Articles
Chile’s copper output falls 0.9% y/y as supply shortfall nears
331159 July 31, 2023 21:17 Forexlive Latest News Market News
I infrequently write about the looming shortage of base metals, including copper. Chile’s stats agency is out with data showing production in the country — which itself is the equivalent of OPEC for the copper market — is down 0.9% y/y.
It’s not improving either. On Friday, state copper company Codelco cut its 2023 output forecast to 1.31-1.35 million metric tons from 1.35-1.45 million previously. That’s after several production halts and because grades are falling.
In a related story, the FT this weekend outlined a looming supply shortage in electricity cables and converter stations, with orders being pushed out four years or more.
To be clear, there’s no shortage of copper at the moment and some mines are coming online this year and next; but around mid-decade there is a strong case that there will be undersupply. Given that it takes about 10 years to bring a copper mine online, the chances of an upside supply surprise are virtually nil.
What’s missing at the moment for the copper market is Chinese demand but that could change with looming stimulus.
S&P 500 Index: Break above 4,650/4,680 to clear the way toward previous highs near 4,818 – SocGen
331158 July 31, 2023 21:17 FXStreet Market News
Economists at Société Générale analyze S&P 500 technical outlook.
June high of 4,450 could be an important support
S&P 500 has staged a steady uptrend after breakout from a large base earlier this year. It is now inching closer to potential resistance zone of 4,650/4,680 representing a multi-month ascending trend line and high of March 2022.
Interestingly, daily MACD has turned flat and is languishing close to highest levels achieved in December denoting receding upward momentum. This is not a reversal signal however a phase of consolidation is not ruled out.
June high of 4,450 could be an important support near term.
Full ArticleIf S&P 500 establishes itself beyond 4,650/4,680, next objective would be at previous highs near 4,818.
AUD/USD extends upside above 0.6700 ahead of RBA policy
331157 July 31, 2023 21:12 FXStreet Market News
- AUD/USD climbs quickly above 0.6700 as US Dollar comes under pressure.
- Expectations indicate that US manufacturing sector will continue its contracting spree straight for the ninth month.
- The Australian Dollar will dance to the tunes of the interest rate decision by the RBA.
The AUD/USD pair stretches its north-side move above the round-level resistance of 0.6200 in the late European session. The Aussie asset is swiftly moving higher as the US Dollar Index (DXY) retreats ahead of the United States ISM Manufacturing PMI data, which will be published on Tuesday.
S&P500 is expected to open on a positive note, following positive cues from overnight futures. US equities are consistently getting bids amid earnings season. The US Dollar comes under pressure as investors are discounting weak expectations from US factory data.
The US manufacturing sector has been contracting for the past eight months due to an aggressive rate-tightening cycle by the Federal Reserve (Fed). Firms have been postponing their expansion plans to avoid higher interest obligations.
According to the estimates, US factory orders are seen at 46.5 vs. the former release of 46.0. This indicates that the US manufacturing sector will continue its contracting spree straight for the ninth month. After the US Manufacturing data, investors will shift their focus to Employment data to be reported by Automatic Data Processing (ADP) on Wednesday.
Meanwhile, the Australian Dollar will dance to the tunes of the interest rate decision by the Reserve Bank of Australia (RBA), which will be announced on Tuesday. Economists at UOB Group believe that the RBA is aware that rates are “clearly restrictive”, and there is a chance they remain on pause at 4.10%. However, we look for a further 25bps rate hike, keeping in mind that inflation rates remain substantially above the RBA’s target band of 2-3%. The decision on Aug 1, will nonetheless, be a close call.
Full Article
Chile Industrial Production (YoY) up to -2.7% in June from previous -4.5%
331156 July 31, 2023 21:02 FXStreet Market News
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John Deaton calls Ripple XRP case “the most significant non-fraud SEC enforcement action in modern history”
331155 July 31, 2023 20:56 FXStreet Market News
- Pro-XRP attorney John Deaton recently commented on the SEC’s request to Coinbase to halt trading of all tokens except Bitcoin.
- Deaton believes that the US financial regulator has an anti-crypto stance and the XRP ruling protected the ecosystem from the SEC’s full force.
