Forex Updates by Solid ECN

[Solid ECN]

USDCHF Technical Analysis​

USDCHF pair is currently rising and is expected to breach the 0.8996 (50 SMA in Yellow) level and attack 0.9093. However, caution is advised for upcoming trading as breaching the last level will cancel the negative effect of the double top pattern and lead the price to start a new bullish wave. The targets for this wave begin at 0.9032.

Therefore, due to the contradiction between the technical indicators, it is recommended to stay aside until the price confirms breaching 0.8996 resistance or breaking 0.8956 (25 SMA in Blue) support. It should be noted that breaking this support will push the price to resume the bearish trend and head towards 0.89071 followed by 0.88869 areas mainly.


Price action signal​

• Sell with SL above the LUW (long upper wick) candle at 0.9007​
• TP 1: 0.8956​
• TP 2: 0.8901​

 

[Solid ECN]

Bitcoin near $29,000​

"Bulls" return to crypto. The market is reacting to more moves by financial institutions

The cryptocurrency market has had some really good days. Fear over the Binance exchange and regulations has given way to positive sentiment due to the recent actions of investment funds. It's thanks to them that the market is reassured that cryptocurrencies 'won't disappear' from Western financial markets, and Bitcoin can finally count on interest from institutions. As a result, the largest cryptocurrency is struggling to break through $29,000 today.
​

• Following news of a Bitcoin Trust ETF from BlackRock and a similar fund application from Fidelity Investments, investors were optimistic about Deutsche Bank's application to provide digital trust services.​
• In the evening, the market also reacted to news of the opening in the US of a new crypto exchange EDX Markets. For the moment, however, the entity will specialize in serving institutions and cannot be compared to Binance or Coinbase​
• EDX is backed by Citadel Securities and Virtu Financial, among others, some of the largest market makers in the world, as well as Charles Schwab , Fidelity Investments fund and other Wall Street institutions.​
• Today's reports from the US indicate that another institution, Invesco, has once again applied to the SEC for approval of a spot Bitcoin ETF​
• A Nomura survey indicated that 96% of professional institutional investors managing nearly $5 trillion (303 institutions) are willing to invest in cryptocurrencies, and 82% had a positive view of the long-term prospects of Bitcoin and Ethereum​
• As a result of Bitcoin's sudden rise in the market, the largest wave of short position liquidations since May 28 took place (Approx. $40 million liquidation in the last 24 h according to CoinGlass)​

On-Chain data shows the fastest increase in Bitcoin flows to institutions with very little or even zero trading history in more than 6 months. This behavior of the network may indicate an accumulation trend on the part of long-term investors.

Bitcoin (BITCOIN) stock chart, W1 interval. The largest cryptocurrency has rebounded from the lower limit of the uptrend sustained since the beginning of this year and is currently heading towards the upper resistance barrier, set by the zone of local peaks from April this year.​

 

[Solid ECN]

UK100​

Britain's main benchmark UK100 is the weakest European index today, losing more than 1%. The upcoming - likely hawkish - decision by the Bank of England by no means signals the end of tightening in the British economy. While it is uncertain whether rates will rise by 25 or 50 bps, the market will almost certainly have to swallow a higher 50 bps BoE hike - today or in August. Yesterday's reading indicated that UK inflation in May appears to have stabilized at excessively high levels. Core CPI was unchanged at 8.7% y/y - the market had expected 8.4% y/y. Also, the core CPI , which was expected to remain unchanged at 6.8% y/y, accelerated to 7.1% y/y - the highest level in 30 years.

The difficult situation could prompt the Bank of England to an extremely restrictive cycle if the BoE prioritizes the fight against inflation. In such a situation, the baseline scenario seems to be economic damage, which is generally not good for the performance of firms and consequently the stock market. With inflation anchored too high and a period of below-trend growth, a stagflationary scenario is a sizable threat to the British economy. As long as the labor market remains relatively strong, the market has no reason to be overly concerned, however, macro uncertainty has been reflected in the quotations of British indices recently.

