Focus on EUR/USD.

On fundamentals, last week PMI figures in the euro zone reconfirmed the pressure on the European economy, with the manufacturing sector recording 42.7 in July, the lowest manufacturing PMI since 2020. The PMI for the services sector was revised down to 50.9 in July, the lowest up to date. In this context, the market’s expectation for the end of the ECB interest rate hike has fallen from the high of 3.95% in July to the current 3.8%. Investors can wait for the market to digest the interest rate difference between Europe and the United States, and then pay attention to the impact of more economic data on the future.

Technically speaking, in EUR/USD daily cycle, the short-term moving averages formed by the 15-day and 21-day suppressed the rise of the exchange rate in the short run. Although it fell below Monday’s low yesterday, there are still bullish opportunities.

(EUR/USD daily cycle, Ultima Markets MT4)

The stochastic oscillator formed a golden cross gesture last week, and there is a bullish potential, but it can only be clarified after the suppression of the short-term moving averages reverses.

(EUR/USD 4 -hour cycle, Ultima Markets MT4)

In the 4- hour cycle, the exchange rate doesn’t form an effective long structure, and still needs to wait for the confirmation of moving averages and price actions. It is necessary to watch out for any bearish strike in the short term.

(EUR/USD 1 -hour cycle, Ultima Markets MT4)

According to the pivot indicator, the central price of the day is 1.09612,

Bullish above 1.09612, the first target is 1.09956, and the second target 1.10437.

Bearish below 1.09612, the first target is 1.09140, and the second target 1.08813.

Disclaimer

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided.

Focus on GBP/AUD today.

On fundamentals, there is no notable financial data due today. The difference in monetary policy between the UK and Australia will control the currency exchange rate in the short run.

(Blue vs Black, BoE rate vs RBA rate)

The BoE raised its benchmark interest rate by 25 bps to the highest level of 5.25% since 2008. At the same time, the RBA’s is currently set at 4.1%. The interest rate differential means room for arbitrage. AUD is deemed as a commodity currency, inherently vulnerable to commodity prices. The market is positive about RBA rate hikes, resulting in a bullish view of AUD.

Technically speaking, the GBP/AUD daily cycle structure presents a potential Wolf Wave structure. However, the current price action structure does not show a clear bearish structure.

(GBP/AUD daily cycle, Ultima Markets MT4)

The daily price action has room to rise — support is found on the 33-day moving average. The exchange rate fluctuated on the 5-day moving average for three days and stopped falling with three lower shadows. Still, we need to be alert. The stochastic oscillator has been entangled, and the upper resistance line is not far away. The market may reverse at any time.

(GBP/AUD 1 -hour cycle, Ultima Markets MT4)

On the hourly chart, GBP/AUD has formed a clear rectangular range after three days of swinging. Yesterday’s breakthrough suggested that bulls are more dominant in the short run. However, judging from the ATR combination indicators, it is doubtful whether the market breakthrough is effective. From a technical standpoint, GBP/AUD looks bullish, however, the sentiment may quickly change.

(GBP/AUD 1- hour cycle, Ultima Markets MT4)

According to the pivot indicator in Ultima Markets MT4, the central price of the day is 1.94141,

Bullish above 1.94141, the first target is 1.94943, and the second is 1.95451.

Bearish below 1.94141, the first target is 1.93626, and the second is 1.92806.

Disclaimer

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided.

The non-farm payrolls have passed, the inflation data has come, and the dollar is still in decline

Last Friday, August 4th, the U.S. nonfarm payrolls data fell short of expectations for the second consecutive month. According to the data released by the U.S. Department of Labor, the seasonally adjusted non-agricultural employment in the United States increased by 187,000 in July, the lowest number of new jobs since December 2020, compared with market expectations of 200,000.

Nonfarm Payrolls: A Disappointing Trend

Previously, new job figures for May and June were revised down as well. The May’s number was revised down from 339,000 to 306,000 and the June’s down to 185,000.

It is worth noting that ADP, the identical twin of non-agricultural employment data, also showed a downward trend in August, and this time it did not show the opposite trend to the nonfarm payrolls data.

The divergence in the first two months made the reference value of ADP to decrease.

(Blue column vs black line; non-farm payrolls vs ADP)

Unemployment Rate and Hourly Wages

On the other hand, the unemployment rate eased to 3.5% from 3.6 % in June. In addition, the hourly wage continued to record steady growth in July, increasing by 4.4% year-on-year, beating expectations of 4.2%. The increase in hourly wages may not be what the FED wants to see because of its 2% inflation target.