- Deaton argues every coin is in danger and the XRP ruling is significant to all market participants and projects in crypto.
XRP holder community is awaiting the US Securities and Exchange Commission’s (SEC) next steps to appeal versus Judge Torres’ ruling on XRP status as a security. Amidst the anticipation surrounding the ruling, pro-XRP attorney John Deaton has made more comments on the recent information about the SEC lawsuit against Coinbase.
Deaton explained the relationship between the XRP ruling and the crypto ecosystem, arguing that no cryptocurrency is safe from the SEC’s anti-crypto stance.
XRP ruling and its impact on cryptocurrencies listed on Coinbase
Coinbase CEO Brian Armstrong told the Financial Times in an interview that the US SEC requested the exchange to halt trading for all cryptocurrencies except Bitcoin. Armstrong said that the SEC believes every asset other than Bitcoin is a security and that the regulator refused to explain how the agency arrived at such a conclusion.
The request was to delist from the biggest cryptocurrency exchange in the world every asset other than Bitcoin. Deaton used these words by Armstrong to remind the XRP community how important Judge Torres’ ruling is. According to Deaton, all cryptocurrencies in the ecosystem are “in danger” of the full-force of the SEC coming at them, if XRP was proven to be an investment contract/ security.
The ruling makes it clear that XRP is not a security in itself, however the altcoin can be considered as a security depending on the circumstances of the transaction or sale. Deaton believes that this XRP ruling is a win for the crypto ecosystem and that the SEC vs Ripple case is “the most significant non-fraud SEC enforcement action in modern history”, since 1946.
Deaton’s argument for why “every coin is in danger”
John Deaton had already warned the crypto community nearly a year ago that the SEC’s lawsuit against Ripple could emerge as a groundbreaking one, as the regulator’s argument could be applied to every single asset. Deaton wrote to the SEC, asking the regulator to limit their claims against Ripple, in the way the firm sells XRP.
At the beginning of the video I say: “I’m going to prove why everyone, even if you hate @Ripple and despise XRP, should be hoping the SEC falls flat on its face.” https://t.co/88PgXCMs4r
— John E Deaton (@JohnEDeaton1) July 31, 2023
The SEC filed its first amended complaint against Ripple on February 19, in the southern district of New York, and the regulator’s response was to refer to XRP as a “digital asset security.” This is where, Deaton explains, the regulator clarified their stance on cryptocurrencies and shifted its stance from 2013 to the present, referring to assets as “securities” instead of referring to the circumstances of sale of the asset.
SEC vs Ripple lawsuit FAQs
It depends on the transaction, according to a court ruling released on July 14:
For institutional investors or over-the-counter sales, XRP is a security.
For retail investors who bought the token via programmatic sales on exchanges, on-demand liquidity services and other platforms, XRP is not a security.
The United States Securities & Exchange Commission (SEC) accused Ripple and its executives of raising more than $1.3 billion through an unregistered asset offering of the XRP token.
While the judge ruled that programmatic sales aren’t considered securities, sales of XRP tokens to institutional investors are indeed investment contracts. In this last case, Ripple did breach the US securities law and will need to keep litigating over the around $729 million it received under written contracts.
The ruling offers a partial win for both Ripple and the SEC, depending on what one looks at.
Ripple gets a big win over the fact that programmatic sales aren’t considered securities, and this could bode well for the broader crypto sector as most of the assets eyed by the SEC’s crackdown are handled by decentralized entities that sold their tokens mostly to retail investors via exchange platforms, experts say.
Still, the ruling doesn’t help much to answer the key question of what makes a digital asset a security, so it isn’t clear yet if this lawsuit will set precedent for other open cases that affect dozens of digital assets. Topics such as which is the right degree of decentralization to avoid the “security” label or where to draw the line between institutional and programmatic sales are likely to persist.
The SEC has stepped up its enforcement actions toward the blockchain and digital assets industry, filing charges against platforms such as Coinbase or Binance for allegedly violating the US Securities law. The SEC claims that the majority of crypto assets are securities and thus subject to strict regulation.