Looking at the chart of FTSE (UK100) contracts, however, we see that the upward trend line is maintained although the index has dropped below the SMA200 (red line) indicating a possible further weakening of momentum. In addition, looking at the index's quotations since February, this year, we can juxtapose them with the technical formation of a rising wedge from which a breakout usually takes place at the bottom. RSI indicators near oversold and MACD confirm considerable weakness in the bulls - further decline without an upward correction would therefore have to be outright 'capitulation'. The market's reaction to the BoE minutes and decision may prove crucial.​

 

[Solid ECN]

DE30​

Release of flash PMIs for June from France and Germany turned out to be a disappointment. French data showed a slump in service gauge from 52.0 to 48.0, meaning that the sector was contracting. Meanwhile, German data showed a plunge in the manufacturing index from 43.2 to 41.0 - the lowest level since May 2020 when sentiment in the industry was slumping amid Covid-19 pandemic and resulting lockdowns. While DE30 saw a positive reaction to French data and moved slightly higher, the index took a hit following release of German data as it hinted at continued struggles of the German economy's main motor - manufacturing.

Taking a look at the DE30 chart at the H4 interval, we can see that the index is currently trading near a psychological 16,000 pts level. A point to note is that the index plunged back into the recently broken 15,810-16,085 trading range. Nevertheless, the ongoing pullback has not yet exceeded the range of the correction that occurred in the second half of May 2023 and, according to the Overbalance methodology, remains in an uptrend. Should declines deepen traders should watch the 15,850 pts area, where the lower limit of the Overbalance structure can be found.​

 

[Solid ECN]

Oil - Morning Wrap​

• Feud between Russian Ministry of Defense and PMC Wagner escalated into a rebellion over the weekend with the latter taking control of a few Russian cities and marching an armored convoy towards Moscow​
• However, a deal between Kremlin and PMC Wagner was brokered by Belarusian president Lukashenko and the short-lived rebellion was ended​
• Given lack of any significant resistance from the Russian army against Wagner's advance on Moscow, war analysts wonder whether the uprising was staged​
• As Wagner's mutiny started and ended before the opening of markets, we do not see any major reaction to the events. Oil and precious metals opened slightly higher​
• Indices from Asia-Pacific traded mixed during the first session of a new week. Nikkei dropped 0.1%, S&P/ASX 200 declined 0.4%, Kospi gained 0.4% and Nifty 50 gained 0.1%. Indices from China traded 0.3-1.5% lower​
• European index futures point to a more or less flat opening of the cash session on the Old Continent​
• SNB Chairman Jordan said that recent rate hikes were likely not enough to bring inflation down​
• Chinese travel activity has still not recovered after a pandemic. Data for recent Dragon Boat Festival holiday (June 22-24) showed travel was 22.8% below pre-pandemic 2019​
• Summary of Opinions from BoJ June meeting showed that CPI inflation is not expected to drop below target towards the end of the year. On top of that, one member saw it as appropriate to make changes to yield curve control mechanism​
• OPEC expects global oil demand to reach 110 million barrels per day by 2045​
• Saudi Aramco head said that China and India account for over 2 million barrels of oil demand growth​
• S&P Global lowered its Chinese GDP growth forecast for 2023 from 5.5 to 5.2%​
• Cryptocurrencies are trading lower - Bitcoin drops 0.6%, Ethereum trades 0.9% lower and Dogecoin slumps 1.6%​
• Energy commodities gain - oil trades 0.2% higher while US natural gas prices jump 2%​
• Precious metals advance - gold trades 0.4% higher, silver jumps 1.6% and platinum adds 1.4%​
• GBP and NZD are the best performing major currencies while USD and CHF lag the most​

OIL.WTI opened higher following a short-lived Russian coup but all of the gains have been erased already.​

 

[Solid ECN]

GBPUSD​

GBPUSD pair’s decline halted at the 1.2675 level, where it found solid support. It then began to rise and attempt to recover on an intraday basis, which suggests that it is heading towards building a new bullish wave. The targets of this wave begin with testing the broken support of the main bullish channel that has now turned into resistance at 1.2815. It is worth noting that breaching this level will push the price back to the mentioned channel and achieve additional gains that reach 1.2900 areas.

Therefore, we expect to witness more bullish bias in the upcoming sessions, supported by the technical indicators’ positivity. It is important to consider that breaking 1.2675 will stop the bullish wave and push the price to achieve bearish correction on an intraday and short-term basis.​

 

[Mohamed1261]

View attachment 20346
The European currency shows moderate growth against the US dollar during the Asian session, developing a "bullish" signal formed the day before, when the instrument retreated from its March 7 local lows.

