IC Markets Europe Fundamental Forecast | 10 August 2022

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What happened across the Asia session?

Most currencies continued trading in a tight consolidation through the Asia session as markets await the US CPI and Core CPI data release.

What does it mean for Europe and US Sessions?

Look for potential high volatility price movement across all major currencies during the Europe and US session with the release of US inflation data, a key indicator to signal future Federal Reserve interest rate decisions.

The Dollar Index (DXY)

Key news events today

USD CPI m/m

USD Core CPI m/m

What can we expect from DXY today?

Overnight, the DXY traded lower to test the 105.90 level but the move was quickly reversed, with the price ending the session above the 106 level. The US Core CPI is due to be released today, forecasted at 0.5% (previous: 0.7%), the expectation is for the data to indicate a slight slowdown in inflation growth. This would mean that the interest rate hikes from the Federal Reserve are starting to have an impact on inflation growth. 

In the lead-up to the release of the inflation data, the DXY is likely to continue trading along the 106 price level with some brief downside. However, look for the DXY to strengthen into the US session, climbing higher towards the 107 resistance level.

Central Bank Notes:

  • Federal Reserve hiked rates by 75bps taking interest rates to 2.50%
  • Next meeting on 22 September 2022
  • Balance Sheet reduction plan to continue at $60b (treasuries) and $35b (MBS) over a three-month timeframe

 

Next 24 Hours Bias

Weak Bullish

Gold (XAU)

Key news events today

No major news events. 

What can we expect from Gold today?

Gold failed to trade lower from the 1790 resistance level, as the DXY slid to test the 105.90 price level overnight. Currently trading at the 1792 level, look for Gold price to drop briefly, to test the interim support level of 1785 before another climb towards the 1800 price level. However, if the DXY does recover strongly on the release of the US inflation data, the Gold price could break below 1785 and trade lower towards the 1769 support level. 

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

No Major News Events  

What can we expect from EUR today?

The EURUSD currently trades at the 1.0210 price level with no clear directional bias. Anticipating DXY strength, the EURUSD could trade towards the 1.012 level if the price is able to close strongly below the 1.019 interim support level. Alternatively, look for the EURUSD to climb to the upside towards the 1.0255 level if the DXY fails to strengthen with the CPI data release. 

Central Bank Notes:

  • Raised rate by 50bps 
  • Next meeting on 8 September 2022

 

Next 24 Hours Bias

Weak Bearish

The Swiss Franc (CHF)

Key news events today

No Major News Events 

What can we expect from CHF today?

The USDCHF is currently trading near the 0.95 key support level. While this downward move follows the longer-term trend, look for price to find support at the 0.9490 level before staging a possible rebound. Potential strength in the DXY could cause the USDCHF to trade higher towards the 0.96 round number resistance level.

Central Bank Notes:

  • Surprise rate hike by 50bps to -0.25%
  • Next meeting on 22 September 2022

Next 24 Hours Bias

Weak Bearish

The Pound (GBP)

Key news events today

No Major News Events

What can we expect from GBP today?

The price movement of the Pound continues to be supported by the 1.2055 level. The GBPUSD could trade higher towards the near-term high of 1.2130. However, this move higher could be brief, with a major US news event due today. If the GBPUSD is able to close below the key support level of 1.2055, the price could move significantly to the downside, towards the 1.1925 key support level. 

Central Bank Notes:

  • Interest rate is currently at 1.75%
  • Peak inflation revised to more than 15% in 2023. 
  • Next meeting on 15 September 2022

Next 24 Hours Bias

Weak Bearish

The Canadian Dollar (CAD)

Key news events today

No Major News Events

What can we expect from CAD today?

The USDCAD currently trades just below the 1.29 resistance area. If the price is able to climb higher and close above the 1.29 resistance, the USDCAD could trade higher towards the next resistance level of 1.30. This move higher could be driven by a potential strengthening of the DXY, on the release of the CPI data due today. 

Central Bank Notes:

  • Increased rates by 100bps, taking interest rates to 2.50% 
  • Indicated further rate increases likely.
  • Next meeting on 7 September 2022

Next 24 Hours Bias

Medium Bearish

Oil

Key news events today

No Major News Events 

What can we expect from Oil today?

Brent and WTI are currently trading lower after a brief spike overnight, which tested the near-term resistance of 101 and 93 respectively. Look for energy prices to continue with the overall downtrend to trade lower towards the key support levels. The key support level for Brent is 97.00 and for WTI at 89.00.

Next 24 Hours Bias

Weak Bearish