AUD/USD has been the worst performer among the major currencies in the past 4 weeks due to a double whammy slow-down growth effect from the US and China. RBA’s “hawkish hold” monetary policy stance on Tuesday may offer a relief for the AUD/USD. The recent 6.6% decline in the AUD/USD has almost reached an extreme oversold condition since December 2021. In the past four weeks, the Aussie dollar has faced similar bloodshed with the major benchmark stock indices ranging from the US, and Europe to Asia on a synchronized global risk-off episode that intensified last week after the odds of a hard-landing recessionary environment in the US have increased. Global markets witnessed a flight to safety to longer tenure US Treasury bonds and gold (XAU/USD) that outperformed in a mixed-bag US dollar environment. The Aussie dollar is considered a higher-beta currency as it tends to be referenced as a proxy for growth, in turn also commodities-related due to Australia being the world’s largest iron ore producer that supplied most of its iron ore to China, its biggest export market. Hence, the Aussie dollar is being hampered by a double whammy economic growth slow-down effect from two of the world’s largest economies, the US and China. In addition, China after the recent conclusion of its Third Plenum, top China policymakers emphasized the continuation of piecemeal stimulus policies rather than massive accommodative policies via heavy infrastructure spending to jumpstart the current lackluster internal demand environment. The Aussie dollar is the worst-performing major currency against the US dollar Fig 1: 1-month rolling performance of the US dollar against major currencies as of 5 Aug 2024 (Source: TradingView, click to enlarge chart) Thus, the Aussie dollar has been the weakest currency among the majors. Based on a one-month rolling performance basis, the US dollar has gained by 4.20% against the Aussie dollar and in contrast weakened against the safe haven proxies; the US dollar underperformed against the Swiss franc and Japanese yen by 5.60% and 11.85% respectively at this time of the writing. RBA may offer a relief to the battered down AUD/USD Fig 2: ASX 30-day interbank cash rate futures implied yield curve as of 5 Aug 2024 (Source: RBA Rate Tracker from ASX, click to enlarge chart) Despite Australia’s core inflation decelerated unexpectedly to 3.9% y/y for the second quarter from 4% in the first quarter, most economists expect RBA to hold its policy cash rate at 4.35% for a sixth consecutive meeting on Tuesday, 6 August, and leave the options open for its remaining monetary policy meetings in 2024. Another potential impact on the AUD/USD is likely to come from its latest quarterly update of economic forecasts that will be released on Tuesday as well; so far past remarks from RBA Governor Bullock implied that RBA is not in a hurry to cut interest rates as current inflationary trend in Australia is still well above of its 3% to 2% target. At this juncture, as of Monday, 5 August, the ASX 30-day interbank cash rate futures implied yield curve indicated an implied yield of 4.06% for the November 2024 contract which suggests a potential first RBA rate cut to occur towards the end of the year, in the November meeting versus a much more dovish US Federal Reserve (see Fig 2). Latest data from the CME FedWatch tool has priced in with almost certainty that a 50 basis points cut in the Fed funds rate is to be enacted in the September FOMC meeting followed by a high chance of 78% for another 50 bps cut to bring it down to 4.25%-4.50% in the November meeting. AUD/USD has almost reached an extremely oversold condition Fig 3: AUD/USD medium-term trend as of 5 Aug 2024 (Source: TradingView, click to enlarge chart) The 6.6% decline seen in the AUD/USD from its 12 July high of 0.6798 in the past 4 weeks has caused the daily RSI momentum indicator to hit an oversold condition of 23.40 at this juncture, its most extreme oversold level reached since 3 December 2021 reading of 20.25. If the 0.6360 key medium-term pivotal support holds, the AUD/USD may see a potential mean reversion rebound to retest the intermediate resistances of 0.6565 and 0.6630 (also the 20-day and 50-day moving averages). However, failure to hold at 0.6360 may ignite a bearish “Symmetrical Triangle” range breakdown scenario to expose the first major support of 0.6200.