The growth of buying activity in the single currency is facilitated by technical factors, as well as some correction of the US dollar after the publication of consumer and industrial inflation, which, as expected, renewed record highs. The Producer Price Index released the day before rose by 1.4% in March after rising by 0.9% a month earlier. Analysts expected an acceleration of only up to 1.1%. In annual terms, the growth rate of producer prices accelerated from 10.3% to 11.2%, which was also higher than the market forecast at 10.6%. Such statistics once again confirm the fact that many politicians and economists were mistaken last year, arguing that the rapid rise in prices is only a temporary phenomenon.

Support for the single currency is also provided by the meeting of the European Central Bank (ECB), which will be held today. Despite the fact that analysts' forecasts do not imply any changes in the vector of the monetary policy of the European regulator, the comments of its representatives will be extremely important. Traders are primarily interested in the timing of the start of the rate increase, since the central banks of developed countries have already managed to resort to tightening monetary policy. Investors will focus on a statement by the ECB President Christine Lagarde, including information on how long after the end of the quantitative easing program a cycle of rate hikes could begin, given the complex combination of inflation far above the target and a slowdown in the national economic recovery due to a sharp jump in energy prices.

View attachment 20344

On the D1 chart, Bollinger Bands demonstrate a tendency to reverse into a horizontal plane. The price range is also trying to consolidate, but within a fairly wide range, fully consistent with the observed dynamics. MACD is reversing upwards and forming a new buy signal (located above the signal line). Stochastic is showing the same dynamics being located in the middle of its area.

Resistance levels: 1.09, 1.0957, 1.1, 1.1051 | Support levels: 1.086, 1.0835, 1.08, 1.0767

View attachment 20345

great information

 

[Solid ECN]

NZDUSD​

The NZDUSD currency pair is currently exhibiting positive trading patterns and is attempting to surpass the 50-day exponential moving average (EMA50), which has been providing significant resistance against price movements. We anticipate further upward movement in order to achieve our positive targets, which begin at 0.6220 and extend to 0.6290. Notably, we have observed two bullish engulfing candlestick patterns on the 4-hour time frame, which serve to confirm the strength of the current bullish trend.

Overall, we expect the bullish trend scenario to remain valid and active, provided that the price does not break below 0.6140 and hold with a daily close below this level.​

 

[Solid ECN]

DE30​

Risk-on moods can be spotted on the markets today. Equities in Europe and China traded higher earlier today and now solid gains can be spotted on Wall Street as well. Upbeat comments from the Chinese Prime Minister on additional stimulus measures being implemented starting from July as well as solid US data earlier today are supporting upbeat sentiment on the markets.

German DAX futures (DE30) found their way back above the 16,000 pts mark this afternoon. Index tested 15,850 pts support zone yesterday but failed to break below. Bulls managed to hold the index above the upper limit of the upward channel. Bullish candlestick patterns suggest that a recovery move may be on the cards now. In such a scenario, 16,090 pts area will be the first near-term resistance to watch.

US indices are trading higher today with S&P 500 futures (US500) breaking above 4,400 pts area. Taking a look at the index at H1 interval, we can see that price broke above the upper limit of the bearish channel and 50-period moving average (green line). Advance continued and bulls managed to break above the 4,400 pts resistance zone, where the upper limit of market geometry was located, flashing another sign that a short-term bullish trend reversal occurred. The next resistance zone to watch can be found in the 4,427 pts area and is marked with previous price reactions.​

 

[Solid ECN]

USDCHF Under the Negative Pressure​

The USDCHF currency pair has recently experienced a significant amount of negative pressure. This has resulted in the pair breaking through the 0.8965 level and settling below it. This downward movement suggests that the pair may continue to decline, with potential targets being the 0.8900 and 0.8800 levels, which are considered to be key negative stations.

