Welcome to the Topaz Global Weekly Market Outlook for July 22, 2024. This week’s analysis includes a comprehensive review of major financial instruments, macroeconomic highlights, fundamental information, and a detailed economic calendar. We aim to provide valuable insights to help you navigate the complex world of forex trading.
Weekly Market Outlook Summary
House View
- Bullish: US Dollar Index (DXY), Gold (XAUUSD), Bitcoin (BTCUSD)
- Bearish: Euro (EURUSD), UK Pound (GBPUSD), US Oil (WTI Crude Oil)
- Neutral: Nasdaq 100 (USTEC)
Focus of the Week
- The market outlook for the upcoming week is influenced by both technical and macroeconomic factors. While the technical analysis offers expectations of price movements, the macroeconomic analysis varies based on changes in sentiment.
Key Points
- Dollar faces headwinds: The Fed may signal openness to rate cuts starting in September.
- Eurozone growth slowdown: Weak PMIs suggest slower growth in the Eurozone economy.
- MPC meeting focus: This week’s focus is on the MPC meeting and interest rate decisions.
- BoJ meeting complexity: The latest economic data paints a complex picture for the upcoming BoJ meeting.
- Gold price trajectory: Fed rate cuts sentiment maintains gold prices’ upward trajectory.
- Oil market uncertainties: Mixed sentiments cause uncertainties in the oil market.
- Bitcoin liquidity inflows: Optimistic investors drive liquidity inflows to Bitcoin.
- US indices trajectory: Earnings releases will determine the short-term trajectory of US indices.
Instrument Outlooks
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
North America
- The US economy demonstrated surprising resilience in Q2 with GDP growing at a robust 2.8% QoQ. This strong performance significantly reduces the likelihood of a cut at the upcoming Fed’s meeting on July 30-31. The S&P global flash PMI for July rose to 55, driven by stronger services demand, while the manufacturing sector fell into contraction territory.
- The PCE price index grew modestly in June, rising 0.2% MoM from May. Consumer spending remained robust, indicating that inflation is cooling without harming the overall economy. The Fed is expected to maintain its current rate stance at the upcoming meeting, but may signal openness to cuts starting in September, hence the dollar is expected to face some volatility.
Europe and UK
- The Eurozone’s preliminary PMIs continued to fall for two consecutive months, with the composite PMI of 50.1 dragged mainly by a contraction in the manufacturing PMI of 45.6. Although the service PMI remained in the expansion range of 51.9, the weaker data showed that the recovery in the Eurozone in H2 2024 could be softer.
- In the UK, the July preliminary composite PMI rebounded to 52.7 from 51.3 last month, driven by more robust growth in output, new orders, and employment across manufacturing and service sectors. This suggests the recovery will continue in Q3 but at a slower pace compared to Q2. This week’s focus is the MPC meeting on August 1 to decide the policy rate, which is expected to be cut at a 5-4 vote.
Asia and Oceania
- In Japan, inflation in Tokyo accelerated for the third consecutive month in July, with consumer prices excluding fresh food rising by 2.2% YoY. Energy prices, particularly electricity, increased by 19.7% YoY. The au Jibun Bank PMI for the service sector rebounded to 53.9 in July from 49.4 in June, suggesting more robust domestic demand. Conversely, manufacturing activity contracted again, indicating an uneven economic performance.
- In China, the economic outlook reflects a pivotal moment as the PBoC takes significant steps to bolster the slowing economy. The central bank’s unexpected decision to cut the one-year medium-term lending facility (MLF) rate by 0.20% to 2.30%, with an earlier reduction in the seven-day reverse repo rate, marks the most substantial monetary easing in over three years. These actions respond to weaker-than-expected Q2 growth, particularly in consumer spending.
Fundamental Information
Metals
- Gold (XAUUSD): The latest Commitments of Traders report indicates that market participants have recently accumulated more ‘long’ positions, indicating their optimism about gold prices. Gold prices fluctuated during the previous week before closing nearer to their weekly opening on Friday following the release of the core PCE price index. The core PCE price index figure has not changed market perceptions about the Fed’s stance on rate cuts.
- Other Metals: Discussions of the Middle Eastern conflict ceasefire have developed significantly, making market participants more optimistic about a potentially orderly environment. However, this development does not favor gold prices.
