Topaz Global Weekly Market Outlook: Week of July 1, 2024
As we enter the week of July 1, 2024, the financial markets are poised for significant movements influenced by a combination of macroeconomic indicators, geopolitical events, and market sentiment. Here are the key takeaways:
1. Cooling Economy and Inflation: There is an increasing probability of a Federal Reserve rate cut in September due to a cooling economy and inflation.
2. European Central Bank (ECB) Rate Cuts: Softer economic data supports the ECB’s potential rate cuts, though a July cut is unlikely.
3. Bank of England (BoE) Rate Cuts: Markets anticipate two BoE rate cuts in August and November.
4. Bank of Japan (BoJ) Rate Hike: Recent events have fueled speculation of a BoJ rate hike in July.
5. Stable Gold Prices: Gold prices hold steady as market focus shifts to upcoming economic data.
6. Geopolitical Tensions and Oil Prices: Heightened geopolitical tensions shape a cautious outlook for oil prices.
7. Bitcoin Market: Reduced selling pressure on Bitcoin dampens its plunge.
8. Sector Rotation: Weakening tech sector rotates investors to the energy and finance sectors, creating bullish momentum.
House View
The current outlook indicates a bullish trend for the US Dollar Index (DXY), Gold (XAUUSD), and US Oil (WTI Crude Oil). Conversely, the Euro (EURUSD), UK Pound (GBPUSD), and Bitcoin (BTCUSD) are expected to exhibit bearish trends. The Nasdaq 100 (USTEC) remains neutral, reflecting mixed market sentiment.
Bullish
•US Dollar Index (DXY)
•Gold (XAUUSD)
•US Oil (WTI Crude Oil)
Bearish
•Euro (EURUSD)
•UK Pound (GBPUSD)
•Bitcoin (BTCUSD)
Neutral
•Nasdaq 100 (USTEC)
Instrument Outlooks
The Weekly Market Outlook provides detailed analyses of key financial instruments, highlighting their recent performance and future potential. The US Dollar Index (DXY) shows upward momentum, likely to retest key resistance levels if it remains above crucial support points. Gold (XAUUSD) is facing mixed signals with potential for range-bound trading unless significant economic data impacts the market. The Euro (EURUSD) and UK Pound (GBPUSD) display bearish trends amid economic uncertainties and potential rate cuts. Meanwhile, the Australian Dollar (AUDUSD) and Japanese Yen (USDJPY) exhibit patterns suggesting possible breakouts depending on upcoming economic indicators. The Dow Jones (US30) and Nasdaq 100 (USTEC) indices reflect cautious optimism, influenced by broader economic data and market sentiment. Crude Oil (USOIL) maintains its bullish trajectory, driven by geopolitical tensions, whereas Bitcoin (BTCUSD) faces downward pressure, struggling with investor sentiment and market movements. This comprehensive view ensures you are well-informed about the dynamics shaping these pivotal instruments.
DXY (US Dollar Index)
The US Dollar Index (DXY) retested the 106.10 level before retracing to the 105.70 support and bouncing slightly. The index remains above both EMAs, indicating its upward structure. If DXY stays above the key level at around 105.70, it may retest its previous swing high at around 106.10 before advancing to 106.40, May’s high. Conversely, if DXY fails to stay above the 105.70 support, it may remain within the 105.10-105.70 range.
•Support Levels: 105.70, 105.10
•Resistance Levels: 106.10, 106.40
XAUUSD (Gold – US Dollar)
Gold prices edged higher as the dollar dropped following slower US PCE inflation last month. Despite early gains, gold prices faced pressure due to rising Treasury yields. If gold remains above the 2325 level, it may retest the 2370-2386 resistance area. Failure to break above 2325 may result in a range-bound trade between 2287-2325.
•Support Levels: 2287, 2210
•Resistance Levels: 2325, 2386
EURUSD (Euro – US Dollar)
EURUSD fluctuated around the 1.0700 support without any apparent breakout. The price has formed a Descending Triangle pattern, and a breakout could dictate the next direction. Closing below the pattern may extend the plunge to test the next support at 1.0600. Successfully returning above the pattern may prompt a retest of the 1.0800 resistance.
•Support Levels: 1.0700, 1.0600
•Resistance Levels: 1.0800, 1.0900
GBPUSD (UK Pound – US Dollar)
GBPUSD retested the 1.2700 resistance and plunged towards the 1.2600 support, forming lower swings, emphasizing its downtrend. If GBPUSD closes below the 1.2600 support, it may extend its decline to test the 1.2500 support. Staying above the 1.2600 support with a follow-up recovery could see it close above the 1.2700 resistance.
•Support Levels: 1.2600, 1.2500
•Resistance Levels: 1.2700, 1.2800
AUDUSD (AU Dollar – US Dollar)
AUDUSD remained steady and formed a Symmetrical Triangle pattern, suggesting an accumulation phase preceding a potential breakout. Breaking the pattern’s upper bound may surge the price to the target at the previous high around 0.6850. Without a breakout, AUDUSD may continue moving within the Triangle pattern.