The Australian dollar has taken a nasty spill to start off the trading week. AUD/USD dropped as much has 2.5% in the Asian session and fell to its lowest levels since November 2023. The Aussie has pared those losses and is down 0.96% at the time of writing, trading at 0.6448. RBA likely to deliver hawkish hold The Reserve Bank of Australia meets early Tuesday and it’s a virtual certainty that the Bank will hold the cash rate at 4.35%. The RBA has maintained rates six straight times and policy makers have discussed raising rates at recent meetings. This goes against the grain of the current trend in which central banks are lowering rates. The RBA would prefer to lower rates, which are at a 12-year high and are squeezing businesses and households. The problem remains stubborn inflation, which moved the wrong way in the second quarter, rising from 3.6% to 3.8%. This is well above the RBA’s upper band of its target range of between 1 and 3% and it won’t be a surprise if policy makers again debate raising rates at tomorrow’s meeting before keeping rates on hold. With the RBA expected to stay pat, the markets will be focusing on the rate statement and Governor Bullock’s press conference. The message from the RBA is expected to be along the lines that inflation remains too high and it’s premature to cut interest rates. Fed expected to stay on sidelines The Federal Reserve is aiming for a soft landing for the US economy, but concerns are rising that the economy could tip into recession. US nonfarm payrolls for July slowed to 114 thousand on Friday, much lower than the revised 179 thousand in June and the market estimate of 175 thousand. The labour market has cooled much more quickly than expected, and there have been calls for an emergency unscheduled rate cut. The Fed would prefer not to make such a move, which could panic the markets, but the next meeting on September 18th is looking far away. Can the Fed afford to wait until then to deliver a rate cut? AUD/USD Technical AUD/USD pushed through 0.6471 and is testing support at 0.6432 There is resistance at 0.6520 and 0.6559

Global markets extend losses, Nikkei plummets, Nasdaq 100 enters correction territory. Selloff attributed to recession fears, profit-taking, and geopolitical tensions. Goldman Sachs raises recession odds, Australian government increases terrorism threat level. Nasdaq 100 technical analysis indicates potential for further decline or dip-buying rebound. Most Read: Markets Weekly Outlook – Rising US Job Fears, Geopolitics in the Spotlight Global markets extended their losses in Asian trading as concerns about a global recession continued to weigh on sentiment. In Japan, the Nikkei has dropped by as much as 12%, marking its largest two-day decline in history with a total loss of 18.2%. The Nasdaq 100 fell by as much as 6.5% as the “Magnificent 7” stocks continued to decline, with NVIDIA down approximately 8.8% in pre-market trading. This has firmly placed the index in correction territory. A report indicating that the company’s new AI chip will be delayed did not help matters, though the selloff is more attributable to global sentiment. Source: TradingView (click to enlarge) Despite the economic slowdown that markets are anticipating, the magnitude of the selloff does resemble panic selling in many ways. However, given the unprecedented rally in the first half of 2024, much of this could also be attributed to profit-taking and repositioning. The S&P 500 exemplifies this shift, having shed only 3% month-to-date (MTD) and down around 7% from its recent all-time high of approximately 5669. Safe havens experienced some gains this morning, with gold opening higher and reaching a peak of $2458/oz before retreating. Currently, the precious metal is down around 0.5% for the day. In the forex market, the Yen and the Swiss Franc have benefited from rising safe haven appeal and the unwinding of carry trades. Changes in rate cut expectations have been accompanied by an increase in recession probabilities. Goldman Sachs has raised its 12-month recession odds by 10 percentage points to 25%, according to an analyst note. Goldman further indicated that another weak job report in September could prompt a 50 basis points cut by the Federal Reserve. Meanwhile, geopolitical tensions in the Middle East continue to keep market participants on edge. This was exacerbated by the Australian Government raising its terrorism threat level to “probable” from “possible,” citing a global rise in politically motivated violence and extremism. This move could be in response to widespread riots across the UK over the weekend, which targeted immigration. With markets already contending with a range of external threats, these new developments only add another layer of uncertainty moving forward. US Earnings and Data Releases Later in the day we will get a peak at the employment numbers from the service sector as the ISM non-manufacturing data is released. This will be the major piece of economic data from the US and could mean that market moves will largely be driven by external factors this week. On the earnings front, Disney (DIS.N) will report this week but Caterpillar (CAT.N) will likely get more attention. Caterpillar may provide some insight into the state of the consumer and manufacturing as well.  