Energies
- Oil (WTI Crude Oil): US crude oil prices fell over 1% last Friday, posting a third weekly decline. Concerns about reduced demand in China outweighed strong economic growth in the US. Oil imports to China were down 10.7% YoY in June, and refined product imports fell 32% during the same period. The outlook for oil remains uncertain due to mixed factors. The strong economic growth in the US could support demand, but the significant reduction in Chinese imports suggests potential global demand weakness.
- Other Energies: US utilities added 22 billion cubic feet of gas into storage, raising the total stockpiles to 3,231 Bcf. The outlook for natural gas remains bearish due to concerns surrounding the potential impact of a trade dispute with China and the global economic downturn.
Indices
- US Indices: The US indices continued their correction trajectory last week as disappointing earnings from Alphabet (GOOGL) and Tesla (TSLA) weighed on bullish sentiment. However, overall market breadth seems to improve as investors flock to small-cap stocks. Despite resilience in corporate earnings within finance and consumer staples, notable disappointments from Tesla and lackluster Alphabet earnings dampened market sentiment.
- Chinese Indices: Chinese indices dropped last week as investor pessimism grew, driven by the economic slowdown and geopolitical risks. However, recent rate cuts and the Communist Party meeting provided little support to the declining stocks.
Cryptos
- Bitcoin (BTCUSD): Bitcoin surged further after the SEC approved the Grayscale Mini Trust, and the US Republican Party made favorable statements about bitcoin. US Senator Tim Scott emphasized that the Democratic Party stalled the passage of the cryptocurrency bill, and a Republican Party landslide victory in the election could pave the way for a favorable environment for bitcoin.
- Other Cryptos: Investors remain optimistic about the potentially unfinished cycle, while on-chain activities agree with this perception. Meanwhile, investors also invested over $1.1 billion in spot ether (ETH) ETFs during the initial week of launching.
Economic Calendar
Monday, July 29, 2024
- 6:00 EUR: German Retail Sales (MoM) (May) – Forecast: 0.00%, Previous: -1.20%
Tuesday, July 30, 2024
- 1:30 AUD: Building Approvals (MoM) (Jun) – Forecast: 5.50%
- 7:00 CHF: KOF Leading Indicators (Jul) – Forecast: 102.7
- 8:00 EUR: German GDP (QoQ) (Q2) – Forecast: 0.20%, Previous: 0.20%
- 8:00 EUR: German GDP (YoY) (Q2) – Previous: -0.20%
- 9:00 EUR: GDP (QoQ) (Q2) – Forecast: 0.20%, Previous: 0.30%
- 9:00 EUR: GDP (YoY) (Q2) – Forecast: 0.40%
- 12:00 EUR: German CPI (MoM) (Jul) – Forecast: 0.1%
- 12:00 EUR: German CPI (YoY) (Jul) – Forecast: 2.2%
- 13:00 USD: S&P/CS HPI Composite – 20 n.s.a. (MoM) (May) – Forecast: 1.4%, Previous: 7.2%
- 14:00 USD: CB Consumer Confidence (Jul) – Forecast: 99.9, Previous: 100.4
- 14:00 USD: JOLTs Job Openings (Jun) – Forecast: 8.140M
- 23:50 JPY: Industrial Production (MoM) (Jun) – Forecast: 3.6%
Wednesday, July 31, 2024
- 1:30 AUD: CPI (QoQ) (Q2) – Forecast: 1.00%
- 1:30 AUD: CPI (YoY) (Q2) – Forecast: 3.60%
- 1:30 AUD: Retail Sales (MoM) – Forecast: 0.60%
- 1:30 AUD: Trimmed Mean CPI (QoQ) (Q2) – Forecast: 1.00%
- 1:30 CNY: Chinese Composite PMI (Jul) – Forecast: 50.5
- 1:30 CNY: Manufacturing PMI (Jul) – Forecast: 49.5
- 1:30 CNY: Non-Manufacturing PMI (Jul) – Forecast: 50.5