While defendants can use parts of Ripple’s ruling in their favor, the SEC can also find reasons in it to keep its current strategy of regulation by enforcement.
The court decision is a partial summary judgment. The ruling can be appealed once a final judgment is issued or if the judge allows it before then. The case is in a pretrial phase, in which both Ripple and the SEC still have the chance to settle.
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Gold price rebounds ahead of US Manufacturing and Employment data
331154 July 31, 2023 20:51 FXStreet Market News
- Gold price seeks US economic data to gauge a decisive move.
- The US Dollar Index remains in the bullish trajectory as the tight labor market supports more rate hikes from the Fed.
- The US manufacturing sector looks to be contracting for the ninth month in a row amid an aggressive rate-tightening cycle.
Gold price (XAU/USD) discovers support around $1,950.00 as the robust performance of the United States in the April-June quarter was offset by soft consumer spending data. The precious metal is under pressure as the US Dollar capitalizes on upbeat Gross Domestic Product (GDP) numbers and a robust Durable Goods Orders report.
United States factory activities have been contracting for the past eight months due to the aggressive rate-tightening cycle by the Federal Reserve (Fed). The manufacturing sector is broadly expected to continue reporting a vulnerable performance as firms struggle to tap credit due to the twin headwinds of higher interest rates by the Fed and tighter credit conditions among US regional banks.
Daily Digest Market Movers: Gold price finds support ahead of US Manufacturing PMI
- Gold price finds pressure above $,1,960 as investors shift focus to the July Manufacturing PMI reported by the United States Institute of Supply Management (ISM), which will be published on Tuesday at 14:00 GMT.
- As per the expectations, Manufacturing PMI jumps to 46.5 from June’s figure of 46.0. In spite of higher factory activities, the Manufacturing sector is expected to remain in a contraction phase. Investors should note that a figure below 50.0 is considered contractionary and this would be the ninth contraction print in a row.
- Meanwhile, the New Orders Index demonstrates that forward demand is expected to drop to 44.0 vs. the prior release of 45.6.
- US factory activities are consistently facing the wrath of higher interest rates by the Federal Reserve.
- This week, the Gold price is expected to remain highly active as US factory data will be followed by Automatic Data Processing (ADP) Employment Change data, which will release on Wednesday at 11:45 GMT.
- The US Dollar Index struggled to recapture the crucial resistance of 102.00 as Fed’s preferred inflation tool core Personal Consumption Expenditure (PCE) price index softened.
- The US core PCE price index gained at a pace of 0.2% in June as expected by the market but remained slower than the 0.3% figure registered in May. On an annualized basis, the economic data softened to 4.1% vs. the expectations of 4.2% and the former release of 4.6%.
- After Fed policymakers decided to remain dependent on incoming data for further action on interest rates, the essence of economic indicators increased significantly.
- Last week, US Q2 Gross Domestic Product (GDP) data remained robust amid a tight labor market and stellar consumer spending. US GDP for the April-June quarter expanded by 2.4% against expectations of 1.8%.
- In spite of aggressive policy-tightening by the Fed, a stellar performance in the second quarter indicates strength in the labor market and consumer demand.
- Fed policymakers seem confident that the US economy will not enter into recession as demand for labor remains robust.
- Consumer Sentiment improves significantly in July, delivering the highest reading of 71.6 since October 2021 but misses expectations of 72.6.
- Easing inflationary pressures and strong employment conditions have remained major contributors to improving household sentiment.
Technical Analysis: Gold price bounces back from $1,950
Gold price remains sideways near the 20-day Exponential Moving Average (EMA) around $1.955.00 as investors shift their focus to factory activities and labor market data. On an hourly time frame, Gold price forms a bearish divergence that will be triggered after a breakdown below the crucial support of $1,940.00. An occurrence of the same would push the Gold price into a bearish trajectory.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
US equity futures tick higher
331153 July 31, 2023 20:49 Forexlive Latest News Market News
The mood is improving as New York trade ramps up. S&P 500 futures are now 11 points higher to 4617. The positive momentum is seeping into commodity currencies, which are broadly higher to start the week. AUD/USD is particularly strong, up 63 pips to 0.6713. It still has some work to do to retrace the losses from late last week.