As a result of these developments, a bearish bias is suggested for the USDCHF pair in today’s trading. However, it is important to note that if the pair breaches the 0.8980 level, this could halt the expected decline and instead push the price towards a new bullish correction. In this scenario, the next target for the pair would be the 0.9055 level.​

 

[Solid ECN]

Oil​

• Saudi Arabia and Russia's supply cut announcement fails to offset concerns over manufacturing activity slowdown worldwide​
• Deceleration in China, Eurozone, and the US manufacturing PMI data contribute to the downward pressure on WTI prices​

Despite the supply cut efforts by Saudi Arabia and Russia, WTI crude oil prices continue to face downward pressure due to concerns about a global economic slowdown. The slowdown in manufacturing activity worldwide, as evident from PMI data, has overshadowed the impact of the supply cuts. China's manufacturing PMI indicates a modest expansion but a continued deceleration, while the Eurozone and Germany are experiencing deceleration and a technical recession. The US manufacturing PMI suggests a slowing economy, which could have implications for the rate hike decisions of the US Federal Reserve. Additionally, Russia's plan to reduce exports to boost oil prices is overshadowed by China's slow reopening.

Amidst the deteriorating global manufacturing sector, the bearish sentiment for crude oil persists. Despite OPEC+ cuts and monetary stimulus from China, oil prices remain range-bound. The resistance at $73 has led to repeated rejections, maintaining a bearish bias. There is a possibility of testing the support level at $67.44 or further at $64, and a break below this level could trigger a significant downward movement towards the $57 level. Currently, the price is likely to test the $67.44 support, where buyers might enter the market. Otherwise, if buyers step in, the price may find support and potentially rally towards the $73 resistance zone.​

 

[Solid ECN]

GBPUSD​

UK economists at Goldman Sachs are predicting a 50 basis point increase in the Bank of England's interest rate during the August meeting, with a projected peak of 6% by November. The current interest rates are at 5.0%. The forecast for a further 100 basis point increase is based on continued strong inflationary pressure, wage growth, and a slower-than-expected response of outstanding mortgages to changes in interest rates.

Additionally, GBPUSD rates have been supported by speculation that the Federal Reserve (FED) may have to revise its hawkish policy due to lower-than-expected inflation readings. This shift in sentiment, combined with upcoming inflation and retail sales data in the UK, may lead to larger movements in the GBP/USD pair this week.​

 

[Solid ECN]

Oil Loses 1.5% as China's Growth Disappoints​

China's GDP growth came out below market expectations! Looking at expectations from the Bloomberg survey, only one economist expected that the country's growth could be at such a “low level”. Of course, looking at the dynamics, growth of 6.3% y/y does not seem weak, although more was expected (growth of 7.1% y/y). In the first quarter, growth was 4.5% y/y. It's worth remembering that in the second quarter of last year, China introduced very restrictive covid measures, including in the Shanghai region, which then severely limited economic growth. That is why the market expected that economy would grow much stronger.

In quarterly terms, growth came out at 0.8% q/q, in line with market expectations and the growth in the previous quarter was 2.2% q/q. Industrial production for June grew stronger than expected at 4.4% y/y and retail sales were slightly below expectations at 3.1% y/y. So where is the problem with the Chinese economy? In the real estate market and in the "strong" yuan. The yuan is not weak enough to boost subdued exports. On top of that, real estate market sentiment remains very weak. At the same time, it seems that GDP data is not weak enough to lead to a further cut in interest rates. PBOC will decide on interest rates on July 20 and despite weak data, there is no expectation that the bank will cut rates once again. Recently, the PBOC surprised negatively by cutting rates less than expected.

Oil is losing nearly 1.5% today, mainly due to data from China, as the country is responsible for a very large share of expected demand growth this year. At the beginning of the year, imports were disappointing due to high inventories. Now that inventories are running out and China should import more oil. However, without a stronger stimulation of the economy, China's demand growth may fall short of expectations. At the same time, looking from the side of oil itself - a very cheap dollar may support the continuation of the rebound, although a "tactical correction" cannot be ruled out.

Brent oil is testing the area of $78.5 per barrel. If this level is broken, a test of the area around $77 per barrel cannot be ruled out. The size of the range of the previous downward wave also falls slightly lower. Seasonality indicates that further decline may be seen until the end of July. Nevertheless, for the moment, the uptrend remains unbroken.​

 

[Solid ECN]

Bitcoin​

• Bitcoin struggles to maintain the $30,000 level​
• Extreme emotions in cryptocurrencies​

Last week, we wrote about the euphoria surrounding BTC, XRP, and other cryptocurrencies after XRP won the case against the SEC in court. Riding the positive sentiment, BTC briefly surged to the $31,800 level, ETH surpassed $2,000, and XRP gained over 80% to reach $0.90.