FED’s Role in the Labor Market

Elon, analyst at Ultima Markets Investment Research Group, said “In general, the FED’s continued tightening policy has begun to take effect in the labor market, and the decline in the number of new jobs for two consecutive months represents the beginning of cooling job market. As a result, the consensus for rate hike in September has not changed significantly.

(The chance that the Fed will not raise interest rates stays at nearly 90%, sourced from the Fed Interest Rate Observation Tool)

Impact on Gold and Non-U.S. Currencies

Gold and non-US currencies altogether is happy with the expectation of the Fed’s move to leave interest rates unchanged. It is important to watch out for inflation data this week. Last month, the inflation rate returned to 3%. If the inflation continues cooling, the dollar will go downwards again.

(CPI rates in one year)

Technical Analysis of the Euro

Technically, the euro finds its support on the back of 1.09, rising above the 65-day moving average and the 5-day moving average again. The Stochastic Oscillator is also showing a golden cross gesture, suggesting an underlying bullish trend. If the euro breaks through the peak last week, it will expectedly resume an uptrend.

(Daily chart of EUR/USD, Ultima Markets MT4)

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Disclaimer

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided.

Focus on GBP/AUD today.

On Fundamentals, BoE raised its benchmark interest rate by 25 bps yesterday, reaching the highest level since 2008. Rising interest rates mean higher borrowing costs, meaning more pressure on many homeowners. The UK continues to be on the edge of recession. Separately, RBA’s monetary report suggests suspending interest rate hikes, however, leaves room for another 15-bps raise.

BoE’s monetary policy was significantly more hawkish than RBA’s, resulting in an appreciation of GBP/AUD since February 2023. However, BoE’s policy no longer brought bullish sentiment on the pound but worries on the British outlook. At present , the market is certian on the future peak interest rate of the RBA, which will lead to a potential bullishness on the Australian dollar .

Technically speaking, the GBP/AUD daily cycle presents a potential Wolf Wave structure, but the price action structure does not display a clear bearish signal at moment.

(GBP/AUD daily cycle, Ultima Markets MT4)

The Stochastic Oscillator shows no dead cross on the daily cycle. Please be aware of GBP/JPY’s next bullish trend.

(4-hour GBP/AUD cycle, Ultima Markets MT4 )

The 4-hour Elliott Wave structure of GBP/AUD suggests that it may be in a double-saw-tooth rebound phase. After the market confirms the bearish trend, it is possible to pave a sharp downward path.

(1-hour GBP/AUD cycle, Ultima Markets MT4)

On 1-hour cycle of GBP/AUD, a turning point emerged. The exchange rate fell rapidly and was close to the previous breakthrough price. On August 2, the price action formed a potential head-and-shoulders structure. If it falls below the 1.9338 neckline, the probability of going bearish will increase.

(1- hour GBP/AUD cycle, Ultima Markets MT4)

According to the pivot indicator in Ultima Markets MT4 , the central price of the day is 1.94039 ,

Bullish above 1.94039, the first target is 1.94667, and the second is 1.95328.

Bearish below 1.94039, the first target is 1.93373, and the second is 1.92745.

Disclaimer

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided.

The Impact of BoE’s Interest Rate Hike on the Pound and the Economy

To combat inflation, the BoE makes its 14th move to raise interest rates by 25 bps, marking a new high of 5.25% since 2008.

(UK Interest rates in the past 25 years)

(BoE briefing in Aug.)

BoE’s Battle Against Inflation

BoE’s consecutive 25bps rate hikes made the market no longer optimistic on the future, lowering the estimate from 5.74% to around 5.68%. Meanwhile the pound came under pressure. BoE has repeatedly emphasized its view that the British economy would not head for a recession and revised the GDP growth rate for 2023 from 0.25% to 0.5% in May.

Heavy Borrowing Costs

High rates mean heavy borrowing costs, putting pressure on mortgage borrowers. Tenants also suffer as homeowners pass on their additional burden. The average two-year mortgage rate in the UK is now close to 7%. The future economic status will need to be verified by further data.

(4-hour graph of GBP/USD)

GBP/USD’s Reaction

Technically, GBP/USD gains upward space after interest rate hikes. In the 4-hour period, the price action shows a clear Wolfe wave.

