The U.S. economy continues to experience a reduction in price pressure. In July, both the overall and core Consumer Price Index (CPI) registered a modest 0.2% increase. From a yearly perspective, the core CPI increased by 4.7% in July.
The core CPI has maintained a three-month annualized growth rate of 3.1% over the past few months, which is a positive sign. In addition, the Producer Price Index (PPI) and the NFIB Small Business Optimism Index for July indicate that underlying inflation is declining.
Surprisingly, the U.K. economy demonstrated resilience in the second quarter, as its GDP increased by 0.2% quarterly. A closer look reveals robust domestic demand, with consumer expenditure up 0.7% and business investment up 3.5%. Nevertheless, given the recent inflation and interest rate increase, we anticipate that the United Kingdom will enter a moderate recession later this year.
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Forex Technical Outlook for 14 August 2023 to 18 August 2023
Let’s see the list of events to look at this week:
- AUD Monetary Policy Meeting Minutes on Tuesday
- GBP Claimant Count Change on Tuesday
- CAD CPI on Tuesday
- US Retail Sales on Tuesday
- RBNZ Cash Rate and Rate Statement on Wednesday
- FOMC Meeting Minutes on Wednesday
- AUD Employment Change on Thursday
- US Unemployment claim on Thursday
Let’s see the market outlook from the weekly forecast:
The EUR/USD pair closed the week with a bearish momentum, although the loss was not significant.
The indecisive direction from the US employment report increased the possibility that the Fed would raise the rate again in the coming quarter. However, the better-than-expected unemployment report, with annual earnings of a 4.4% increase in July, became a matter to follow.
The EUR/USD price closed bearish for four consecutive weeks, although the price remained above the 1.0900 psychological threshold. However, the daily price shows a corrective downside pressure, signaling that the US dollar might be exhausted.
In the weekly chart, the price is still trying to hold momentum at the 61.8% Fibonacci retracement level from 1.1275 high to 1.0833 low. Also, a bullish rebound is visible from the 20 Simple Moving Average level. The 100 SMA is below this structure, which indicates a limitation to the downside possibilities.
On the daily chart, the bearish is preferable as the price trades below the 20-day SMA level. As the price bottomed at the 1.0911 level, a bearish break could increase the downside possibility toward the 1.0830 level.
The alternative approach is to look at the price action at the 1.1064 zone as a bullish pressure above this area could increase the price towards the 1.1120 zone.
The downside pressure in the GBP/USD price was extended for the fourth consecutive week, but the current price still trades above the August 2023 low.
Despite the optimistic report on UK GDP, the price was mostly followed by the stronger US Dollar. However, the current market direction is shifted to the FOMC meeting and the US retail sales.
The weekly GBP/USD price shows a positive sign after four weekly declines as the price remains bullish above the 20-week SMA level. However, other technical indicators suggest increased bearish pressure, while the current RSI is moving south. The bullish case will be potent if the price holds the upside momentum above dynamic levels.
On the bearish side, the recent price shows a consolidation at the 1.2750 area with a downside continuation below the 20-day EMA. The next support level to look at is the 1.2600 level; below this area, a strong downside pressure may come toward the 1.2450 level.
On the bullish side, the 100-day SMA level is at the 1.2615 level, and a bullish recovery from this zone with a D1 candle above the 1.2830 level would resume the broader bullish trend.
The former US Dollar’s performance with an ignorance of the AUD resumed the bearish trend throughout the week. However, the price seems volatile at the support area, from where a weaker US data could be a potential reversal opportunity.
In the weekly chart, the downside momentum resumed for the fourth consecutive week, while the 100-week SMA is the major resistance at the 0.6921 level. The weekly RSI is below the 50.00 line, and there is a strong possibility of reaching the 30.00 level.
In the daily price action, the price reached near the May 2023 low and became volatile throughout the week. Although the recent candles were bearish, no significant downward pressure was present below the 0.6597 zone.
In the bullish case, a liquidity sweep from the 0.6458 low could validate the buying possibility, targeting the 0.6800 level. However, a strong, strong bearish trend continuation from the 20 EMA resistance might resume the momentum towards the 0.6300 area.
The stronger US data was the main reason for the USD/JPY bull run, which took the price near the major resistance area. Now, market participants will see the critical US Data before anticipating the price movement for the USD/JPY.
The weekly candlestick closed with a strong bullish trend continuation opportunity, while the dynamic 20 and 100 SMA levels are backing as major support. Other technical indicators are still bullish for this pair, where the weekly RSI is yet to test the 70.00 overbought zone.
In the daily price, the price approaches the 145.00 critical resistance level, and the additional price movement depends on how the price reacts on this level. There is a downside possibility from the 20 EMA as a mean reversion, while the 14-period RSI remained steady above the 50.00 line.
Based on this outlook, a false break above the 145.00 level would increase the bearish momentum toward the 20 EMA support. However, an immediate downside movement and a stronger bullish break above the critical zone could resume the existing trend.
The monthly candle of XAU/USD was flipped without taking liquidity from the July 2023 high. It is a sign that an action is pending in this area, which needs a proper bullish rejection to validate the upside possibility.
The current 14-day Relative Strength Index shows a downside momentum below the 50.00 line for the XAU/USD price. It is a sign of a strong downside pressure, which may extend the pressure until the RSI reaches the 30.00 line.
On the bearish side, the next critical support level is at the 1900.00 area, which is the 38.2% Fibonacci Retracement from the existing swing. Also, the 200-day SMA remains steady at the 1900.00 psychological area as confluence support. As a result, a bearish daily close below this level could lower the price toward the 1880.00 level.
On the bullish side, the next resistance level is at the 1940.00 level, which would be a barrier before reaching the 1955.00 level.
Following BlackRock's spot ETF filing in mid-June, the Bitcoin Exchange Traded Fund (ETF) has garnered renewed traction. This development has piqued the interest of investors. According to James Seffart of Bloomberg, the SEC has until August 13 to decide whether to approve or deny ARK 21 Shares' Bitcoin ETF.
Due to the SEC's cautious stance on cryptocurrencies, most experts anticipate a similar outcome, despite Seyffart's prediction of a potential rejection.
In the unlikely event that the SEC approves ARK's Bitcoin ETF, it could propel Bitcoin's rally in 2023 to key levels between 35K and 40K.
Given the anticipated SEC rejection, investors can expect Bitcoin's comparatively calm and volatile phase to continue with a gradual downward trend.
Bitcoin's price increased by 27% between June 14 and June 23 following BlackRock's BTC spot ETF registration announcement. This peak was momentarily surpassed on July 13, indicating a selling opportunity and a forthcoming correction.
The Fair Value Gap (FVG), extending from 30,380.00 to 31,068.00 due to Bitcoin's rapid price decline, has created an imbalance that favors sellers. In addition, uncollected buy-stop liquidity was observed in the swing highs recorded between July 16 and July 23, just below the FVG.
In such a scenario, the initial and optimal target would be the midpoint of the 27% advance at 28,138.00 Consequently, the two significant support levels located at 27,330.00 and 26,700.00 offer profitable opportunities.
Investors might experience a volatile market from the FOMC but a clear market direction may come after releasing the US rate decision.