However, the upper boundary of the consolidation channel for BTC is incredibly strong. The $31,200-$31,400 level served as significant support during the bull market in 2021 and the bear market in 2022. This time, BTC failed to break above it and experienced a sharp decline to around $30,000 on Friday evening. Speculations arose regarding the reason for the drop, but it was most likely a combination of several factors:​

• Still ongoing regulatory and macroeconomic uncertainty​
• XRP's win against the SEC, which after emotions cooled down, still leaves room for the SEC to appeal and continue the dispute​
• Speculations about Binance's weak condition following information concerning layoffs of 1,500-3,000 employees compared to the total employment of around 8,000​

The failure to break above the channel despite such significant news may suggest weakness in the bulls and an upcoming short-term downward trend. A key level to watch is the lower boundary of the channel around $29,700-$30,000. A daily close below this level could pave the way towards $27,500.​

 

[Solid ECN]

GBPUSD​

The GBPUSD pair goes below the psychological barrier of 1.3 and paves the way to the next important support levels set by the 200-week EMA (golden curve) and the abolition of the 61.8% Fibo of the February 2021 downtrend wave. It is worth bearing in mind, however, that the market does not seem to be unduly changing expectations for further rises, so the risk of a continuation of the ongoing upward wave is still there.

 

[Solid ECN]

USDJPY​

Next Friday (July 28), we await the BoJ's interest rate decision. However, this event does not seem to surprise the market, as earlier this week, BoJ Governor Kazuo Ueda communicated that the Bank would maintain its ultra-tight monetary policy

As Reuters reported, the BoJ was due to deliberate this month on changes to the operation of the YCC (yield curve control programme). When asked about this, Ueada said that as long as everything pointed to a return to the 2% inflation target, the BoJ would not change its monetary policy.

A weak yen may boost profits for Japanese exporters, but it raises the price of energy and other yen imports for businesses and consumers. Despite rising inflationary pressures, Japan is trying to stimulate the economy in the face of broad market uncertainty, Ueda added.

In the long term, however, this situation may change. The Japanese government today lowered its economic growth forecast for the current fiscal year and raised its inflation outlook. The proximity of these updates to the BoJ's next meeting raises heightened curiosity, but nevertheless the chances of actual monetary changes (if any) do not appear to be warranted anytime soon. In this regard, tomorrow's CPI data for June (00:30 am BST) may tell us a little more.​

• GDP growth forecast for 2023/24 at 1.3% (previously 1.5% in January)​
• Growth forecast for 2024/25 financial year at 1.2%​
• Inflation forecast for 2023/24 at 2.6% (previously 1.7%)​
• Inflation forecast for 2024/25 at 1.9%​

The USDJPY pair is currently testing the psychological 140 zone. In the short term, the most important support and resistance zones to watch will be the previously mentioned 140 zone and the 50-day EMA (blue curve) and the zone of recent local minima (green zone).​

 

[Solid ECN]

US100​

CFD contracts on the Nasdaq 100 (US100) reacted with a significant correction after yesterday's initial attempt to break above 16,000. The Nasdaq 100 index lost 2.3% at the close of trading on Thursday, marking the worst performance since the start of the year. This sharp decline is due to several factors.

Firstly, it's currently the quarterly earnings season, and not all reported results are satisfying investors. Tesla and Netflix published their earnings two days ago after the session, and the results were worse than expected, leading to nearly 10% drops in both companies during yesterday's session. These are companies valued at approximately $820 billion and $200 billion, respectively. Given these poor results, investors are also starting to worry about upcoming releases. Yesterday's session saw losses for Nvidia (-3.3%), Microsoft (-2.3%), Meta (-4.3%), and Alphabet (-2.3%).

Another factor could be the recently announced upcoming rebalancing of the Nasdaq index. The new weights are set to be implemented on July 24, which is next Monday. The new weights significantly reduce the share of the largest companies such as Apple, Meta, Alphabet, and Tesla. Therefore, all passive funds will also have to revise their equity portfolios, which carries significant short-term selling pressure on large companies and, conversely, on smaller ones buying pressure, making an opportunity for saavy investors. Currently, the six largest companies account for 50% of the Nasdaq 100's assets. Rebalancing the index will reduce these shares to 40% of the index portfolio.