For all market-moving economic releases and events, see the MarketPulse Economic Calendar. Technical Analysis Nasdaq 100 From a technical perspective, the Nasdaq 100 is in correction territory. Last week’s selloff continued into the Asian session, with the index tapping into a key support area around 17300 before a significant rebound. At the time of writing, the index is trading at 17730. Price is currently testing the 200-day moving average (MA), and a continued selloff could see the index revisiting the daily low around the 17300 level. A break below this point opens up the possibility of testing support at the 17000 mark and potentially the 16600 mark. Conversely, a deeper retracement and some dip buying could push the index toward resistance at the 18416 level. Beyond this, the 100-day MA and resistance around the 19000 handle may come back into focus. Nasdaq 100 Chart, August 5, 2024 Source: TradingView (click to enlarge) Support 17300 17000 16600 Resistance 18416 18800 19000 Fact of the Day: Berkshire Hathaway Have Reduced Their Stake in Apple by 55.8% Since the End of 2023. Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

US jobs data underwhelmed, triggering the SAHM rule, signaling a likely recession. The Magnificent 7 tech companies have lost nearly $1.75 trillion in market capitalization over the past 10 days. Rate cut bets for the US face significant revisions with recessionary fears weighing on global markets. Reserve Bank of Australia (RBA) next week. Will the RBA deliver a dovish pivot. Read More: EUR/CHF: Medium-term global risk-off kickstarts (Part 2) Week in Review: US Unemployment Rate Triggers Recession Fears US jobs data underwhelmed on Friday triggering the SAHM rule, which is used to identify the start of a recession based on changes in the unemployment rate.  Named after economist Claudia Sahm, the SAHM rule specifies that a recession is likely underway if the three-month moving average of the national unemployment rate rises by 0.5 percentage points or more relative to its lowest point in the previous 12 months. This metric is designed to provide an early and reliable signal of economic downturns, enabling policymakers to respond more swiftly.  As you can see from the chart below, the July unemployment rate has seen the SAHM rule triggered hinting that the US is already in a recession with a print of 0.53. Source: Federal Reserve Bank of St. Louis. The unemployment rate rose to 4.3% while the NFP print missed estimates, coming in at a measly 114k with a downward revision of around 29k for the past two months. By my calculation we have now had downward revisions in 5 of the last 6 job reports with unemployment at a 3 year high. The impact of which has seen rate cut bets for the US face significant revisions with recessionary fears weighing on global markets. Market participants are now pricing in a 71.5% chance of a 50bps rate cut in September with further cuts at the November and December. The data accelerated the early week selloff in US Equities, with both the S&P 500 and Nasdaq 100 deep in the red for the day (at the time of writing.) Source: LSEG For context, the Magnificent 7 (Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta) have collectively shed nearly $1.75 trillion in market capitalization over the past 10 days. To put that in perspective, this loss is almost 50% of Apple’s total market cap, the world’s largest company. On Wednesday alone, they experienced their biggest daily loss in history, totaling $750 billion. On the FX front, the US Dollar finally broke below support at the 104.00 level, trading around 103.100 at the time of writing. This allowed the EUR and GBP to recoup some of their early-week losses against the greenback, finishing the week on a high note. Commodities had a mixed day, with gold surging sharply toward the $2480/oz level following the jobs data, only to experience a significant selloff as the US session progressed. This rally was likely driven by substantial profit-taking ahead of the weekend. With the potential for escalating tensions in the Middle East, market participants may have been reluctant to hold significant positions over the weekend. Overall, it was not the best week for markets, with mega-cap tech shares among the biggest losers along with the US dollar. It appears that market participants correctly anticipated rate cuts, while the Fed may be slower to act on reducing rates. The Week Ahead: Rising Recessionary Fears, Geopolitics and Asia Pacific Data The upcoming week promises to be intriguing given the recent developments. The weekend could bring