AUDUSD 10 mins
USD rebound likely to run out of momentum – Scotiabank
331152 July 31, 2023 20:49 FXStreet Market News
USD trades mixed to slightly lower in quiet trade. Shaun Osborne, Chief FX Strategist at Scotiabank, analyzes Greenback’s outlook.
Eyes on NFP
Calendar-wise, it’s a pretty light session and overall focus is on Friday’s Nonfarm Payrolls data.
Beyond month-end today, the USD may consolidate a little more as investors leverage developments to determine whether the USD rebound can extend or, more likely in my opinion, runs out of momentum and resumes its broader decline.
See: USD Index to trade 101.00-102.00 near term – ING
Full Article
Pound Sterling remains rangebound as focus shifts to monetary policy
331151 July 31, 2023 20:49 FXStreet Market News
- Pound Sterling remains topsy-turvy ahead of BoE’s interest rate decision this week.
- Recession fears in the United Kingdom economy deepen due to aggressive policy-tightening by the BoE.
- The BOE is expected to raise interest rates consecutively for the fourteenth time.
The Pound Sterling (GBP) demonstrates a directionless performance as investors eye the monetary policy of the Bank of England (BoE). The GBP/USD pair struggles to gauge direction as investors worry about deepening recession fears due to aggressive policy-tightening by the United Kingdom’s central bank. To tame stubborn inflation, the BoE is expected to raise interest rates for the fourteenth time in a row.
The Bank of England has already raised interest rates to 5%, and a fresh interest rate hike of 25 basis points (bps) is expected to build more pressure on inflation. Labor shortages and higher food prices have remained major contributors to sticky UK inflation. BoE policymakers are also expected to consider a 50 bps interest rate hike as inflationary pressures in the UK economy are the highest compared to other G7 economies.
Daily Digest Market Movers: Pound Sterling oscillates ahead of BoE policy
- Pound Sterling remains rangebound below 1.2900 as investors await interest rate policy by the Bank of England for further guidance.
- BoE policymakers are expected to discuss further policy tightening as they are committed to bringing inflation to 2%.
- Inflationary pressures in the United Kingdom’s economy are well diverged from the desired rate of 2%, therefore more interest rate hikes cannot be ruled out.
- UK headline and core Consumer Price Index (CPI) data are at 7.9% and 6.8% respectively and will take sufficient time in easing to the desired rate.
- Headline inflation has softened to 7.9% from its peak of 11.1% but a recent recovery in global oil prices has elevated fears of a rebound in inflationary pressures.
- Core inflation is still near a 31-year high of 7.1% due to higher cost of services and tight labor market conditions.
- Recently, the BoE and UK authorities discussed with industry regulators to avoid overcharging customers so that the burden from households could ease and inflationary pressures could be anchored.
- UK delegates decided to widen their inflation-controlling toolkit to better deal with inflationary pressures.
- The BoE is expected to raise interest rates further by 25 bps to 5.25% despite fears of a recession enlarging.
- A poll conducted by Reuters showed that interest rates in the UK economy will peak around 5.75%.
- Last week, UK Treasury advisers remained concerned about deepening recession fears due to aggressive policy-tightening by the BoE.
- The market mood turns cautious as China’s official Manufacturing PMI contracts for the fourth month in a row amid bleak demand. The economic data landed 10 bps higher than expectations of 49.2. A figure below 50.0 is considered a contraction.
- The US Dollar Index (DXY) approaches 102.00 as the United States’ upbeat performance in the April-June quarter has triggered hopes of more interest-rate hikes from the Federal Reserve (Fed).
- US Gross Domestic Product (GDP) in Q2 rose by 2.4% amid a tight labor market and higher momentum in consumer spending.
- On Friday, the US Labor Cost index for Q2 dropped to 1.0% vs. expectations of 1.1% and Q1 publication of 1.2%. This might ease retail demand and eventually the price pressures.
- Meanwhile, investors are preparing for the US ISM Manufacturing PMI data, which will be released on Tuesday at 14:00 GMT. The economic data is expected to continue its contracting spell.