Looking at the chart from a technical perspective, all the news coincided perfectly with the US100 approaching the upper limit of the upward channel. This strong reaction may indicate a short-term correction and a decline in indicators. It's possible that we may approach the lower limit in the short term.​

 

[Solid ECN]

EURUSD - Chart of the Day​

The current week is crucial for the EURUSD pair, considering today's preliminary readings of PMI indices in the US and the eurozone for July. Generally speaking, the estimated PMI data in the eurozone is expected to be weaker than in the US for both industry and services. In addition, investors' attention will also be focused this week on decisions by the ECB and the Fed, which will take place on Wednesday and Thursday, respectively. Currently, the market assumes the following decisions:
​

• Fed - the market does not foresee a surprise and with a 99.8% probability, it will raise rates by 25 basis points.​
• ECB - at this moment, the market assumes that in the eurozone rates will be raised twice more by 25bp, however, the probability for the second hike of 25 bp is just over 50%.​

However, in both cases, the Powell and Lagarde's comments after the decision will be more significant. In the US, the latest labor market data are still strong, hence despite falling inflation, the tone of the conference may be perceived as neutral/hawkish. While in the EU, weakening data, including PMI, may weigh in favor of a more dovish message.

From a technical point of view, on the daily chart, EURUSD broke out of the consolidation area between 1.053 and 1.106 two weeks ago, and the rate went around 1.126. The breakout, however, was not long-lasting, and last week the price returned to the area of the upper limit at 1.112. The appreciation of the dollar occurred after stronger macro data, including from the labor market in the US. The dollar behaved stronger against most currencies. Key to maintaining the uptrend on EURUSD is defending the support area at 1.106. Otherwise, if the price returns to the consolidation area, EURUSD may retest the level of 1.10 or further 1.08.​

 

[Solid ECN]

Chart of the Day: USDCNH​

The theme of the morning session that generated the most market volatility was reports of further stimulus solutions to the Chinese economy. During a meeting of China's Politburo (i.e. an important part of the Chinese Communist Party's Politburo focused on the State's current political affairs), announcements were made that indicated a willingness to introduce solutions to improve the troubled property and debt markets. In the face of this news, China's real estate-focused corporate benchmark climbed 11%, posting its biggest one-day gain in eight months and bolstering sentiment around APAC markets and the yuan itself.

Moreover, the Chinese currency itself was boosted today by another factor, namely the PBoC's decisions to set the official reference rate for the USDCNH pair at 7.1406 (versus the expected 7.2044), which encouraged local banks to resell USD in the FX market and thus repurchase CNH.

As added by Morgan Stanley analysts, the euphoria around today's statements is mainly due to the words that came out of the Politurbo meetings. At the time, the establishment communicated that "real estate is for living, not for speculation", thus assuring the upcoming policy optimisations.

The USDCNH pair is trading close to 0.61% down today and is testing the support zone set by the 23.6% Fibo measure of the upward wave initiated in early 2022.​

 

[Solid ECN]

AUDUSD​

• Lower CPI data weakens the Australian dollar​
• Goldman Sachs predicts a lower target rate for the RBA​
• AUDUSD react to the key level at 0.679​

Australian inflation slowed more than expected in the second quarter due to a decline in domestic holiday and gasoline costs, suggesting less pressure for another rate hike and causing a sharp weakening of the Australian dollar.

Annual headline inflation fell to 6.0% in June from 7.0% in March, which was weaker than the 6.2% consensus and the RBA's own 6.3% forecast. Importantly, the RBA's preferred measure - core inflation - the trimmed mean - slowed to 5.9% from 6.6%, which was slightly less than the market and RBA's expectation of 6.0%.

On a quarterly basis, the Australian consumer price index rose 0.8% in Q2, which is the weakest quarterly pace since September 2021. Economists believe this signals a peak in the interest rate cycle, despite a shift in inflation from goods to services. This shift might push the Reserve Bank of Australia (RBA) to raise rates by 0.25 percentage points in August and September. As a result, Goldman Sachs lowered its peak cash rate prediction to 4.6% from 4.85%, and National Australia Bank expects the RBA to leave rates unchanged in August. Current OCR rate is 4.10%.​