- 2:30 JPY: BoJ Monetary Policy Statement
- 3:00 JPY: BoJ Interest Rate Decision – Forecast: 0.10%, Previous: 0.10%
- 4:00 JPY: BoJ Outlook Report (YoY)
- 6:00 EUR: German Retail Sales (MoM)
- 6:30 JPY: BoJ Press Conference
- 7:55 EUR: German Unemployment Change (Jul) – Forecast: 19K
- 7:55 EUR: German Unemployment Rate (Jul) – Forecast: 6.0%
- 9:00 EUR: Core CPI (YoY) – Forecast: 2.9%
- 9:00 EUR: CPI (MoM) – Forecast: 0.2%
- 9:00 EUR: CPI (YoY) (Jul) – Forecast: 2.50%
- 12:15 USD: ADP Nonfarm Employment Change (Jul) – Forecast: 150K
- 12:30 USD: Employment Cost Index (QoQ) (Q2) – Forecast: 1.20%
- 12:30 CAD: GDP (MoM) (May) – Forecast: 0.10%, Previous: 0.30%
Thursday, August 1, 2024
- Holiday: Switzerland – National Day
- 1:45 CNY: Caixin Manufacturing PMI (Jul) – Forecast: 51.8
- 6:00 GBP: Nationwide HPI (MoM) (Jul) – Forecast: 0.2%
- 6:00 GBP: Nationwide HPI (YoY) (Jul) – Forecast: 1.5%
- 7:55 EUR: HCOB Germany Manufacturing PMI (Jul) – Forecast: 42.6, Previous: 43.5
- 8:00 EUR: ECB Economic Bulletin
- 8:00 EUR: HCOB Eurozone Manufacturing PMI (Jul) – Forecast: 45.6, Previous: 45.8
- 8:30 GBP: S&P Global/CIPS UK Manufacturing PMI (Jul) – Forecast: 51.8, Previous: 50.9
- 9:00 EUR: Unemployment Rate (Jun) – Forecast: 6.4%
- 11:00 GBP: BoE MPC vote cut (Aug) – Forecast: 2
- 11:00 GBP: BoE MPC vote hike (Aug) – Forecast: 0
- 11:00 GBP: BoE MPC vote unchanged (Aug) – Forecast: 7
- 11:00 GBP: BoE Interest Rate Decision (Aug) – Forecast: 5.00%, Previous: 5.25%
Friday, August 2, 2024
- 1:30 AUD: PPI (QoQ) (Q2) – Forecast: 0.90%
- 1:30 AUD: PPI (YoY) (Q2) – Forecast: 4.30%
- 6:30 CHF: CPI (MoM) (Jul)
- 7:30 CHF: procure.ch PMI (Jul) – Forecast: 43.9
- 11:15 GBP: BoE MPC Member Pill Speaks
- 12:30 USD: Average Hourly Earnings (YoY) (Jul) – Forecast: 3.90%
- 12:30 USD: Average Hourly Earnings (MoM) (Jul) – Forecast: 0.30%, Previous: 0.30%
- 12:30 USD: Nonfarm Payrolls (Jul) – Forecast: 185K, Previous: 206K
- 12:30 USD: Participation Rate (Jul) – Forecast: 62.60%
- 12:30 USD: Private Nonfarm Payrolls (Jul) – Forecast: 155K, Previous: 136K
- 12:30 USD: U6 Unemployment Rate (Jul) – Forecast: 7.40%
- 12:30 USD: Unemployment Rate (Jul) – Forecast: 4.1%, Previous: 4.1%
- 14:00 USD: Factory Orders (MoM) (Jun) – Forecast: -0.5%
Analysis of Market Trends
The financial markets have been characterized by significant volatility and uncertainty over the past week. Key events such as central bank meetings, economic data releases, and geopolitical developments have played crucial roles in shaping market trends.
US Dollar (DXY) The US Dollar has shown resilience amidst a backdrop of mixed economic data. The potential for rate cuts by the Federal Reserve in September has added to the dollar’s volatility. Investors remain cautious, keeping a close watch on upcoming data releases and Fed communications.
Gold (XAUUSD) Gold has maintained its upward trajectory, driven by expectations of Fed rate cuts. The metal’s safe-haven appeal remains strong, particularly in light of geopolitical tensions and economic uncertainties. However, rising Treasury yields could pose a challenge to sustained price increases.
Euro (EURUSD) The Euro has been under pressure due to weak economic data from the Eurozone. The decline in PMIs highlights slower growth, raising concerns about the region’s economic outlook. The ECB’s cautious stance on rate cuts has added to the euro’s woes.