Technical Analysis: Pound Sterling remains back-and-forth below 1.2900
Pound Sterling remains back-and-forth below the round-level resistance of 1.2900 as investors shift their focus toward the interest rate decision by the Bank of England. The Cable aims for a firm footing after correcting to near the 20-day Exponential Moving Average around 1.2860. The major trades in a Rising Channel chart pattern and it can discover support after testing the lower portion of the trade pattern.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data.
Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates.
When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money.
When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP.
A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Australian Dollar rebound fueled by rising Crude Oil prices
331148 July 31, 2023 20:45 FXStreet Market News
- Australian Dollar rebounds after last week’s depressing finish.
- A rise in Crude Oil prices could be a factor in the rebound, as Oil is Australia’s second largest export.
- Tough support and resistance at 0.6700 is likely to be a pivotal level for bulls and bears.
The Australian Dollar (AUD) recovers against the US Dollar (USD) on Monday, rising back up to a band of major Moving Averages in the 0.6700 zone. The Australian Dollar manages to shrug off downbeat data from its largest trading partner China, helped, perhaps, by a rise in Crude Oil prices, given Petroleum is the country’s second-largest export.
AUD/USD trades in the lower 0.67s as the US session gets underway.
Australian Dollar news and market movers
- The Australian Dollar repairs Friday’s losses on Monday, rebounding back up to the confluence of support and resistance around 0.6700, on the back of a rally in Crude Oil prices and a flat US Dollar.
- Crude Oil is rising on the back of Saudi supply cuts and a drop in inventories, which now play a bigger role in influencing price than the US Dollar, due to differentiation away from a Dollar-centric market. Since the war in Ukraine and Russian sanctions, the Oil market has diversified away from the US Dollar into a variety of currencies, according to Reuters.
- Key data releases for the US Dollar in the week ahead, include US labor market data, with the release of the ADP report on Wednesday, the usual weekly Initial Jobless Claims on Thursday, and the crucial Nonfarm Payrolls on Friday.
- The ISM gauges for the US manufacturing and services sectors will also be under the spotlight, given the data-dependence context highlighted by the Federal Reserve in its last meeting on July 26.
- China’s Non-Manufacturing PMI data came out lower than previously on Monday morning, registering 51.5 in July compared to 53.2 in June.
- Chinese Construction PMI showed the most concerning decline given the sector’s importance as an employer in the context of rising unemployment in China, falling to 51.2 in July from 65.6 in March.
- Manufacturing PMI, meanwhile, beat expectations of 49.2 but only by one point, coming out at 49.3, from June’s 49.0.
- The Chinese authorities released more policy guidelines but no concrete support measures after the data on Monday.
- At an official news conference, the Chinese state planner gave only vague promises to “study and formulate policies” though investors were left wanting more, according to a report by Reuters.
Australian Dollar technical analysis
AUD/USD is in a sideways trend on both the long and medium-term charts. The February high at 0.7158 is a key hurdle, which if vaulted, will alter the outlook to one that is more bullish longer term.
Likewise, the 0.6458 low established in June is a key level for bears, which if breached decisively, would give the chart a more bearish overtone from a longer-term perspective.
Australian Dollar vs US Dollar: Weekly Chart
The confluence of moving averages (MA) close to 0.6700, made up of all the major SMAs – the 50-week, 50-day and 100-day – remains a key support and resistance level. The exchange rate is currently challenging this level from below after temporarily breaking below it on Friday.
Australian Dollar vs US Dollar: Daily Chart
Whether the break was decisive is questionable – Friday’s candlestick is long and red but the close was not as close to the low as would be desirable for a really bearish signal. Nevertheless, it did cleanly breach the level.
With last week’s move down it is possible price may have completed a Measured Move pattern or three wave ABC correction (see labels on daily chart), where waves A and C are of similar length. If so, it is not surprising Monday is showing a reversal higher, although for how long the up move will last, it is impossible to tell.
On Monday price has recovered back up to the 0.6700 area and the cordon of MAs. It would require a decisive break above this level to reinvigorate short-term bullish hopes. Otherwise, the exchange rate has every chance of recapitulating and continuing last week’s bearish tone lower. A break below Friday’s 0.6623 low would revive the short-term downtrend.