additional complications if there are signs of escalating tensions in the Middle East. Such indications may boost the appeal of safe havens, potentially creating gaps in the US Dollar Index and gold prices. Recessionary fears combined with a broader regional conflict could be key market drivers, especially with limited data releases from both the EU and the US next week. The primary data releases will come from the Asia Pacific region. Asia Pacific Markets In Asia, the week will start with the release of the Caixin Services PMI in China on Monday before the focus shifts to Australia. On Tuesday, the Reserve Bank of Australia (RBA) meeting takes center stage, particularly since the Australian central bank has been considering rate hikes at its previous two meetings. Following this week’s rate decisions by the Bank of Japan (BoJ) and the Bank of England (BoE), market participants will be closely monitoring the RBA meeting. The possibility of a dovish pivot by the RBA remains a prominent topic of discussion. Although the BoJ summary of opinions may not typically be a major economic release, it is expected to garner more attention than usual following the recent rate hike by the BoJ. Market participants will be eager to hear any plans for further hikes or insights into the BoJ’s expected future policy path. Europe + UK + US Looking ahead to the Euro Area, the US, and the UK, the economic calendar is relatively sparse. Markets are likely to focus on any hints from Fed policymakers following the recent series of weak data releases. In the absence of high-impact data, geopolitical tensions are expected to be a significant factor influencing markets next week. For all market-moving economic releases and events, see the MarketPulse Economic Calendar. Chart of the Week The chart of the week that I will be focusing on is the US Dollar Index (DXY). Following weak data prints and adjustments to rate cut expectations, next week could be crucial for the DXY. Currently, the DXY is hovering just above a key support level at 103.00, with additional support around 102.64. A break below this could potentially lead to a retest of the psychological 100.00 level. On the upside, any recovery attempt faces resistance around 103.50, followed by the 200-day moving average (MA) at 104.29. The 100-day MA is positioned just below the key psychological level of 105.00. US Dollar Index (DXY) Daily Chart – June 28, 2024 Source:TradingView.Com (click to enlarge) Key Levels to Consider: Support: 103.00 102.64 101.50 Resistance: 103.50 104.29 105.00 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

Gold and oil prices have surged due to rising tensions in the Middle East. Gold with a trendline break as bulls eye $2480/oz, FOMC meeting next. Brent crude oil found support around the 78.00 handle and is currently trading at 80.82 a barrel, with potential for further upside due to geopolitical risks. Most Read: GBP/USD Stalls as Bulls and Bears Clash Ahead of Central Bank Meetings Gold and oil have both surged due to rising tensions in the Middle East, which began during the US session yesterday. An airstrike on Lebanon followed by an airstrike on Tehran targeting senior Hamas leader Ismail Haniyeh has significantly increased safe haven demand. These events set the stage for an interesting few days from a geopolitical standpoint, with tensions expected to escalate as Iran’s incoming President, Masoud Pezeshkian, is anticipated to respond. World leaders have already called for calm amid growing fears of regional spillover, which could have widespread consequences. Any hope for a ceasefire will likely be sidelined, leading to increased safe haven demand flows, with gold and potentially the US dollar benefitting. As the US session approaches and with the FOMC meeting scheduled later in the day, markets may calm down. This could lead to some consolidation and potentially a pause in the recent rally in gold and oil prices. Surprisingly, despite benefiting from safe haven demand on Monday, the US dollar has struggled this morning. This could be due to market participants’ apprehension ahead of the FOMC meeting. Brent Crude Technical Outlook Market participants may fear supply disruptions if a wider conflict breaks out in the Middle East. This has led to a rebound with Brent finding support around the 78.00 handle, up around 1.6% at the time of writing to trade at 80.82 a barrel. From a technical standpoint, the daily candle close below the 80.00 mark yesterday hinted at the potential for further downside. The external threat posed by geopolitical risks have scuppered that move for now at least. The concerns around Oil prices are mixed at the moment, with concerns around depleted stockpiles countered by the growth concerns out of China.  