UK Pound (GBPUSD) Sterling has faced downward pressure amid disappointing economic data and uncertainties surrounding the Bank of England’s interest rate decisions. The upcoming MPC meeting will be crucial in determining the pound’s near-term direction.
Australian Dollar (AUDUSD) The Australian dollar has been relatively stable, with traders closely monitoring domestic economic data and geopolitical developments. The RBA’s monetary policy stance and global risk sentiment will be key drivers of AUDUSD movements.
Japanese Yen (USDJPY) The Japanese yen has strengthened due to rising domestic inflation and potential BoJ interventions. However, the currency remains vulnerable to global risk sentiment and monetary policy decisions by major central banks.
Bitcoin (BTCUSD) Bitcoin has experienced significant price fluctuations, influenced by regulatory developments and market sentiment. The approval of the Grayscale Mini Trust and favorable political statements have bolstered investor confidence. However, the cryptocurrency market remains highly speculative.
Crude Oil (WTI) Crude oil prices have been volatile, reflecting mixed signals from the global economy. Concerns about reduced demand in China and geopolitical tensions have impacted prices. The outlook for oil remains uncertain, with investors weighing the potential for supply disruptions against demand growth.
Stock Indices (US30, USTEC, HK50) Major stock indices have shown divergent trends, with US indices correcting due to disappointing earnings and Chinese indices declining on economic concerns. The performance of corporate earnings and geopolitical developments will be critical in shaping future trends.
Technical Analysis
US Dollar Index (DXY)
- The US Dollar Index has retested key support and resistance levels, indicating potential for further volatility. The 105.70 support level remains crucial, with a breach likely to lead to further declines.
Gold (XAUUSD)
- Gold prices have shown resilience, with the 2325 level acting as a significant support. A sustained move above this level could see prices retest the 2370-2386 resistance area.
Euro (EURUSD)
- The Euro has formed a Descending Triangle pattern, indicating potential for a breakout. A move below 1.0700 could extend declines to 1.0600, while a move above 1.0800 could prompt a retest of 1.0900.
UK Pound (GBPUSD)
- Sterling remains in a downtrend, with key support at 1.2600. A breach of this level could see further declines to 1.2500, while a recovery above 1.2700 could provide short-term relief.
Australian Dollar (AUDUSD)
- The AUDUSD has formed a Symmetrical Triangle pattern, suggesting potential for a breakout. A move above 0.6700 could see prices target 0.6850, while a move below 0.6550 could lead to further declines.
Japanese Yen (USDJPY)
- The USDJPY has breached key resistance levels, with 160.00 acting as a critical threshold. Sustained support above 158.00 could see prices target 162.00, while a move below 156.50 could indicate further weakness.
Bitcoin (BTCUSD)
- Bitcoin prices have extended their decline, with key support at 58000. A move below this level could see further declines to 48000, while resistance at 68000 remains a significant hurdle.
Crude Oil (WTI)
- Crude oil prices have shown mixed signals, with key support at 80.00 and resistance at 83.50. The outlook remains uncertain, with geopolitical developments and economic data likely to influence price movements.
Market Sentiment
Market sentiment has been influenced by a range of factors, including economic data releases, central bank meetings, and geopolitical developments. The following key themes have emerged:
Central Bank Policies
- Central banks remain in focus, with investors closely monitoring their policy stances. The Fed’s potential rate cuts, the ECB’s cautious approach, and the BoJ’s interventions are critical in shaping market sentiment.
Geopolitical Risks
- Geopolitical tensions, particularly in the Middle East and between major economies, have added to market volatility. Investors remain cautious, seeking safe-haven assets amid uncertainties.
Economic Data
- Economic data releases have provided mixed signals, with strong US growth contrasting with weaker data from the Eurozone and China. The divergence in economic performance has impacted currency and commodity markets.
Corporate Earnings
- Corporate earnings have influenced stock market trends, with notable disappointments from major companies weighing on investor sentiment. The performance of earnings releases will be critical in determining future market direction.
The financial markets remain dynamic and complex, influenced by a range of factors including economic data, central bank policies, and geopolitical developments. Our comprehensive analysis provides valuable insights to help you navigate these challenges and make informed trading decisions. Stay tuned for next week’s market outlook, and remember to leverage our advanced trading algorithms to enhance your investment strategies.
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