Currency Pairs Market Analysis

[Solid ECN]

BOS's Dilemma: Balancing Economy and Inflation

The UK's currency, the British Pound, is falling against the US dollar today. This is due to weaker than expected economic growth data for July and a drop in industrial production. The economy shrank by 0.5% in July, the biggest fall since December 2022. All parts of the economy were affected, with the service sector seeing the biggest drop. This was unexpected, especially as this is usually a time when tourism boosts the economy.

The Bank of England (BoE) is in a tough spot right now. The economy is showing signs of slowing down because of high interest rates. At the same time, average earnings, including bonuses, have gone up from 8.4% to 8.5%. This increase in wages adds to inflationary pressure. Despite already high inflation, this could lead to further interest rate hikes. Experts are predicting another increase of 0.25% at the BoE meeting next week on September 21st.​

 

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EURUSD - Chart of the Day

The European Central Bank (ECB) will make a decision today at 1:15 PM BST, and this could cause some changes in the value of the Euro compared to the US Dollar. The markets are unsure about what ECB's head, Christine Lagarde, will decide. The ECB might keep the interest rates the same at 4.25%.

At the same time, the US will release some economic data at 1:30 PM BST. This includes information about retail sales, inflation, and changes in the number of people without jobs. This could give us more insight into the US job market.

If the ECB keeps the rates the same, it might cause the Euro to decrease in value compared to the Dollar. This could be because people are speculating that the ECB might stop increasing rates due to the weaker economy in the Eurozone. The Eurozone economy might have been affected by the previous nine rate increases. On the other hand, if the ECB increases the rates, the Euro might increase in value compared to the Dollar. This could mean that the ECB doesn't think the economy is weak enough to stop fighting inflation and start stimulating demand. However, the value of the Euro could also be affected by the US Federal Reserve's decision next week.

It's important to note that the economy in Europe is weaker than in the US, which is clear in the industrial sector. So, any increase in the value of the Euro might be due to speculation, and any worsening data could stop further increases. This is as long as the US data continues to be stronger than Europe's. Christine Lagarde will start a conference at 1:45 PM BST.

Looking at the Euro-Dollar chart, we can see that the value of the Euro is decreasing. This trend could only change if the value increases significantly to 1.08. Until then, there might be resistance at 1.078, which is where the value started decreasing in September. If the value decreases below the averages of 200, 100, and 50 days, which are all around 1.073, it might suggest that the Euro will continue to decrease to 1.06, which would be the lowest value this year.​

 

[Solid ECN]

US30 - Chart of the Day

As we will learn a number of macro data from the US economy today and today, we have 'Freaky Friday' so elevated volatility among Wall Street indices may continue. Although the share of industrial companies in the Dow Jones Industrial Average (US30) is quite limited these days, it is still substantial (including Boeing, Honewyell and General Electric) - it is today that we will learn data from US industry. The industrial production reading at 2:15 PM BST may show whether consumer and business demand is indeed strong enough to stimulate production, and data on consumer sentiment and inflation expectations will complete the picture of overall prosperity in the U.S. economy.

In the results of the rollover in the options and derivatives market, today's volatility on US30 may accelerate - and if investors' new positioning will be in line with the current upward trendline there are chances for a strong session on Wall Street. A Bank of America survey indicated a record $26.4 billion in inflows into US equity market this week, the vast majority of which ($18.7 billion) flowed into large-cap companies. Analysts pointed out that the market consensus is reassuring of a successful scenario for the stock market - a soft landing of the economy in the United States.

Looking at the Dow Jones (US30) contracts, we see that they are quite close to historical highs, and it is possible that the bulls will eventually reach record levels above 36,000 points. The upward trend line is maintained, and the index has not approached the SMA 200 (red line) since September 2022, demand reacted quickly in the 23.6 Fibonacci retracement zone at 32,400 points. So far, the current week has been exceptionally successful for the Dow Jones, as illustrated by the green candle with a large body. Seasonally, September has often proved to be a suitable time for stock accumulation for the last, usually successful 'Christmas quarter.' Bulls are hoping that this will also be the case this time.​

 

[Solid ECN]

CHN.Cash - Chart of the Day

Today, Chinese stock markets are falling sharply, with CHN.cash down almost 1%. Economic data is weaker than expected. Excluding oil, exports from Singapore, the world's biggest port, dropped 3.8% month over month, which is worse than the 4.2% growth predicted and the previous 3.2% drop. This shows that some economic indicators are weakening for a longer period. China, which depends a lot on demand from Western countries, especially the US, could suffer greatly if demand from developed economies decreases, for instance, due to a recession. The fact that fewer goods are leaving China each month might indicate a wider problem. How a declining Chinese market affects global fund managers' portfolios is a big question because China's economic weakness is somewhat separate from other 'emerging markets'.

Another risk factor was the nearly 20% drop in Evergrande shares at the start of the Chinese session. Although they recovered their losses, it raised wider concerns about China's real estate sector. Country Garden, which is financially troubled, faced two major challenges: the initial deadline for interest payments on more than $50 million in dollar bonds and the end of a creditor vote on a proposal to extend repayment of debt in yuan. While property sales in China increased month over month in August, other key indicators like new housing starts, total construction area and real estate investment continued to fall. Data from the 70 biggest cities show that property prices fell in most cities.