Later in the North American session, the US Energy Information Administration (EIA) will release the Crude Oil Stocks Change report. The market expects a decline of 1.60 million barrels for the week ending July 26, following the previous week’s decrease of 3.741 million barrels. Tomorrow’s OPEC+ meeting is not expected to result in significant changes to oil output levels. While further reductions are unlikely, there seems to be little chance of an increase in production. Market participants hope that this meeting will provide clarity from OPEC, allowing attention to shift toward supply risks stemming from Middle East conflicts. Brent Crude Oil Daily Chart, July 31, 2024 Source:TradingView.com Support 80.00 79.00 77.50 Resistance 81.58 83.00 84.72 Gold (XAU/USD) Technical Analysis From a technical standpoint, gold has surpassed the descending trendline that has been in place since the July 17 high around the 2481.00 level. The breakout has gained momentum without any retest of the trendline, thus not offering a better risk-to-reward entry point. The 100-day moving average provides support around the 2405.00 level. Immediate resistance is at 2432, followed by the 2450 mark.  Based on the rules of a trendline break, in theory the break should lead prices toward the previous highs at 2481.00. With the FOMC meeting scheduled for later today, it will be interesting to see if bulls continue to drive gold prices higher.There is a strong possibility that markets might enter a period of consolidation ahead of the meeting later in the day. GOLD (XAU/USD) Four-Hour Chart, July 31, 2024 Source: TradingView (click to enlarge) Support 2405 2394 2378 Resistance 2432 2450 2467 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

Citigroup Economic Surprise Indices across the different regions (except for Latin America) on average are suggesting lackluster economic growth. US crude oil inventories (excluding SPR) are showing signs of a build-up. Technical factors are suggesting further potential weakness for WTI crude oil below US$80.30 key medium-term resistance. Since its high of US$84.74 printed on 5 July 2024, the price actions of West Texas Oil CFD (a proxy of the WTI crude oil futures) have tumbled by 10% to print a current intraday low of US$76.16 at this time of the writing in light of sluggish demand from China and the lack of direct fiscal stimulus measures from China top policymakers after the conclusion of The Third Plenum; a twice-a-decade work plan meeting to set China’s economy strategy for the medium-term. In addition, Donald Trump, the Republican US presidential nominee spoke about lowering the inflationary pressures in the US by reducing energy costs through an increase in domestic oil and gas production during the Republican National Convention on 18 July. In turn, added further downside pressure on WTI crude oil. Lackluster economic growth prospects may put a cap on oil demand Fig 1:  Citi Economic Surprise Indices of different regions as of 29 Jul 2024 (Source: MacroMicro, click to enlarge chart) Since the start of spring 2024 (April), the Citigroup Economic Surprise Indices for different regions have been trending downwards except for Latin America (see Fig 1). These indices measure the difference between the actual readings of key economic indicators and their respective forecasts. Hence, results trending toward zero suggest that economic conditions are generally worse than expected which in turn is likely to reduce oil demand. US crude oil inventories are showing signs of a build-up Fig 2:  EIA US crude oil inventories excluding SPR (y/y change) with WTI crude oil futures as of 19 Jul 2024 (Source: MacroMicro, click to enlarge chart) The growth of US crude oil inventories excluding the Strategic Petroleum Reserve (SPR) on a year-on-year basis has an indirect correlation with the movement of WTI crude oil as build-up in oil inventories put downside pressure on oil prices. Since mid-March 2024, the drawn down of US crude oil inventories (excluding SPR) has slowed down from -7.5% y/y to -4.45% y/y as of 19 July based on data from the US Energy Information Administration (EIA) which suggests a potential build-up in oil inventories which is likely to dampen the prices of WTI crude oil (see Fig 2). WTI crude oil reintegrated below its 200-day moving average Fig 3:  West Texas Oil CFD medium-term trend as of 30 Jul 2024 (Source: TradingView, click to enlarge chart) After a failure to have a recent positive follow-through in price actions last Friday, 26 July, the West Texas Oil CFD has broken below its key 200-day moving average, and its daily MACD trend indicator has continued to trend lower below its centreline in the past six sessions. These observations suggest further technical weakness for West Texas Oil CFD to expose the “Symmetrical Triangle” range support of US$73.15/71.35 in the coming weeks (see Fig 3). However, a clearance above the US$80.30 key medium-term pivotal resistance is likely to negate the bearish tone the see a retest on the upper boundary of the “Symmetrical Triangle” that is acting as an intermediate resistance at US$83.00 in the first step.