•Support Levels: 0.6550, 0.6464
•Resistance Levels: 0.6700, 0.6850
USDJPY (US Dollar – JP Yen)
USDJPY advanced to the 160.00 threshold, breaching its previous high and rising to the 161.00 level. If USDJPY sustains support above EMA21, it may gain upward momentum towards the 162.00 resistance. Failing to stay above the 158.00 support could see the price fall further to the 156.50 level.
•Support Levels: 158.00, 156.50
•Resistance Levels: 161.00, 162.00
GBPJPY (UK Pound – JP Yen)
GBPJPY remains bullish, trading above 203, with strong bullish momentum possibly surging towards resistance levels at 205.00 and 207.00. Retracing further could return the price to the 203.00 support before heading towards 200.75 support.
•Support Levels: 203.00, 200.75
•Resistance Levels: 205.00, 207.00
US30 (Dow Jones Industrial Average)
US30 has remained steady after bouncing from the 38550 support, suggesting a continued rise in the short term. Breaking the 40000 resistance could continue towards the 41000 resistance. Failing to maintain momentum may retest the 38550 support before plunging to 37700 support.
•Support Levels: 38550, 37700
•Resistance Levels: 40000, 41000
USTEC (Nasdaq 100)
USTEC retreated after retesting the 20000 resistance, falling to the 19500 level. Maintaining support above EMA21 could regain upward momentum toward the 20000 resistance. Failing to stay above EMA21 and breaking the 19300 support may see a further fall to 18850 level.
•Support Levels: 19300, 18850
•Resistance Levels: 20000, 20500
HK50 (Hang Seng)
HK50 fell below EMA78, forming a lower low and confirming a downtrend. Extending its plunge may test the next support zone at around 17000. Rebounding and breaking the 17800 resistance may retest the 18600 resistance.
•Support Levels: 17000, 16030
•Resistance Levels: 17800, 18600
USOIL (WTI Crude Oil)
WTI crude oil extended its rally, driven by escalating Middle East tensions. Sustaining bullish momentum may rise towards the 83.50 resistance. A bearish breakout could lead to a deeper price retracement, with 76.00 as the next potential support.
•Support Levels: 80.00, 76.00
•Resistance Levels: 83.50, 87.00
BTCUSD (Bitcoin – US Dollar)
BTCUSD extended its decline, with the EMA dead cross indicating further downside potential. Sustaining bearish momentum may see a further decline towards the 58000 support. A bearish breakout of the descending channel could prompt further price weakness, with 48000 as the next potential support.
•Support Levels: 58000, 48000
•Resistance Levels: 68000, 73000
Macroeconomic Highlights
In this Weekly Market Outlook, the macroeconomic highlights underscore significant trends and forecasts across major regions. In North America, the cooling economy and inflation suggest a probable Federal Reserve rate cut in September, with Canada’s inflation figures supporting a delay in easing by the Bank of Canada. Europe and the UK are seeing continued disinflation trends, with the Eurozone possibly urging the ECB to consider rate cuts, while the UK’s stable inflation rate has kept the BoE’s policies in a holding pattern. In Asia and Oceania, Japan’s rising inflation and potential BoJ rate hike in July reflect mounting economic pressures, whereas China’s economic outlook remains complex with contractionary manufacturing PMI and supportive measures from the PBoC. These macroeconomic insights provide a crucial backdrop for understanding the broader financial landscape and the potential impacts on various market instruments.
North America
•Cooling Inflation and Economy: Oxford Economics forecasts a decline in 2Q2024 GDP growth towards 1%. Cooling inflation and the economy increase the probability of a September Fed rate cut.
•Canada’s Inflation: Canada’s May headline CPI inflation rose to 2.9% YoY from 2.7% in April. The BoC may delay further easing, supporting the Canadian dollar.
Europe and UK
•Eurozone’s Disinflation: The Eurozone’s disinflation trend is expected to continue in June, possibly urging the ECB to cut interest rates soon.
•UK Inflation and BoE Policy: UK inflation reached the target of 2% in May, but the BoE maintained interest rates due to lower data backed by energy prices.
Asia and Oceania
•Japan’s Inflation: Tokyo’s inflation picked up in June, driven by higher energy prices. The BoJ may contemplate an interest rate hike in July.
•China’s Economic Outlook: China’s manufacturing PMI stayed in the contractionary area at 49.5 for the second consecutive month. The PBoC has signaled support for the property sector.
