next couple of years.
The Board wants to have reasonable confidence that inflation will return to target over the current forecast period.
Key Data
The US CPI report showed further disinflation.
CPI Y/Y came in worse at 3.2% vs. 3.3% expected and 3.0% prior.
CPI M/M came in at 0.2% vs. 0.2% expected and 0.2% prior.
Core CPI Y/Y came in worse at 4.7% vs. 4.8% expected and 4.8% prior.
Core M/M came in at 0.2% (0.16% unrounded), vs. 0.2% expected and 0.2% prior.
The US Initial Jobless Claims came in worse at 248K vs. 230K expected and 227K prior.
UK Q2 Preliminary GDP came in strong across the board:
GDP Q/Q came in better at 0.2% vs. 0.0% expected and 0.1% prior.
GDP Y/Y came in better at 0.4% vs. 0.2% expected and 0.2% prior.
The US PPI came in better across the board:
PPI Y/Y came in better at 0.8% vs. 0.7% expected and 0.2% prior (revised from 0.1%).
PPI M/M came in better at 0.3% vs. 0.2% expected and 0.0% prior (revised from 0.1%).
Core PPI Y/Y came in better at 2.4% vs. 2.3% expected and 2.4% prior.
Core PPI M/M came in better at 0.3% vs. 0.2% expected and -0.1% prior (revised from 0.1%).
The University of Michigan Consumer Sentiment Index came in better across the board:
Consumer Sentiment came in better at 71.2 vs. 71.0 expected and 71.6 prior.
Current conditions came in better at 77.4 vs. 76.9 expected and 76.6 prior.
Expectations came in better at 67.3 vs. 68.1 expected and 68.3 prior.
1-year inflation came in better at 3.3% vs. 3.4% prior.
5–10-year inflation came in better at 2.9% vs. 3.0% prior.
Technicals
The US dollar had gained some ground against its major counterparts across the board this week.
AUDUSD 1W Chart
USDJPY 1W Chart
EURUSD 1W Chart
GBPUSD 1W Chart
The key focus for the upcoming trading week will be:
Tuesday: Australia Wage Price Index, UK Jobs Report, German ZEW, US Retail Sales
Wednesday: Reserve Bank of New Zealand Policy Decision, UK CPI, FOMC Meeting Minutes
Thursday: Australia's Jobs Report, US Jobless Claims
Friday: Japan CPI, UK Retail Sales
We will be back with another Forex Weekly Recap report next week.
Best of luck for the upcoming trading week ahead. Trade safely and responsibly.
BluetonaFX