The GBP/USD pair is currently experiencing a standoff between bulls and bears, with the pair clinging to support at the 1.2850 level. The upcoming Federal Reserve and Bank of England policy meetings are adding to market uncertainty, with the odds of a BoE rate cut hovering around 58%. UK Finance Minister Rachel Reeves has announced immediate spending cuts, citing the unsustainability of public finances. Most Read: Trump Courts Crypto Fans Amid Bitcoin’s Battle to Break $70k Barrier Cable has held onto support at the 1.2850 level as the battle between bulls and bears heats up. With the Federal Reserve and the Bank of England (BoE) holding their policy meetings this week, markets are on edge. Yesterday, an attempted move lower driven by renewed US dollar safe haven appeal pulled the pair below 1.2850, but buying pressure quickly emerged. The increasing geopolitical risk premium continues to weigh on Cable, although expectations of the Federal Reserve’s rate cut cycle are providing some offset. The BoE faces an even more intriguing situation at its upcoming monetary policy meeting. The odds for a rate cut on Thursday remain around 50%, making it a difficult decision to predict. Bank of England Interest Rate Probabilities, July 30, 2024 Source: LSEG An excellent way of looking at it, two members of the nine-person committee have already begun voting for rate cuts. Two or possibly three others hold the opposite view and are clearly resistant to cuts. This leaves four or five members in the middle, who seem undecided. June’s meeting indicated that some, perhaps most, of these officials believed the decision was finely balanced. However, since the general election was called in late May, we’ve heard very little from these policymakers.  UK Government Cuts Spending Britain’s new Finance Minister, Rachel Reeves, informed Parliament that her conservative predecessor had set public spending to reach £21.9 billion this year, necessitating immediate cuts of £5.5 billion. Reeves emphasized the unsustainability of current public finances. Conservative opponents criticized her remarks, accusing her of setting the stage for tax hikes—a possibility Reeves has not dismissed. The Office for Budget Responsibility announced it would review the preparation of Jeremy Hunt’s March budget, calling it a serious issue. Economic Data Ahead A big week for Central Banks with the Bank of England (BoE), Federal Reserve and the Bank of Japan (BoJ). On top of that we also have the NFP and jobs report on Friday which could have a bigger impact on the US Dollar than the FOMC meeting.  Of course the impact of the Fed meeting will largely depend on the rhetoric adopted by Fed Chair Jerome Powell as markets are expecting the Fed to hold rates steady.  Source: For all market-moving economic releases and events, see the MarketPulse Economic Calendar.  (click to enlarge) Technical Analysis From a technical perspective, GBP/USD has been consolidating over the past three days since hitting support at 1.2850. Both bulls and bears have attempted to move the price away from this level, but each effort has been countered by buying or selling pressure. This underscores the current uncertainty surrounding the upcoming Central Bank meetings. Immediate support below the 1.2850 area lies at the 1.2800 and 1.2750 levels. A break below these support zones could shift focus back to the psychological 1.2500 mark. Conversely, an upward movement will face resistance at 1.2950 before the psychological 1.3000 level becomes crucial again. GBP/USD Chart, July 30, 2024 Source: TradingView (click to enlarge) Support 1.2800 1.2750 1.2680 Resistance 1.2950 1.3000 1.3040 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The Japanese yen has sparkled in the second half of July but has lost steam this week. USD/JPY is trading at 154.88 in the European session, up 0.57% on the day at the time of writing. To hike or not to hike The Bank of Japan meets early Wednesday and the markets aren’t sure what to expect. Will we see the first rate hike since March or will the policy markets again stay on the sidelines? The markets have priced in a 65% chance of a 10-basis point hike, which would raise rates to 0.1%-0.2%, while some economists expect a hike of 15 even 25 basis points. Inflation remains above the BoJ’s inflation rate of 2% but is still relatively moderate, which means it isn’t really a factor in tomorrow’s crucial decision. With the Fed widely expected to cut in September, the US/Japan rate differential will narrow, putting less pressure on the BoJ to hike rates. The BoJ is also expected to provide details on a quantitative tightening plan to cut bond buying by around half in the next 12 to 18 months. This would help contain inflation and put upward pressure on interest rates. Still, most of the buzz in the markets surrounds the rate decision. Will Fed signal a September cut? Following the BoJ policy meeting, the Federal Reserve meets later o n Wednesday. Unlike the BoJ meeting, there won’t be any drama around rates, as the Fed is virtually certain to hold the benchmark rate of 5.25%-5.5%, where it has hovered since July 2023. Investors will be monitoring the rate statement and Fed Chair Powell’s follow-up rate statement. Will we see a signal of a September cut? The markets have priced in a quarter-point cut at 89% and a half-point cut at 10% according to CME’s FedWatch. Any hint of a rate cut in September could have a significant impact on the movement of the US dollar. . USD/JPY Technical USD/JPY has pushed past resistance at 154.58 and is testing resistance at 155.13 154.58 and 153.80 are the next support level

Oil prices have faced challenges recently, but buying pressure prevented a drop below $80. Technical indicators suggest potential for an upward bounce, with key resistance levels to watch. Fundamental factors like Canadian wildfires, US stockpiles, and rate cut expectations support oil prices. Most Read: GBP/USD Dips to 1.2850 Amid Growing BoE Rate Cut Speculation Oil prices faced challenges yesterday until buying pressure during the US session prevented crude oil from dropping below the psychological 80.00 mark.  Currently, oil is on track for a third consecutive week of losses unless bullish momentum persists through Friday, which could result in oil finishing the week flat or with slight gains. WTI losses have outpaced Brent this week, this could in part be down to output fears in Canada exerting downward pressure on WTI. Wildfires in Canada have led some producers to reduce production at a time of peak demand in both the US and Canada.  The drop of 8.1% in Chinese oil demand in June to 13.66 million bpd spooked market participants and brought growth concerns to the fore. The Chinese authorities did slash interest rates this week in a bid to ensure the economic targets set by the Government are reached.  In the Middle East, hopes for a ceasefire are growing despite ongoing tit-for-tat attacks between Israel, Hezbollah, and the Houthis in Yemen. On Friday morning, leaders from Australia, New Zealand, and Canada issued a joint statement calling for an immediate ceasefire. Such a ceasefire could help ease fears of a broader conflict, which could have significant implications for oil prices and supply chains. Later in the day we have the US PCE data release which could stoke some short-term volatility and may be worth paying attention to.  Technical Analysis Oil From a technical perspective, Brent appeared poised to test the 80.00 per barrel psychological mark. However, buying pressure during the US session yesterday around the 80.50 level pushed Brent prices back above the key resistance level at 81.58. The daily candle closed with a hammer candlestick pattern, engulfing the previous two daily candles. Theoretically, this suggests further upside potential, though it will face several obstacles if Brent is to revisit its early July high around 88.552. A move higher will need to overcome the confluence area around 83.00, where the 200-day moving average currently lies. A daily candle close above these hurdles could see Brent aiming for resistance at 84.727, before encountering the 100-day moving average at 85.277. Conversely, a downward push would require a daily candle close below the 81.580 support level, opening the possibility of a move toward the 80.00 mark and potentially down to the recent lows around the 77.00 handle. On the fundamental side, oil price fundamentals still seem supportive. Factors such as the Canadian wildfires affecting production, declining US stockpiles, and rate cut expectations are all providing support. Additionally, interest rate cuts in China might be seen as positive for oil prices and may not yet be fully priced in. Brent Oil Chart, July 26, 2024 Source: TradingView (click to enlarge) Support 81.58 80.00 77.00 Resistance 83.06 84.72 86.21 Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

The Japanese yen has hit the brakes on this week’s impressive rally. USD/JPY is trading at 154.34 in the European session, up 0.30% on the day. On Thursday, the yen climbed as much as 1.3% but gave up all of those gains after the strong US GDP report. Still, the yen is up 1.9% this week. Tokyo Core CPI ticks higher Tokyo Core CPI rose to 2.2% y/y in July, a notch higher than the 2.1% gain in June and matching the market forecast. This is the third straight acceleration and the highest level since March. Higher electricity prices drove the gain. Earlier this week, service inflation for businesses rose to 3% in July, up from 2.7% in June and above the market forecast of 2.6%. This was the highest level in 33 years. The Bank of Japan faces a tough task and must decide whether to maintain policy or deliver a rate hike at next week’s meeting. It’s a close call as to what decision the central bank will make and Bank officials can be expected to maintain radio silence. There are strong arguments for both sides. Inflation and wage growth have been moving higher which would support a rate hike. As well, a rate hike could give a boost to the yen, which has been trading at multi-year lows. On the other hand consumption remains weak and a rate hike would only further dampen consumer spending. Fed eyes Core PCE Price index Later today, the US releases Core PCE Price index, which is the Federal Reserve’s preferred inflation measure. The index is expected to rise 0.1% m/m in June, matching the May figure. The PCE Price index is expected to ease to 2.5% y/y, down a notch from 2.6% in May. USD/JPY Technical USD/JPY has pushed past resistance at 154.03 and is testing resistance at 154.39, followed by 154.68 153.74 and 153.38 are the next support levels