Fundamental Information
In this Weekly Market Outlook, the fundamental information section delves into the performance and future prospects of key asset classes. Gold prices (XAUUSD) have experienced marginal gains amidst fluctuating market conditions, driven by expectations of potential Fed interest rate cuts. The energy sector, particularly WTI Crude Oil (USOIL), continues to rally due to escalating geopolitical tensions and upward revisions to demand growth. Despite these rallies, the market sentiment for indices like the Dow Jones (US30) and Nasdaq 100 (USTEC) reflects cautious optimism, as investors navigate through economic data and sector rotations. In the cryptocurrency market, Bitcoin (BTCUSD) faces renewed selling pressure, but reduced selling from long-term holders offers some respite. These insights into metals, energies, indices, and cryptocurrencies are essential for comprehending the current market dynamics and making informed investment decisions.
Metals (Gold and Other Metals)
•Gold Prices: Gold prices finished marginally higher last week. Market expectations for interest rate cuts remained unchanged despite incoming data and comments from Fed officials.
Energies (Oil and Other Energies)
•Oil Prices: WTI crude oil extended its rally, marking its third consecutive weekly gain. Geopolitical tensions and rising crude inventories influence market sentiment.
Indices
•Market Sentiment: The indices failed to reach new highs last week as upward momentum waned. The US presidential debate injected volatility, prompting an increase in the ‘Fear index.’
Cryptos (Bitcoin and Other Cryptos)
•Bitcoin Market: Bitcoin faced renewed selling pressure, pushing prices to a 50-day low. However, reduced selling pressure from long-term holders may dampen its decline.
Economic Calendar
In this Weekly Market Outlook, the economic calendar highlights significant events and data releases that could impact market movements throughout the week. Monday, July 1, 2024, starts with retail sales data from Australia and manufacturing PMI figures from China, alongside a European Central Bank non-monetary policy meeting. Key highlights for Tuesday include the RBA meeting minutes and speeches from various ECB officials, providing insights into future monetary policies. Mid-week, Wednesday, brings a focus on the US with factory orders, ISM non-manufacturing PMI, and ADP nonfarm employment changes, crucial for gauging the health of the US economy. Thursday sees the Independence Day holiday in the US but includes trade balance data from Australia and factory orders from Germany. Finally, Friday wraps up the week with the highly anticipated nonfarm payrolls report from the US, along with employment changes and Ivey PMI from Canada. These events are pivotal for traders and investors to monitor, as they provide critical data points and potential market-moving information.
Monday, July 1, 2024
•Canada Day Holiday
•Retail Sales (MoM) (AUD)
•Caixin Manufacturing PMI (CNY)
•Nationwide HPI (MoM) (GBP)
•European Central Bank Non-monetary Policy Meeting (EUR)
•HCOB Germany Manufacturing PMI (EUR)
•HCOB Eurozone Manufacturing PMI (EUR)
•S&P Global/CIPS UK Manufacturing PMI (GBP)
•German CPI (MoM) (EUR)
•S&P Global US Manufacturing PMI (USD)
•ISM Manufacturing PMI (USD)
•ISM Manufacturing Prices (USD)
•Atlanta Fed GDPNow (USD)
•ECB President Lagarde Speaks (EUR)
Tuesday, July 2, 2024
•RBA Meeting Minutes (AUD)
•10-Year JGB Auction (JPY)
•ECB’s De Guindos Speaks (EUR)
•Core CPI (YoY) (EUR)
•CPI (MoM) (EUR)
•Unemployment Rate (EUR)
•Fed Chair Powell Speaks (USD)
•JOLTs Job Openings (USD)
•API Weekly Crude Oil Stock (USD)
Wednesday, July 3, 2024
•Holiday (Japan)
•au Jibun Bank Japan Services PMI (JPY)
•Building Approvals (MoM) (AUD)
•Caixin Services PMI (CNY)
•procure.ch PMI (CHF)
•HCOB Germany Services PMI (EUR)
•HCOB Eurozone Composite PMI (EUR)
•HCOB Eurozone Services PMI (EUR)
•S&P Global/CIPS UK Composite PMI (GBP)
•S&P Global/CIPS UK Services PMI (GBP)
•German 10-Year Bund Auction (EUR)
•ADP Nonfarm Employment Change (USD)
•Factory Orders (MoM) (USD)
•ISM Non-Manufacturing PMI (USD)
•Crude Oil Inventories (USD)
Thursday, July 4, 2024
•Independence Day Holiday (USA)
•Trade Balance (AUD)
•German Factory Orders (MoM) (EUR)
•CPI (MoM) (CHF)
•BOE Credit Conditions Survey (GBP)
•ECB Publishes Account of Monetary Policy Meeting (EUR)
•Fed’s Balance Sheet (USD)
Friday, July 5, 2024
•Halifax House Price Index (YoY) (GBP)
•German Industrial Production (MoM) (EUR)
•SECO Consumer Climate (CHF)
•Mortgage Rate (GBP)
•Nonfarm Payrolls (USD)
•Unemployment Rate (USD)
•Employment Change (CAD)
•Unemployment Rate (CAD)
•Ivey PMI (CAD)
•US Baker Hughes Oil Rig Count (USD)
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