Because the pair is in a sideways trend on the higher time-frame charts, the probabilities do not favor one scenario over another – nor is the Relative Strength Index (RSI) providing much insight on either timeframe.
A break below the 0.6623 lows, however, would probably indicate a continuation down to 0.6600 and the June lows, after which a continuation down to the May lows at 0.6460, could be quite possible.
In technical terms, a ‘decisive break’ consists of a long daily candlestick, which pierces cleanly above or below the critical level in question and then closes near to the high or low of the day. It can also mean three up or down days in a row that break cleanly above or below the level, with the final day closing near its high or low and a decent distance away from the level.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
EUR/USD Forecast: Optimism limits US Dollar demand
331146 July 31, 2023 20:29 FXStreet Market News
EUR/USD Current Price: 1.1020
- Optimism maintains the Euro afloat amid signs of cooling global inflation.
- Investors will be focusing on the United States employment data this week.
- EUR/USD could resume its decline if sellers push it through the 1.1000 psychological support.
The EUR/USD pair is in recovery mode for a second consecutive day, trading near an intraday high of 1.1039. Optimism rules financial markets following encouraging inflation-related figures. The United States (US) reported last Friday that the core Personal Consumption Expenditures (PCE) Price Index rose 4.1% from a year earlier in June, the lowest annual increase since September 2021, and below the 4.2% expected. The monthly increase was 0.2%, as anticipated.
On Monday, the Eurozone reported that the Harmonized Index of Consumer Prices (HICP) declined by 0.1% MoM in July, according to preliminary estimates. The annual reading met expectations by printing 5.3%, contracting from the previous 5.5%. The core yearly HICP, however, held steady at 5.5%, missing the 5.4% expected. The EU also published the preliminary estimate of the Q2 Gross Domestic Product (GDP), which showed the economy expanded by 0.3% in the three months to June, improving from the previous -0.1% and above the 0.2% anticipated by market players.
Cooling inflation hints at a soft landing instead of a steep recession, boosting the market mood. Asian shares edged higher, following Wall Street’s lead from last week, although European indexes are mixed, stuck around their opening levels. In the meantime, government bond yields tick lower, in line with the better sentiment.
The US calendar includes minor figures, as the country will publish the Chicago Purchasing Managers’ Index and the Dallas Fed Manufacturing Business Index, both for July. Attention, however, will be on US employment data this week, as the country will release multiple figures ahead of the Nonfarm Payrolls report (NFP) next Friday.
EUR/USD short-term technical outlook
From a technical point of view, the EUR/USD pair’s bullish potential seems limited. The daily chart shows that technical indicators remain directionless just above their midlines, lacking clear directional strength. At the same time, the pair remains below a still bullish 20 Simple Moving Average (SMA), currently at around 1.1065. A more sustained recovery could occur if the pair breaks above the latter with some momentum. On a positive note, the pair is meeting buyers around the 61.8% Fibonacci retracement of its 1.0833/1.1275 rally at around 1.1000.
Near term, the 4-hour chart shows that the risk skews to the downside. Technical indicators remain within negative levels, with modest bearish slopes. Furthermore, a bearish 20 SMA contains buyers while gaining downward traction far below the 100 SMA. Finally, the 200 SMA heads marginally higher, converging with the aforementioned Fibonacci support, reinforcing the 1.1000 psychological threshold.
Support levels: 1.1000 1.0965 1.0920
Resistance levels: 1.1065 1.1105 1.1150
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USD/IDR could advance to the 15,160 region – UOB
331145 July 31, 2023 20:26 FXStreet Market News
Further upside in USD/IDR could challenge the 15,160 area in the near term, indicates UOB Group’s Markets Strategist Quek Ser Leang.
Key Quotes
Full ArticleLast week, we expected USD/IDR to trade sideways between 14,945 and 15,090. USD/IDR then traded in a higher range than expected (14,980/15,100). Upward momentum is beginning to improve, and this week, we expected USD/IDR to trade with an upward bias toward 15,160. The next resistance at 15,219 is highly unlikely to come under threat. Support is at 15,040, followed by 15,000.