Looking at the CHN.cash chart, we see that supply is maintaining the overall downward trend line and became active again last time at 7000 points. The rebound lost momentum at 6700 and now sellers are back in control again, who may want to test the 61.8 Fibonacci retracement of the upward wave from fall 2022 at 6000 points again. Alternatively, if this support breaks downwards it could lead to a test of 6750 points, which are near 5750 points - 61.6 Fibo retracement. To break the current trend, buyers would have to push the index above the SMA200, which is now at 6672 points.​

 

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USDCAD Technical Analysis

Inflation rates have increased due to a rise in gasoline prices. The inflation rate for the year ending in August was 4.0%, up from 3.3% in July. This was slightly higher than what economists predicted, which was 3.8%. From July to August, inflation increased by 0.4%, which was a bit more than the expected 0.3%, but less than July's 0.6%.

Core inflation, which excludes volatile items like food and energy, also increased to 3.3% from 3.2% in July, but it was less than the expected 3.5%. On a monthly basis, core inflation decreased to 0.1% from 0.5%.

Despite these changes, it's still expected that the Bank of Canada (BoC) will not change interest rates at their next meeting. However, the chances of a rate increase have gone up to about 43%. But with unemployment rates rising since May and signs of slower economic growth, a rate hike is still not likely.

The USDCAD currency pair has recently experienced a bounce from the support area at 1.338. This upward movement suggests that bullish traders might be gearing up to test the resistance level at 1.35. However, it's important to note that the overall trend appears to be bearish.

The bearish outlook remains valid as long as the pair continues to trade within the daily downward channel. This means that despite the recent bounce, we could still see a continuation of the downward trend.​

 

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EURUSD Technical Analysis

The euro has been moving sideways and has had trouble getting past the 1.0700 mark. People are waiting for the FOMC statement today. The cost of living in the Eurozone has dropped a little, from 5.3% to 5.2%, which might mean inflation is slowing down. This could make the euro weaker. People think the Fed will stop increasing interest rates in September, but some believe there might be one more increase this year. This is helping the dollar.

The EURUSD is trading above a level that it's been below for a long time; if it goes above 1.0700, that's a good sign for the euro. The MAACD and RSI indicators suggest the trend might be changing.

The levels to watch are:​

• Resistance (where it might have trouble going higher): 1.0700, 1.0760.​
• Support (where it might bounce back up): 1.0640, 1.0540.​

 

[Solid ECN]

GBPUSD Analysis

The GBPUSD, also known as Cable, dropped to its lowest level since May 26 on Tuesday. This was due to the UK's inflation rate in August being lower than expected.

The yearly CPI (Consumer Price Index) fell to 6.7%, which is the lowest it's been since February 2022. This was a drop from 6.8% in July and was lower than the predicted increase of 7.0%. The core inflation rate, which doesn't include fluctuating components, also fell to 6.2% in August. This was lower than the predicted 6.8% and the 6.9% from the previous month.

Even though inflation is still high (more than three times the target of 2%), the data from August gives some hope. It also gives some relief to the Bank of England, which was expected to raise interest rates for the 15th time in a row at a policy meeting on Thursday. Now, there's a 50-50 chance that they might not raise rates this time.

However, there's still a risk of inflation increasing again. This is because oil and food prices are still going up, which keeps adding to inflation and might lead to more policy tightening.

The daily chart shows a bearish trend. However, the price is nearing a key short-term support level at 1.2307 (the lowest point on May 25), and this could slow down the downward trend because the market is oversold.

Any increase in price is likely to be limited by the broken 200-day moving average (1.2432) to keep the overall downward trend intact. If the price falls below the 1.2307 level, it could lead to a deeper correction of the larger uptrend from 1.0348 to 1.3141 and could potentially reach 1.2074 and 1.2000 (a key psychological level).

On the other hand, if the price consistently stays above the 200-day moving average, it could signal a stronger correction. A rise above the important 1.2500 level could indicate a possible trend reversal.

The market is waiting for the Federal Reserve's decision (expected later today and likely to remain unchanged) and a more important decision from the Bank of England on Thursday. The British pound could face more downward pressure if the Bank of England decides not to raise interest rates this time. However, if the central bank decides to raise rates again and maintains a hawkish stance, it could boost the currency.

Resistance levels: 1.2432; 1.2482; 1.2504; 1.2522.
Support levels: 1.2332; 1.2307; 1.2274; 1.2190.​

 

[Solid ECN]

**Intraday Crude Oil Prices Dip Amid US Rate Hike Expectations**

Crude oil prices are experiencing a downward trend in today's trading session. This decline is largely due to the anticipation of a US rate hike, which has overshadowed the tight supply outlook. The recent dynamic rally has also triggered some profit-taking on the instrument.

**US EIA Data Influences Energy Markets**

Energy markets are responding to the latest data from the U.S. Energy Information Administration (EIA). The data revealed a decrease in oil inventories by 2.14 million barrels. ANZ analysts highlighted in their report that the unexpected drop in inventories encouraged investors to secure profits following a 10% increase since the start of the month.

**Brent Crude and OIL Quotes Show Decline**

Today's session sees Brent crude down by nearly 1%, while OIL quotes indicate a decline of approximately 2% after the most recent futures contract rollover.

**Potential Short-lived Decline Amid Tight Global Supply Concerns**

Despite the current decline, it's possible that this could be a temporary dip. There are ongoing concerns in the market about a tight global supply in Q4. Crude inventories at Cushing, the supply hub for WTI, are at their lowest since July 2022. Additionally, production cuts continue to be implemented by OPEC and its affiliated economies.

**BRENT Crude Oil Prices Eyeing Support Level**

Following the futures rollover, BRENT crude oil prices are moving towards a support level established by a consolidation zone near the $90 per barrel mark.​