Point 3 is below point 1, point 4 retreats to the price range between point 2 and point 3, and point 5 rebounds upward after falling to the line connecting point 1 and point 3 yesterday.

In the short term, GBP/USD has a certain chance of rebounding. The first target is at point 4, and the second target is the line connecting point 1 and point 4.

Conclusion

In conclusion, the Bank of England’s interest rate hike has introduced various challenges and opportunities in the financial landscape.

With the pound’s fluctuations, the burden on borrowers, and the technical patterns in GBP/USD, the economic impact of this decision will continue to unfold.

It’s imperative for individuals and businesses to stay informed and make well-informed financial decisions in this evolving landscape.

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Disclaimer

Comments, news, research, analysis, price and all information contained in the article only serve as general information for readers, and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided.

Focus on GBP/USD today.

Fundamentally speaking, the BoE and Fed are heading for a showdown now, and this is the only factor that affect the exchange rate between the two. First, the BoE tightening policy has not yet been clarified, While the Fed’s rate hike has come to an end. Second, although the probability of the Fed’s raising rates in 2023 has decreased, any positive economic data may trigger Fed’s move again, resulting in an elevated USD.

Before the BoE’s MPC meeting and the US’s nonfarm payrolls due this week, the GBP/USD is dominated by market sentiment in the short run. It is necessary to alert of any technical breakthrough.

Technically speaking, the GBP/USD daily cycle is about to approach the 65- day moving average, and the stochastic oscillator has also entered the oversold zone.

(GBP/USD daily cycle, Ultima Markets MT4)

It is still too early to say that the bear is gone for GBP, so you must stay alert.

(GBP/USD 4 -hour cycle, Ultima Markets MT4)

In the 4- hour period, the exchange rate has fallen to the upward trend line, while the stochastic oscillator indicator shown divergence signals. As a result, a short-term rebound is expected.

(GBP/USD in 1- hour period, Ultima Markets MT4)

In 1- hour period, the price action shows a clear Wolfe wave pattern. Point 3 is below point 1, as point 4 retreats to the price range between point 2 and point 3, and point 5 rebounds upward after falling to the line connecting point 1 and point 3. In the short term, GBP/USD has a certain chance of rebounding. The first target looks at the level of point 4, and the second target looks at  line connecting point 1 and point 4 .

(GBP/USD in 1- hour period, Ultima Markets MT4)

According to the pivot indicator in Ultima Markets MT4, the central price is 1.27864,

Bullish above 1.27864, the first target is 1.28311, and the second target 1.28866.

Bearish below 1.27864, the first target is 1.27314, and the second target 1.26863.

Disclaimer

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided.

Focus on USD/JPY

On fundamentals, last Friday, BoJ revealed its monetary policy. The interest rate was unchanged as expected, however, the YCC curve surprised the market. Although BoJ has made a flexible adjustment on YCC, the targeted yield has not floated accordingly. The market describes BoJ as dovish and expects monetary easing policies to exist for some time in the future. In the short term, the yen is still in a depreciation trend while the market taking in the news.

On technical , the USD/JPY daily rebounded at the key support level last Friday, leaving a long lower shadow.

(USD/JPY daily, Ultima Markets MT4)

USD/JPY’s breaking the previous high before the interest rate decision implies a reverse move. Before it hits 144, the probability of extending the downward trend is relatively small.

(USD/JPY in 4 -hour period, Ultima Markets MT4)

In 4-hour period, the exchange rate rises to the upper edge of the upward channel. In terms of wave structure, the 5th wave structure can be ensured. It is not yet confirmed that the long-term cycle has made a reversal twist.

(USD/JPY in 1- hour period, Ultima Markets MT4)

In 1- hour cycle, the 65- week moving average often appeared as a support position in the trend. After the exchange rose and fell back yesterday, adjustment structure emerged. The Stochastic Oscillator was also in a weakening phase. It is expected to find support at the 65 -week moving average or the Fibonacci retracement position around 23.6%.

(USD/JPY in 1hr period, Ultima Markets MT4)

According to the pivot indicator in Ultima Markets MT4, the central price is 141.975,

Bullish above 141.975 is, the first target is 143.252, and the second target 143.974.

Bearish below 141.975, the first target is 141.264, and the second target 139.975.

Disclaimer

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided.