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Daily Market Analysis from ForexMart

Hot forecast for GBP/USD on 13/07/2022

What is happening with the pound should now be considered exclusively through the single European currency, the behavior of which determines the development of events in the foreign exchange market. And in general, everything happened exactly as predicted - as soon as the euro reached parity, a rebound immediately began. Confused only by the scale of the rebound. Less than a hundred points. And this despite the fact that the dollar is simply unimaginably overbought. So it is quite possible that a second attempt will be made today. Moreover, the single currency is again moving towards parity.

With that in mind, the just-released UK industrial production figures are irrelevant. Although its growth accelerated from 0.7% to 1.4%. Whereas, a decline of 0.3% was called before. But there was no reaction.

Industrial production (UK):

Today's attempt at a rebound will be more successful due to the fact that this time its implementation will be helped by a rather serious reason. The US will release its inflation report, which should accelerate from 8.6% to 8.8%. And if earlier the growth of inflation contributed to the dollar's growth, now the situation is somewhat different. Rising consumer prices forced the Federal Reserve to raise interest rates, the expectation of which just contributed to the dollar's growth. Now everything is clear with the increase in the refinancing rate - the US central bank will raise it until the middle of next year. So the only thing that reflects inflation now is only a further deterioration in the state of affairs in the economy and the approach of a recession.

Inflation (United States):

The GBPUSD currency pair, through a positive correlation with EURUSD, has similar price fluctuations. After the next update of the local low of the downward trend, the quote slowed down around the value of 1.1800, where a rollback eventually occurred.

The technical instrument RSI H4 and D1 is moving in the lower area of the 30/50 indicator, which indicates a high interest of traders in the downward move. RSI H1 in the rollback stage locally crossed the middle line 50 upwards.

The moving MA lines on the Alligator H4 and D1 indicators are directed downwards, which corresponds to the direction of the main trend.

Expectations and prospects

In this situation, everything will depend on speculators' behavior on the correlating euro/dollar pair. In the event of a transition to the stage of a full-size correction, the pound will also be able to strengthen its position towards the values of 1.1950-1.2000. Otherwise, we will update the local low of the downward trend again.

Comprehensive indicator analysis signals a buy in the short term due to a pullback. Technical instruments in the intraday and medium-term periods signal sell due to price movements within parity.
Hot forecast for EUR/USD on 14.07.2022

As the market had been looking forward to the US inflation data, it neglected the report on the EU industrial production. Remarkably, the data was surprisingly strong. The EU industrial output was expected to rebound by 0.4% in May on year following a contraction of 2.0% in April. Nevertheless, the data for April was downgraded to -2.5%. The actual score for May was much better than expected at 1.6%. Thus, even despite the downward revision, the red-hot reading for May was beyond expectations. However, the single European currency again moved towards the parity level.

EU Industrial Producion, y/y

Interestingly, immediately after the release of the US CPI, the market was petrified and cameto a standstill. The thing is that the annual rate of consumer inflation surged to 9.1% following 8.6% a month ago. A faster inflation rate was recorded in November 1981. Analysts had projected the CPI at 8.8% in June. Such elevated inflation rates dispelled doubts that the US economy is firmly on the path to recession. Such warnings have been made by a good many economists. After the market had revived after the initial shock, the US dollar tumbled. It looked like a long-awaited drop. Nevertheless, an hour later, the US dollar reversed abruptly upwards and the single European currency again returned to the parity level. Indeed, inflation acceleration bears grave economic risks and forces the US Fed to raise interest rates more aggressively. Hot on the heels of the inflation report, analysts came up with their forecasts. They project that the US Fed will raise the funds rate by 100 basis points at a time at the nearest meeting. So, the federal funds rate will increase from 1.75% to 2.75%. Such forecasts pushed the euro back to parity.

US Consumer Price Index, y/y

It goes without saying that the US dollar is overbought. The market obviously needs at least acorrection. Still, it has not happened yet. We assume that the euro should go below the parity level with the dollar for a start. Perhaps the US factory inflation data which is due today could push the euro down. The US PPI could have logged an uptick to 10.9% from 10.8%. It would mean that the odds are against a slowdown in consumer inflation at least in the near future. Besides, it will reinforce expectations about the aggressive pace of rate hikes by the US Fed. By and large, the US dollar could push the euro below the parity level and even settle below it.

US Producer Price Index, y/y

Yesterday, EUR/USD was able to gain some ground but it was not enough to change a trend.As a result, the currency pair again retreated to the parity level and got stuck within a narrow range.

The H4 RSI could not grasp the buying interest. The indicator is still hovering in the lower area of 30/50. It means the prevailing selling interest. The D1 RSI is moving in the oversold area which means that short positions are overheated.

Moving averages on the H4 and D1 Alligators are directed downwards according to the overall bearish trend. The H1 Alligator has multiple intersections of moving averages, thus indicating a flat market.

Outlook and trading tips

Despite the fact that the euro is heavily oversold, traders are still interested in selling EUR/USD. The ongoing flat market is viewed as the process of gaining momentum. Once the flat market is over, the trading instrument will burst into sharp price moves. In case the price settles below the parity level on the 4-hour chart, the market will resume the downward cycle, neglecting some technical signals. Under this scenario, we expect the pair to develop an inertial speculative move so that the euro could weaken by another 150-200 pips.

At the same time, traders do not rule out a full-fledged correction bearing in mind the euro'soversold status. To generate the first buy signal, the euro has to recover to levels above 1.0100 on the 4-hour chart.

Complex indicator analysis provides mixed signals for intraday and short-term trading amid the ongoing range-bound market. Technical instruments signal selling in the medium term because the currency pair is still moving at around the parity level.
Hot forecast for EUR/USD on 19/07/2022

The long-awaited correction has finally come true. Although we are not talking about a full-fledged correction, but only about a local one. But even this is quite enough for the market to somewhat correct the resulting imbalances. So the market has prepared for the upcoming meeting of the board of the European Central Bank. But today the single European currency will have to decline somewhat, under pressure from inflation data. The growth rate of consumer prices may accelerate from 8.1% to 8.6%. Given that the issue of raising the refinancing rate has already been closed in principle, inflation data only plays the role of a parameter characterizing the general state of the economy. And judging by the fact that inflation continues to rise, nothing good is happening. Moreover, taking into account the experience of Great Britain, where the Bank of England began to raise the refinancing rate at the end of last year, that the increase in interest rates, all the more so modest, and the ECB plans to raise it from 0.00% to 0.25%, is not much more than will help. Another thing is that today we are talking about the final data, in general, already taken into account by the market at the time of the release of preliminary estimates. So the decline in the single currency will be limited.

Inflation (Europe):

The euro strengthened by more than 200 points against the US dollar from the local low of the downward trend. Despite the scale of price changes, the euro is still oversold in the medium term, this is indicated by a number of historical values in which the quote is currently located.

The oversold status was removed in the short-term and intraday periods, this is indicated by the RSI H1 and H4 indicator, which is moving within the 70 line.

The moving MA lines on the Alligator H4 indicators locally changed direction from downward to upward, which corresponds to a rollback-correction in the market.

On the trading chart of the daily period, there is a subtle rebound of the price from the area of the parity level. Downward interest in the structure of the medium-term trend is still considered the main direction.

Expectations and prospects

The volume of long positions decreased at the moment when the price hit 1.0150, as indicated by the stagnation. For the subsequent growth of the euro's value, it is necessary to return above the level of 1.0150. Otherwise, there may be a gradual recovery of dollar positions, with the price returning to the parity level.

Complex indicator analysis has a buy signal in the short-term and intraday periods due to a rollback. Technical instruments in the medium term signal a sale due to price movement within the parity level.
The dollar is in conflict with oil, and the euro is optimistic before the ECB meeting

The US currency had to slow down a bit, giving way to the European one, which spread its wings ahead of the European Central Bank meeting. However, the euro should not be in euphoria, and the dollar should not be self-confident, analysts believe. At the same time, the dynamics of the latter is in contradiction with oil quotes, causing concerns about the raw materials market.

The greenback partially surrendered its positions on Wednesday, July 20, allowing the euro to move up. The latter was given strength by the upcoming ECB meeting, at which a decision on the interest rate is expected. According to ABN Amro economists, the markets expect the ECB to raise the key rate by 25 bps. In addition, two important issues will be raised at the meeting – the further trajectory of rate hikes and consideration of a new tool to combat fragmentation.

The ECB has doubts about the future rise in interest rates, namely in September 2022. However, ABN Amro believes that "the September increase will be a step of 50 bps" if the medium-term inflation forecast remains at the same level. At the same time, in the autumn and until the end of this year, a "gradual but steady increase in rates" by 25 bps is possible.

The current situation contributed to the euro's steady growth, which had soared by 1% a day earlier on statements that the ECB leadership would discuss the possibility of increasing the key rate by 50 bps at once. The EUR/USD pair was trading at 1.0234 on Wednesday morning, July 20, playing back previous failures. To date, the pair has exceeded the psychologically important level of 1.0200, increasing its weekly growth to 1.50%.

According to preliminary data announced by Reuters, the ECB will consider both options: raising rates by 25 bps and 50 bps. At the last meeting, the ECB allowed the rate to rise by 25 bps in July and the possibility of further increases in September. However, market participants and analysts do not rule out a more aggressive tightening of the monetary policy amid a rapidly growing inflation. Recall that in the first month of summer, consumer prices in the eurozone soared by 8.6% year-on-year after rising by 8.1% in May.

Analysts believe that its fair price plays in favor of the euro, while the dollar becomes overbought. This prevents the latter from growing and conquering the next peaks. The greenback's dynamics is under pressure from being overbought, experts emphasize. In the coming week, analysts expect a correction of the US currency, against which market participants will expect further actions by the Federal Reserve on the rate. The current forecasts regarding the Fed's interest rate hike are the main driving force of the market.

In case of a rise in the price of the greenback, the raw materials sector is experiencing the greatest difficulties. The recent downward trend recorded in the hydrocarbon market demonstrates investors' fear of a possible recession. Market participants fear that the current downturn in the economy will lead to a reduction in demand for raw materials. Experts consider the fact that most commodities are valued in dollars to be another important reason for the decline in the oil market. Take note that the price of benchmark Brent oil peaked in June, and in dollar terms, raw material prices increased by 59%.

As the USD rises in price, the global commodity market also increases in value, increasing pressure on demand. Strengthening the greenback not only increases the cost of buying raw materials outside the US, but also encourages foreign producers to sell stocks. The reason is that after converting dollars into national currencies, the incomes of oil producers are steadily growing.

The rapid rise of the US currency is able to bring down the hydrocarbon market, experts believe. The current conflict between the USD and the commodity sector is a confirmation of this difficult relationship. According to analysts, the correlation of greenback and oil has always been accompanied by difficulties. Such disagreements put significant pressure on demand. According to International Energy Agency (IEA) estimates, a strong USD, combined with record-high fuel prices, is helping to reduce demand in developing countries.
Hot forecast for GBP/USD on 21/07/2022

The intrigue is that investors have no idea what to expect from today's board meeting of the European Central Bank. Of course, the refinancing rate will be raised, but what's next is completely unclear. What exactly ECB President Christine Lagarde will say about the pace and extent of the tightening of monetary policy parameters will determine the further development of events. This uncertainty is the reason for the apparent stagnation in the market. The pound ignored even the data on consumer prices, the growth rate of which accelerated from 9.1% to 9.4%. That turned out to be slightly less than the forecast of 9.5%. And this can be interpreted as a sign of a possible slowdown in inflationary processes. Which of course is an extremely positive thing.

Inflation (UK):

So, the ECB today for the first time since July 2011 will raise the refinancing rate. It should be raised from 0.00% to 0.25%. The very fact of the first increase in interest rates in more than ten years will, of course, spur the market and lead to the growth of the single European currency. Through the dollar index, it will pull other currencies with it. So it will be like a global weakening of the dollar. But what happens after that depends solely on Lagarde's rhetoric.

Refinancing rate (Europe):

It is necessary to take into account the fact that quite recently everyone was sure that the refinancing rate would be raised by 50 basis points, that is, up to 0.50%, and then expectations were significantly reduced. In addition, the head of the Bundesbank recently announced the need for an extremely cautious approach to the issue of raising interest rates, as this will lead to an increase in the yield of government bonds of all countries in the euro area. The debt burden of which is already incredibly high. So they may find themselves in a situation of inability to service their own debts. From all this, a simple conclusion follows - Lagarde will announce just an extremely slow increase in interest rates, and that the next increase may occur in just one meeting. Or something like that. And if this is exactly what happens, then after a slight upward jump, the single currency will again begin to gradually lose its positions and move towards parity. Pulling the pound along.

If Lagarde's rhetoric turns out to be more hawkish, and a large-scale tightening of monetary policy is announced, then the subsequent weakening of the dollar will be much more impressive, and most importantly, prolonged.

The correction move for the GBPUSD pair slowed down within the area of the psychological level of 1.2000. As a result, a range of 1.1950/1.2050 emerged, which indicates the process of accumulation of trading forces, which can lead to new price jumps.

The RSI H4 technical instrument is moving in the upper area of the 50/70 indicator, which indicates a continuing corrective move in the market. RSI D1 ignores the correction, the main reference is the downward trend.

The moving MA lines on the Alligator H4 indicator are directed upwards, which corresponds to a corrective move. While the MA lines on Alligator H1 have a lot of intersections with each other, which indicates congestion.

Expectations and prospects

In this situation, the method of outgoing momentum from the current range of 1.1950/1.2050 is considered the most optimal trading tactic.

We concretize the above into trading signals:

Long positions on the currency pair are taken into account after keeping the price above the value of 1.2060 in a four-hour period.

Short positions should be considered after keeping the price below 1.1920 in a four-hour period.

Complex indicator analysis has a variable signal in the short-term and intraday periods due to stagnation. Technical instruments in the medium term give a sell signal due to a downward trend.
Hot forecast for EUR/USD on July 22, 2022

Until yesterday, the last time the European Central Bank raised the refinancing rate was in July 2011. That was exactly eleven years ago. So there is nothing surprising in the fact that as soon as it was announced that all interest rates were raised by 50 basis points, the single European currency immediately jumped. But it returned to its original position almost immediately, and began to show a downward trend. The ECB was able to surprise everyone greatly. And quite unpleasant. The fact is that, coupled with an increase in the refinancing rate, the launch of the TPI program was announced, which can be deciphered as a Transitional Protective Instrument. In fact, this is another quantitative easing program. It is aimed at supporting the countries of the euro area in the face of rising interest rates. The fact is that the increase in rates will lead to an increase in the yield of government bonds. So borrowing will become more expensive, and the level of public debt is extremely high. Many countries may well be unable to service their debts. This alone simply cancels out any effect from higher interest rates. But what is most important is that the parameters of this program are not known. No timing, no volume. Simply put, the ECB can print as much money as it wants. That opens the way not just to parity, but also to lower values.

Refinancing rate (Europe):

The EURUSD currency pair only locally showed speculative interest during the announcement of the results of the ECB meeting and the press conference. The scale of fluctuations was about 100 points. As a result, the current momentum led to forming a short-term flat within the boundaries of 1.0150/1.0270.

The technical instrument RSI H4 is moving in the upper area of the 50/70 indicator, which indicates a residual signal of a corrective move. RSI D1 has come close to the 50 middle line, which corresponds to the usual correction.

The MA moving lines on the Alligator H1 indicator have many intersections with each other, which indicates a flat. Alligator H4 is in the process of decelerating the upward cycle. Alligator D1 ignores local price rules. There is no intertwining between the MA sliding lines.

Expectations and prospects

In this situation, the current range focuses all the attention of traders on itself. For this reason, the most appropriate trading tactic is considered to be the method of breaking through one or another flat border.

We concretize the above into trading signals:

Long positions on the currency pair are taken into account after keeping the price above the value of 1.0280 in a four-hour period.

Short positions should be considered after keeping the price below 1.115 in a four-hour period.

Complex indicator analysis has a variable signal in the short-term and intraday periods due to the flat. Technical instruments in the medium term give a sell signal due to a downward trend.
Tips for beginner traders in EUR/USD and GBP/USD on July 25, 2022

Details of the economic calendar from July 22
Preliminary data on business activity indices in Europe, Great Britain, and the United States reflected an overall decline. And since the picture is the same, there was no reason for fuss.

Details of statistical indicators:

In Europe, the index of business activity in the service sector fell from 53.0 to 50.6 points, while the forecast was 52.0 points. Manufacturing PMI fell from 52.1 to 49.6 points, with forcast of a decline to 51.0 points. The composite index fell from 52.0 to 49.4 points.

The situation is slightly better in the UK. Services PMI fell from 54.3 to 53.3 points, while the forecast assumed a decline to 53.0 points. Manufacturing PMI, on the other hand, fell from 52.8 to 52.2, with a forecast of 52.0 points. The composite index fell from 53.7 to 52.2 points.

In the US, Manufacturing PMI fell from 52.7 to 52.3 points. Services PMI fell from 52.7 to 47.0 points, while forecasts expected it to remain at the same level. As a result, the composite index fell from 52.3 to 47.5 points.

Analysis of trading charts from July 22
The EURUSD currency pair is in the flat stage, where the values of 1.0150/1.0270 serve as boundaries. The prolonged presence of the price in a closed amplitude indicates a characteristic uncertainty among traders. At the same time, this process can lead to a cumulative effect, which will lead to speculative price jumps.

The GBPUSD currency pair has been moving along the psychological level of 1.2000 for almost a week, only having a local deviation from the control range of 1.1950/1.2050.

Economic calendar for July 25
Monday is traditionally accompanied by an empty macroeconomic calendar. Important statistics in Europe, the United Kingdom and the United States are not expected.

Trading plan for EUR/USD on July 25
In this situation, trading tactics still considers the method of breaking through one or another border of the established flat. In this regard, buy positions will be valid after the price holds above 1.0280 in a four-hour period, and sell positions will arise after the price holds below 1.0115 in a four-hour period.

Trading plan for GBP/USD on July 25
In this situation, the pound sterling repeats the movement of the European currency, where there is a similar flat. Thus, based on a positive correlation, the completion of the euro flat will lead to a movement in the pound.

If we proceed from the price levels, then to increase the volume of short positions in the pound, it is necessary to keep below the value of 1.1950. Meanwhile, the conversation about buying the pound may come if the price holds above the 1.2050 mark in a four-hour period.
US stock market closed mixed, Dow Jones up 0.28%

At the close of the New York Stock Exchange, the Dow Jones rose 0.28%, the S&P 500 rose 0.13%, and the NASDAQ Composite index fell 0.43%.

Chevron Corp was the top performer among the components of the Dow Jones index today, up 4.29 points or 2.98% to close at 148.48. The Travelers Companies Inc rose 3.56 points or 2.28% to close at 159.98. Caterpillar Inc rose 3.19 points or 1.79% to close at 181.81.

The biggest losers were Salesforce.com Inc, which shed 5.18 points or 2.84% to end the session at 177.29. McDonald's Corporation was up 3.61 points (1.42%) to close at 250.38, while Boeing Co was down 1.52 points (0.96%) to close at 156.64 .

Leading gainers among the components of the S&P 500 in today's trading were SVB Financial Group, which rose 8.25% to 391.16, Marathon Oil Corporation, which gained 6.57% to close at 23.18, and also shares of CF Industries Holdings Inc, which rose 6.45% to end the session at 90.28.

The biggest losers were Newmont Goldcorp Corp, which shed 13.23% to close at 44.59. Shares of Align Technology Inc shed 5.19% to end the session at 252.07. IDEXX Laboratories Inc fell 4.56% to 375.56.

Leading gainers among the components of the NASDAQ Composite in today's trading were GeoVax Labs Inc, which rose 150.39% to hit 1.59, Redbox Entertainment Inc, which gained 81.97% to close at 5.55, and also shares of Virax Biolabs Group Ltd, which rose 62.48% to close the session at 16.80.

Shares of Yoshitsu Co Ltd ADR became the leaders of the decline, which decreased in price by 29.57%, closing at 1.62. Shares of Enveric Biosciences Inc shed 28.36% to end the session at 6.92. Quotes Addex Therapeutics Ltd fell in price by 28.28% to 1.42.

On the New York Stock Exchange, the number of securities that rose in price (1923) exceeded the number of those that closed in the red (1233), and quotes of 146 shares remained practically unchanged. On the NASDAQ stock exchange, 1,957 stocks fell, 1,816 rose, and 210 remained at the previous close.

The CBOE Volatility Index, which is based on S&P 500 options trading, rose 1.43% to 23.36.

Gold futures for August delivery lost 0.60%, or 10.35, to hit $1.00 a troy ounce. In other commodities, WTI crude for September delivery rose 2.13%, or 2.02, to $96.72 a barrel. Brent futures for October delivery rose 1.77%, or 1.74, to $100.12 a barrel.

Meanwhile, in the forex market, the EUR/USD pair remained unchanged 0.14% to 1.02, while USD/JPY quotes rose 0.43% to hit 136.63.

Futures on the USD index fell 0.29% to 106.31.
The euro is trying to put pressure on the gas

The euro once again demonstrated its dependence on the situation on the gas market. Difficulties encountered by the euro bloc countries regarding the payment of energy resources had a negative impact on the euro's dynamics. The euro's current task is to find a balance in the EUR/USD pair.

Significant pressure on the euro's dynamics was exerted by fears about the possibility of another reduction in Russian gas supplies. This topic is relevant for European countries dependent on the supply of blue fuel. Difficulties in resolving this issue jeopardize the euro's succeeding growth, experts believe.

Against this backdrop, the threat of a recession looms over the eurozone, which is complicated by the blue fuel conjuncture. The next round of the energy crisis in Europe reduces the single currency's chances to recover, which was violated after reaching parity with the dollar.

European countries are trying to solve the emerging problems in their own way. France has begun to limit domestic energy consumption, and Germany is in the process of state harmonization of moderate fuel consumption. The deteriorating situation with gas supplies and the lack of alternative mechanisms for solving the problems that have arisen are alarming signals for the euro.

Amid current difficulties, the euro exchange rate reached parity against the USD, but then won back its losses. However, the euro is walking on thin ice, risking repeating destructive actions at any moment. Support for the single currency, which grew moderately on Wednesday, was provided by the expectation of positive data on consumer confidence in the German economy. According to preliminary estimates, this indicator increased to -28.9 points after the previous mark (-27.4 points) recorded last month. The EUR/USD pair traded up to 1.0145 on Wednesday morning, July 27, trying to gain a foothold in current positions.

According to currency strategists at UniCredit Bank, EUR/USD's ability to stay above 1.0100 will help the euro survive the Federal Reserve's 75 bp rate hike expected today. Global markets are focused on the results of the Fed meeting. Note that an increase of 75 bp already included in current prices. At the same time, some experts do not rule out a 100 bp rate hike. According to analysts, the markets are fully prepared for any decision by the US central bank, although a 100 bp increase is expected. Unlikely and undesirable. Such actions are unlikely to help the dollar's growth, since the appreciation of the latter is a settled issue, experts conclude.

At the same time, the euro's positions after the Fed meeting remain shaky. The next interest rate hike by the US central bank will not add optimism to the euro, which is overcome by gas problems. Add fuel to the fire messages about the restriction of Russian gas supplies to Europe, knocking out the ground from under the feet of the euro.

According to experts, at the beginning of this week, the euro was among the outsiders. The reason is the difficulties with the supply of blue fuel through the Nord Stream gas pipeline and with the return of the turbine after repair. The situation is complicated by the increase in the wholesale price of gas by 17%, to 192 euros/MWh. At the same time, the European price for natural gas TTF Cal23 exceeded 150 euros per MWh, reaching the highest value for this contract.

Measures taken by Russia to reduce natural gas supplies to the EU have intensified global competition for blue fuel. According to Bloomberg, against this background, Asian importers are increasing their purchases of LNG for the winter, trying to get ahead of Europe. As a result, LNG prices may exceed $40 per barrel, experts believe. Note that Europe imports 35% of its energy from Russia, but the latter's energy income from trade with the EU is 70%. At the same time, these deliveries are made through pipelines that cannot be redirected to Asia.

Against this backdrop, the euro rate showed a decline, causing traders and investors to worry about the future of the single currency. At the moment, gas prices remain a ticking time bomb for the markets and for the EUR, risking "detonation" in the coming months. According to experts, a further reduction in the supply of blue fuel to the EU and rising prices for raw materials deprive the euro of chances for an effective and long-term recovery.
Hot forecast for GBP/USD on 28/07/2022

The increase in the refinancing rate of the Federal Reserve by 75 basis points, from 1.75% to 2.50%, did not come as a surprise. In principle, the market was ready for this since the previous meeting of the Federal Open Market Committee. It is surprising how rapidly the dollar began to lose its positions. It is noteworthy that this happened during the press conference of Fed Chairman Jerome Powell. Indeed, Powell's words caused complete surprise.

First, he did not give any specifics on the extent of the increase in the refinancing rate during the FOMC's September meeting. Powell only noted that it will be "massive." At the same time, he noted that when making a decision, the central bank will be guided by inflationary dynamics. So in September, the refinancing rate may be raised once again by 75 basis points, for which the market has long been ready. But the difference is that now there is no guarantee of such a rise in interest rates. On the contrary, there is a possibility of a somewhat more modest increase.

Second, Powell said nothing about the coming recession. More precisely, during his speech, he did not say anything about it. When asked a direct question, he only replied that there was no recession, and that the first estimate of GDP for the second quarter, which is published today, is likely to be not entirely accurate. It turns out that the Fed does not see any signs of the beginning of a recession, or pretends not to.

Thirdly, in the final part of his speech, Powell assured that the central bank would seek employment growth, although in the spring there were signs of overheating of the labor market. And this may well become a completely independent cause for a recession and an explosive increase in unemployment. In such a situation, the central bank, on the contrary, should strive to stabilize the labor market and slow down the rate of growth in the creation of new jobs.

Otherwise, the consequences will be horrendous. But according to Powell, nothing will be done in this direction. In other words, the central bank does not see any signs of a recession, and will continue to do everything to start it as soon as possible.

Refinance rate (United States):

All this, of course, not only surprised investors, but rather frightened them. Which weakened the dollar. However, a strong interest rate differential will take its toll and the dollar will soon rise again. Although today it is likely to continue to lose ground. Just under the pressure of GDP data. Of course, there is no talk of any recession in the second quarter, but there is no doubt that they will show a significant slowdown in economic growth. Which would contradict Powell's words. And this reduces the credibility of the central bank, which is probably even worse.

Change in GDP (United States):

The GBPUSD currency pair successfully rebounded from the psychological level of 1.2000, as a result, the primary signal about the prolongation of the corrective move was confirmed on the market. As a result, the quote rushed towards the level of 1.2155.

The technical instrument RSI H4 during the speculative price momentum came close to the level of 70. This approach may indicate a characteristic overheating of long positions. RSI D1 is at the levels of February this year. This may be a signal of a change in trading interest. In this case, this is only an assumption, we should get many more confirming signals of this theory.

The moving MA lines on the Alligator H4 indicator are directed upwards, which corresponds to a corrective move. Alligator D1 has a clear intersection between the green and red MA lines, which indicates a slowdown in the downward trend.

Expectations and prospects

In this situation, much depends on how the quote behaves within the level of 1.2155. Since keeping the price above it with confirmation of the breakdown of the value of 1.2200 can strengthen the upward move.

At the same time, a slowdown in the upward cycle cannot be ruled out, where a rebound may occur amid overheating of long positions. In this case, the course may return to the previously completed level.

Complex indicator analysis has a buy signal in the short-term and intraday periods due to the prolongation of the correction.
Hot forecast for EUR/USD on 08/08/2022

The content of the report of the United States Department of Labor came as a complete surprise, and eventually led to a noticeable strengthening of the dollar. And the fact is that all the main indicators turned out to be much better than forecasts. Thus, the unemployment rate, instead of remaining unchanged, fell from 3.6% to 3.5%. Moreover, 528,000 new jobs were created outside of agriculture. Although, according to forecasts, the creation of 290,000 new jobs was expected. In fact, they were about twice as many. And do not forget that in order to maintain the stability of the labor market, a little more than 200,000 new jobs should be created outside of agriculture. And since they turned out to be more than twice as many, the unemployment rate will continue to decline. Which somewhat contradicts the idea that the US economy is sliding into recession.

Number of new non-agricultural jobs (United States):

Today the macroeconomic calendar is absolutely empty, and apparently, the market will consolidate around the values reached on Friday.

Despite everything, the EURUSD currency pair is moving within the 1.0150/1.0270 horizontal channel, consistently working out the set boundaries. Last Friday, the quote rebounded from the area of the upper border and rushed to the area of the lower one, where the volume of short positions decreased. A consistent cycle of fluctuations is essential in the market, which makes it possible for traders to work based on the natural basis of the past.

The technical instrument RSI H4, following the price rebound from the upper border of the flat, crossed the middle line 50 from top to bottom. This signal only indicates the bounce method, but not the end of the flat. In general terms, the indicator is still centered on the middle line.

The moving MA lines on the Alligator H4 have a lot of interlacing, this indicates a variable signal that corresponds to the flat stage.

Expectations and prospects

The flat stage is still relevant in the market, which is indicated by the current price rebound from the lower border. In this situation, the subsequent increase in the volume of long positions is expected after the price stays above the value of 1.0200. In this scenario, it is possible to consider movement towards 1.2150/1.2170.

The main strategy, as before, is the method of breaking through one of the control levels: 1.0300 - when considering the upward development of the market; 1.0100 - if market participants are oriented towards a hike towards the parity level.

It is worth noting that the signal must be confirmed in a four-hour period.

Complex indicator analysis has a variable signal in the short-term and intraday periods due to the current flat. At the moment, the indicators point to long positions on the euro, due to the price rebound from the lower border of the outset.
Analysis and trading tips for EUR/USD on August 9

Analysis of transactions in the EUR / USD pair

When EUR/USD tested 1.0178, the MACD line had just started to move below zero, which was a good signal to sell. Surprisingly, the quote did not decrease, but rose and tested 1.0195 instead. At that time, the MACD line was just beginning to move above zero, which was a good signal to buy. It prompted a 20-pip increase, while its second test did not bring significant profit.

As expected, the report on investor confidence in the Euro area was ignored by the market.

Today promises to be another calm day as investors are likely to be preparing for tomorrow's release of US inflation. The data will set the direction of the market, right before the end of this month. In the afternoon, reports on small business optimism, labor productivity and labor costs will be published in the US, all of which will affect EUR/USD. Expect it to trade horizontally.

For long positions:

Buy euro when the quote reaches 1.0215 (green line on the chart) and take profit at the price of 1.0248. However, there is little chance for a rally today, especially considering today's lack of statistics and tomorrow's inflation data in the US.

Take note that when buying, the MACD line should be above zero or is starting to rise from it. Euro can also be bought at 1.0193, but the MACD line should be in the oversold area as only by that will the market reverse to 1.0215 and 1.0248.

For short positions:

Sell euro when the quote reaches 1.0193 (red line on the chart) and take profit at the price of 1.0161. Pressure will return if buying pressure decreases.

Take note that when selling, the MACD line should be below zero or is starting to move down from it. Euro can also be sold at 1.0215, but the MACD line should be in the overbought area, as only by that will the market reverse to 1.0193 and 1.0161.

Analysis and trading tips for GBP/USD on August 9

Analysis of transactions in the GBP / USD pair

When GBP/USD tested 1.2094, the MACD was far away from zero, so the upside potential was limited. But in the afternoon, its second test happened when the MACD line had just started to move above zero, which was a good signal to buy. This prompted to a price increase of more than 40 pips. Sadly, the target price of 1.2140 was not reached.

Today promises to be another calm day as investors are likely to be preparing for tomorrow's release of US inflation report. The highest value GBP/USD could reach is yesterday's local resistance level of 1.2135. In the afternoon, data on small business optimism, labor productivity and labor costs will be published in the US, all of which will affect the direction of the market. Expect the pair to trade horizontally.

For long positions:

Buy pound when the quote reaches 1.2092 (green line on the chart) and take profit at the price of 1.2132 (thicker green line on the chart). There is a chance for a rally today, but only after the breakdown of 1.2092.

Take note that when buying, the MACD line should be above zero or is starting to rise from it. It is also possible to buy at 1.2068, but the MACD line should be in the oversold area as only by that will the market reverse to 1.2092 and 1.2132.

For short positions:

Sell pound when the quote reaches 1.2068 (red line on the chart) and take profit at the price of 1.2031. Pressure will increase if the attempt to continue the upward correction fails.

Take note that when selling, the MACD line should be below zero or is starting to move down from it. Pound can also be sold at 1.2092, but the MACD line should be in the overbought area, as only by that will the market reverse to 1.2068 and 1.2031.
EUR/USD. The euro bear trap

The EUR/USD pair remains sensitive to the release of inflation data today. Will there be a surge of interest in one direction or another, or will it remain trading in the current range for quite a long time? Payrolls, although they turned out to be far off from the forecast, failed to stir up traders of the EUR/USD pair.

In the coming sessions, only the dollar will do the weather in the pair, since the calendar of European data is very disappointing. EUR/USD is influenced by geopolitical factors, statistics from the United States and the Federal Reserve press conference. However, no major changes are expected. According to ING, the euro will continue to trade in the middle of the 1.0100-1.0300 range until the end of this year. There will be small bursts, but they will not break the range limits.

Even if an exit does happen, it is more likely to go down than up. The strongest CPI data, especially in detail, may change the forecast for US rates for September, which will put pressure on the quote. Meanwhile, a surprise downside inflation is likely to have traders betting on a less hawkish approach from the Federal Reserve next month.

Euro bulls are pulling like a magnet towards the August high of 1.0293. Pushing the euro beyond this value, bulls will return the upward dynamics for a short time. The exchange rate, under the most optimistic scenario for the euro, may be around 1.0386.

In general, you can't argue with the trend, a bearish view of the pair remains relevant. While EUR/USD is trading below 1.0913, there is no chance of a change in direction.

The picture is that the dollar will continue to receive support, and the euro, on the contrary, will be bombarded with new negative factors. The 1.0100 area is a strong support, but with a steady and strong negative, it may not be able to resist – and then hello parity again!

Catalysts for the Dollar

Rabobank believes that the Fed seems to be going to announce another rate hike of 75 bps. Such a decision may be supported by an impressive report on the US labor market for July, published last week.

In addition, the US currency will find support from the demand for safe assets. The dollar is a widely used billing currency in the world by a wide margin. This means that the growth of the exchange rate tends to have a depressive effect on trade.

Another risk to the global recovery is a decline in demand for commodities from China.

The dollar will remain stable until the situation with risky currencies improves. Consequently, there is a potential for further growth not only this year, but also next year, bank analysts write.

Catalysts for the Euro

A steady sell-off, according to Rabobank, will provoke a number of factors. Firstly, it is a harsh winter for Europe. Cold weather plus the possibility of a complete shutdown of the gas supply via the Nord Stream-1 will do their job.

High energy prices are a serious obstacle for businesses and consumers. The chances of a recession in the euro bloc are high, this is the opinion of most strategists and economists.

As we can see, the euro does not have the slightest hope for growth. In such conditions, how not to fall lower than expected.
SEC on a new form of cryptocurrency regulation

Sentiment to increase regulatory oversight of cryptocurrencies continues to gain momentum after it was revealed on Wednesday that the Securities and Exchange Commission (SEC) asked major hedge funds to report their exposure to cryptocurrencies.

Under the proposal, the SEC and the Commodity Futures Trading Commission (CFTC) are seeking to amend the Form PF process to require accurate reporting of digital asset strategies that involve an amount of at least $500 million.

Form PF was created in the aftermath of the 2008 financial crisis to help regulators identify asset bubbles and other potential risks to financial market stability by bringing greater transparency to the opaque private equity landscape.

Both agencies cited the rapid growth of the hedge fund industry as the main reason for the proposed changes, as well as the fact that cryptocurrencies did not yet exist when the form was originally introduced. Consultations have been held with the Treasury Department and the Federal Reserve to ensure that there are no risks to the private fund industry as a result of the changes.The number of private funds increased by about 55% from 2008 to the third quarter of 2021, according to a newsletter published with the offer, with IBISWorld data showing that there were 3,841 hedge funds in the US as of early 2022.

SEC Chairman Gary Gensler noted that under this form of regulation, which includes business practices, complexity, and changes in investment strategies, the gross asset value of the private fund industry has risen nearly 150 percent.

As to why he supports the proposal, Gensler stated that "if passed, it would improve the quality of the information we get from all PF form fillers, with a particular focus on large hedge fund advisors, which will help protect investors."

The proposal requires comments from the investment community on whether the funds should disclose details of the cryptocurrencies they hold, such as their name and characteristics.

Members of the Securities and Exchange Commission voted 3-2 in favor of passing the motion, with Republican commissioners Hester Pierce and Mark Ueda voting against. Concerns raised by those who disagree included whether the government really needed all the information the new PF form would collect.
The music did not play for long, the yen danced for a short time

The dollar is getting up from its knees after a crushing fall on Wednesday. The yen is currently feeling the greatest pressure from the greenback, which showed the strongest growth on the US inflation data the day before.

The market freaked out
By the end of the week, investors continue to digest the July statistics on US inflation. Recall that the data turned out to be cooler than forecasts, which caused a large-scale sell-off of the dollar.

Last month, annual inflation in the US fell from the previous value of 9.1% to 8.5%, although economists had expected the CPI to fall to 8.7%.

A significant easing of inflationary pressures has increased fears that the Federal Reserve may reduce the degree of its aggressiveness with respect to interest rates already at the September meeting.

The reaction of the market was lightning-fast and very emotional: the yield of US government bonds fell sharply, followed by a plunge in the dollar. The DXY index sank 1.5% to a low of 104.646 on Wednesday.

The dollar's weakness provided support to all major currencies, but the yen gained the most in this situation. The yen soared by more than 1.6% against its US counterpart, to a mark of 135.

The dollar is gaining momentum
After a loud fall on Wednesday, the yield of 10-year US government bonds turned towards growth yesterday. It rose by 3.41% during the day and reached a new high of 2.902%.

The sharp increase in the indicator again widened the gap between the yields of US treasury bonds and their Japanese counterparts.

The yen, which is very sensitive to this difference, could not resist the pressure and moved to decline.

The USD/JPY pair managed to recover by 0.12% to 133.19 on Thursday. It was also supported by the general strengthening of the dollar.

The greenback grew by 0.1% against its main competitors. Its index remained almost unchanged and stayed at 105.2 during the day.

Yesterday's comments by Federal Reserve members contributed to the reversal of the yield of US government bonds and the dollar. Despite the slowdown in inflation in July, the tone of officials still remains hawkish.

Neil Kashkari, president of the Federal Reserve Bank of Minneapolis, said that the latest CPI data did not change his expectations about the Fed's future course.

In addition, he stressed that the central bank is still very far from declaring victory over inflation.

The head of the San Francisco Federal Reserve, Mary Daly, was in solidarity with her colleague. She also does not rule out the continuation of the Fed's hawkish policy, unless, of course, the next portions of macro data will favor such a sharp increase.

Recall that the key Fed's goal is to bring interest rates from the current level of 2.25–2.5% to 4% by the end of the year.

Some analysts believe that the central bank will try to solve this problem as soon as possible, and predict another rate increase of 75 bps at a meeting in September.

Why does the yen have no chance?
This year the dollar index rose by 10%. The greenback received such a solid increase thanks to the aggressive policy of the Fed.

Since March, the US central bank has raised interest rates by 225 bps. This makes it the undisputed leader: none of the major central banks can compete with the Fed in the pace of tightening.

But the biggest divergence in monetary policy right now is between the US and Japan. Despite the global increase in rates, the Bank of Japan is still bending its line and continues to keep the rate at a low level.

The priority for the Japanese central bank is not to fight inflation, but to restore the economy, which has been hit hard by the COVID-19 pandemic.

Unlike the US and EU, which have already managed to get out of the crisis caused by the coronavirus, the Japanese economy is just beginning to show signs of recovery.

According to preliminary estimates, in the second quarter, Japan's annual GDP could show growth of 2.7%, which is in line with pre-pandemic indicators.

Statistics on the gross domestic product will be published on Monday. But even if the data turns out to be positive, it most likely will not affect the policies of BOJ Governor Haruhiko Kuroda in any way.

Many experts are inclined to believe that the head of the BOJ will not give up his commitment to a super-soft monetary rate. The main argument in its favor now will be the low wages remaining in the country.

At this stage, salaries in Japan are far behind the rate of inflation, which undermines the purchasing power of citizens.

Another big reason to keep rates low is the coronavirus statistics. Japan is at the epicenter of a new COVID-19 outbreak, posing a major threat to the world's third largest economy.

According to economists at the Japan Research Institute, the BOJ's position can be changed to hawkish only after Kuroda leaves his post.

Given that he is due to retire no earlier than April 2023, one can estimate how long the downward trend promises to be for the yen.

Analysts at the Finnish bank Nordea predict that the USD/JPY pair will continue to strengthen on the tight policy of the Fed and reach the level of 140 in the foreseeable future.
GBP/USD: How deep could GBP fall?

The pound encountered support after the release of better-than-expected data. The fact that the British economy is not in its best state ahead of the winter season is clear. There are great risks of a recession in the country as monetary tightening along with high energy prices are posing a threat to the economy.

Meanwhile, Pantheon Macroeconomics sees Q4 GDP rising by 0.3% from the previous period.

"A winter recession can't be ruled out, given that the rise in Ofgem's energy price cap in October will boost CPI inflation—and hence reduce real incomes—by nearly four percentage points. But with fiscal support likely to be scaled up considerably by the next PM and high income households still possessing substantial savings, we think that GDP will flatline through the winter, rather than fall," economists at Pantheon Macroeconomics said.

In the second quarter, the British economy contracted by 0.1%, below the expected 0.2%. Overall, the economy expanded by 2.9% year-on-year, above the market forecast of 2.8%.

The pound saw an increase in volatility, but traders made no attempts to trade in any direction. In light of a rise in the dollar, however, a sell-off occurred. At the beginning of the trading week, the pair is trying to consolidate. Demand for the pound is decreasing and the currency is edging down amid gloomy forecasts made by the Bank of England.

On Monday, bearish pressure on the pound increased, and the price fell below 1.2100. So, GBP/USD was unable to rise on better-than-expected macro data.

At the same time, the dollar does not show steady growth either. Traders are now uncertain about the Federal Reserve's further monetary stance. The hawkish comments of some policymakers hint that the regulator will remain aggressive. Yet, there are still questions. The situation will get clearer when the FOMC Minutes are released this week. Should the Federal Reserve stay aggressive, the greenback's rally will extend.

Therefore, the dollar is unlikely to be bearish at the beginning of the trading week although its growth potential will be limited. So, GBP/USD may recover eventually.

Weekly outlook for GBP

This week, the focus will be on the retail sales report scheduled for Wednesday as well as US weekly jobless claims and the FOMC Minutes.

"Next week's FOMC minutes will contain some discussion of the FOMC's apparent desire to slow the pace of hikes soon. But we do not expect it to be a lasting relief," Goldman Sachs said.

Analysts now see a 50 basis-point hike as the unlikely outcome at the September meeting.

US macro data will surely be of great importance to the GBP/USD quotes. Still, macro results in the United Kingdom could affect the Bank of England's interest rate forecast.

On Tuesday, traders will see the release of data on the UK labor market report, which will influence the Bank of England's monetary policy stance.

Meanwhile, the inflation report published on Wednesday will be of primary importance as it will affect both the BoE's monetary policy and the pound's short-term potential. At this point, it is unclear how the market could react to a possible increase or decrease in rate hikes.

Therefore, in light of a busy trading week, the pound is likely to trade in a trend in the coming days after consolidation.On Monday, bullish demand for the pound is falling. In the short-term, the pair is expected to be bearish, with targets at 1.2050 and 1.2000 (psychological level).

Resistance is seen at 1.2200, 1.2265, and 1.2315. Support stands at 1.2080, 1.2030, and 1.1965.
Tips for beginner traders in EUR/USD and GBP/USD on August 16, 2022

Details of the economic calendar for August 15

Monday was traditionally accompanied by an empty macroeconomic calendar. Important statistics in Europe, the United Kingdom, and the United States were not released.

In this regard, traders focused on the information flow, and practiced technical analysis.

Analysis of trading charts from August 15

The EURUSD currency pair, during an intense downward movement from the resistance level of 1.0350, reached the lower limit of the previously passed flat of 1.0150/1.0270. As a result, there was a local reduction in the volume of short positions in the market, which led to a slowdown.

The GBPUSD currency pair accelerated its decline after breaking through a number of variable levels. As a result, the quote came close to the important psychological level of 1.2000, where it formed a small stagnation.

Economic calendar for August 16

At the opening of the European session, the UK labor market data was released, where unemployment remained at the same level of 3.8%. At the same time, employment in the country increased by 160,000 against 296,000 in the previous reporting period. Forecasts assumed that employment would grow by 256,000. At the same time, the change in the number of applications for unemployment benefits in July decreased by 10,500, which is good, but forecasts assumed -32,000.

Statistics for the UK stand out only by the unemployment rate, since everything is ambiguous on other indicators. The pound sterling was standing still at that time.

During the American trading session, data on the construction sector in the United States will be published. The number of issued building permits and the volume of new housing starts is assumed to decrease.

Subsequently, data on the volume of industrial production will be published, which is assumed to decline from 4.2% to 4.0% YoY and grow by 0.3% MoM.

Time targeting:

U.S. Building Permits Issued – 12:30 UTC (prev. 1.696M; prog. 1.65M)

US Housing Starts – 12:30 UTC (prev. 1.55 M; prog. 1.54 M)

US Industrial Production – 13:15 UTC

Trading plan for EUR/USD on August 16

Presumably, the 1.0150 area will put pressure on sellers, which may lead to a gradual slowdown in the downward cycle, resulting in a technical pullback in the market.

Traders will consider a prolonged downward cycle if the price stays below 1.0100. In this case, the quote will rush towards the parity level.

Trading plan for GBP/USD on August 16

In this situation, the area of the control level puts pressure on sellers, negatively affecting the volume of short positions. In view of the local signal about the oversold pound sterling, we can assume the formation of a pullback.

Traders will consider the next downward move if the price holds below 1.1950. Under this scenario, a resumption of the medium-term downward trend is possible.
Tips for beginner traders in EUR/USD and GBP/USD on August 17, 2022

Details of the economic calendar for August 16

The UK's Office for National Statistics (ONS) report on the labor market yesterday showed unemployment rate stabilized at around 3.8%. Employment in the country increased by 160,000 against 296,000 in the previous reporting period. Forecasts predicted that employment would grow by 256,000. At the same time, the change in the number of applications for unemployment benefits in July decreased by 10,500, which is good, but they predicted -32,000.

Statistics for the UK stand out only by the unemployment rate, since everything is ambiguous on other indicators. The pound sterling stood still at the time of publication.

During the American trading session, data on the construction sector in the United States were published, which recorded a widespread decline in performance.


U.S. Building Permits Issued – Prev. 1.696M; Fact. 1.674M.

U.S. Housing Starts – Prev. 1.599M; Fact. 1.446M.

Subsequently, data on the volume of industrial production were published, which recorded a slowdown from 4.02% to 3.9% YoY, and increased by 0.6% MoM.


Data on the US came out negatively; the dollar was under pressure from sellers.

Analysis of trading charts from August 16

The EURUSD currency pair overcame the support level of 1.0150 locally during an intense downward movement, but the sellers failed to stay below the reference value of 1.0100. As a result, there was a pullback in the market above the support level.

The GBPUSD currency pair rebounded from the psychological level of 1.2000 with surgical precision. As a result, there was an increase in the volume of long positions, strengthening the pound sterling by about 100 points.

Economic calendar for August 17

At the opening of the European session, data on UK inflation was published, which recorded an increase from 9.4% to 10.1%. Such a high level of inflation is likely to lead to an even stronger increase in the interest rates of the Bank of England.

In Europe, the second estimate of GDP for the second quarter will be published, where no reaction is expected since it should coincide with the first estimate, which is already included in the current quotes.

During the American trading session, traders expect retail sales data in the United States, the growth rate of which is likely to slow down from 8.4% to 8.1%. Even with a possible slowdown, retail sales are still at a high level. However, the very fact of a slowdown amid fears of a recession will be a catalyst for fear among investors. Thus, the US dollar may be under pressure.

Near the closing of the European session, and when Western traders will be in the active phase, the FOMC minutes will be published.

Time targeting:

EU GDP – 09:00 UTC

US Retail Sales – 12:30 UTC

FOMC protocol – 18:00 UTC

Trading plan for EUR/USD on August 17

Presumably, the area of the level of 1.0150 is still putting pressure on sellers. For this reason, one of the possible scenarios for the price development is a rebound towards 1.0240.

As for the prolongation of the downward cycle, this scenario will be relevant only after holding the price below 1.0100 for at least a four-hour period. In this case, the quote will rush towards the parity level.

The pullback stage may well slow down the move around 1.2120/1.2150. In this case, there will be a gradual increase in the volume of short positions, returning the quote to the psychological level of 1.2000.

Prolonging the current pullback will be considered if the price holds above the value of 1.2160 in a four-hour period.
Dollar - period. USD again trumps on all fronts

The FOMC minutes, published on Wednesday, became another springboard for the dollar. Today, the US currency, inspired by the hawkish mood of the Federal Reserve officials, is growing in all directions.

Temporary weakness
Yesterday investors focused on the minutes of the FOMC meeting. Immediately after its release, the dollar was defeated, but a little later the market interpreted the report in favor of the greenback.

Short-term pressure on the USD came from Fed officials' concerns about a recession. During the meeting, it was noted more than once that sectors of the economy that are sensitive to higher interest rates have already begun to show signs of slowing down.

Some Fed members fear that as part of their commitment to bring inflation under control, the central bank may tighten policy more than is necessary to restore price stability. In this case, the American economy is unlikely to survive.

The rhetoric of the FOMC meeting participants initially seemed dovish to the market. After the release of the minutes, the probability of a rate hike by 75 bps fell to 40% in September, while earlier traders estimated it at 52%.

Against this background, the yield of US government bonds began to decline, which provoked a fall in the dollar index. The greenback's low from yesterday was the 106.39 mark.

The euro won the most from the short-term rebound of the greenback. After the release of the July minutes, the EUR/USD pair rose by almost 50 points and reached the level of 1.0202.

This helped the euro to close the day with a slight increase (+0.13%), while other major currencies, on the contrary, sank in tandem with the USD.

Invincible Hulk
Despite short-term weakness, the dollar index finished Wednesday's session with growth. The revaluation of the FOMC minutes by the market helped it recover.

When the first emotions subsided, the main thing came to the fore: the Fed still intends to fight inflation, which implies further aggression towards interest rates.

At the July meeting, absolutely all of its participants agreed to raise rates by 75 bps. Moreover, many of them supported the view that the Fed will continue to move at the same pace if necessary.

Of course, by "necessary" we mean the persistence of inflationary pressures. At this stage, Fed members do not see convincing signs of a decrease in price growth, so they do not exclude that even more efforts will be needed to resolve the situation.

As for the economy, politicians said they would closely monitor its adaptation to the new monetary rate and take all necessary measures to prevent a recession.

In the ranks of the Fed, they do not deny a possible slowdown in economic growth, but at the same time officials manage to remain optimistic. Many of them believe that thanks to a strong labor market, US GDP could grow in the third quarter.

The data on retail sales in America, which were published on Wednesday, also helped reduce fears of a recession.

The US Department of Commerce said that in July the indicator rose by 10.3% year on year, which is higher than the forecast estimate (8.3%) and more than the previous month's value (8.5%).

A positive retail sales report coupled with hawkish FOMC minutes provided strong support for the dollar. Yesterday, the US currency managed to strengthen against its competitors by almost 0.1%.

The most important outsider was the Australian dollar. It plunged 1.23% against the greenback. The aussie's appeal has also been eroded by heightened concerns about Chinese demand for commodities, including iron ore.

The greenback soared 0.98% against the New Zealand dollar, negating the earlier growth of the NZD. Recall that on Wednesday the Reserve Bank of New Zealand increased interest rates by 50 bps to 3%, and signaled the continuation of the aggressive rate in the coming months. This triggered the rise of the kiwi.

The US dollar jumped 0.55% against the Japanese yen to 134.97. Such significant dynamics is a completely logical reaction of the USD/JPY pair to another increase in the gap between the yields of US and Japanese government bonds.

The greenback edged up 0.34% against the pound. The pound's weakening on Wednesday was also facilitated by the release of July statistics on inflation in the UK.

The report showed that consumer prices in the peninsula hit 10.1% last month, the highest in 40 years.

Double-digit inflation has heightened investor fears that the Bank of England will have to be even more aggressive on rates. This raises the already high risk of a recession in Britain.

Brilliant outlook for USD
"Now the overall picture for the dollar looks very positive. It is in a strong upward trend across the board," notes analyst Matt Simpson.

On Thursday morning, under the pressure of the greenback, the euro, the only currency from the group of 10, which showed growth yesterday in tandem with the USD, could not resist.

EUR/USD fell to 1.0150 amid growing recession risks. Recall that yesterday Eurostat presented the second estimate of the eurozone GDP for the second quarter. The indicator was revised downward.

Also, the euro is under strong pressure from the energy crisis flaring up in the eurozone, which is aggravated by abnormal heat.

Record high temperatures and a lack of rainfall caused the Rhine to dry up in Germany. Since the water level in the river has fallen below the critical level of 40 cm, the transport of coal, food and other goods has been significantly reduced.

Also, the appetite for the euro is now declining amid anti-risk sentiment among investors. The safe dollar is in high demand due to another escalation in geopolitical tensions between the US and China. Washington just announced official trade talks with Taiwan earlier this fall.

As you can see, the EUR/USD pair has fallen into a "perfect storm". According to analysts' forecasts, the dollar will continue to strengthen against the euro in the foreseeable future. Its growth is also expected in other directions.
Tips for beginner traders in EUR/USD and GBP/USD on August 19, 2022

Details of the economic calendar for August 18

The annual inflation rate in the euro area accelerated to 8.9% in July from 8.6% a month earlier, eventually updating the historical record. The market ignored the data since it completely coincided with the preliminary estimate. Nevertheless, rising inflation in the EU points to further steps by the ECB to raise interest rates.

During the American trading session, weekly data on jobless claims in the United States were published, where, despite the divergence of forecasts, we still saw an increase in their volume.

Statistics details:

Continuing claims for benefits increased from 1.430 million to 1.437 million.

Initial claims for benefits decreased from 252,000 to 250,000.

Analysis of trading charts from August 18

The EURUSD currency pair, after a short stagnation within the 1.0150 level, managed to regroup trading forces. As a result, traders managed to properly increase the volume of dollar positions. This step led to a breakdown of the reference value of 1.0100.

On the trading chart of the daily period, there is an attempt to prolong the medium-term downward trend. The recovery of the dollar relative to the recent correction is 72%.

The GBPUSD currency pair noticeably accelerated the decline, which led to the breakdown of the psychological level of 1.2000. Typical speculative interest has accelerated the sale of the pound by more than 140 points, placing the quote below 1.1900.

On the trading chart of the daily period, there is also an attempt to resume the medium-term downward trend. The recovery of dollar positions relative to the recent correction is 72%.

Thus, based on the daily charts, it can be seen that EURUSD and GBPUSD are moving after, actively restoring the downward trend.

Economic calendar for August 19

At the opening of the European session, UK retail sales data were published, its rate of decline slowed down from -6.2% to -3.0%. And let's talk about the decline in sales. The very fact of slowing down this process is important.

Important statistics in Europe and the US are not expected.

Trading plan for EUR/USD on August 19

Despite the local signal of oversold euro in the short term, the market remains in a downward interest. Thus, the subsequent price retention below the 1.0100 mark may push the quote towards parity.

Traders will consider an alternative scenario if the price returns above 1.0100 in a four-hour period.

Trading plan for GBP/USD on August 19

The current price change suggests a recovery of the downward trend relative to the recent correction. Keeping the price below the 1.1880 mark may well prolong the set inertial move in the direction of the local low of the medium-term trend at 1.1750.

It is worth considering that the signal about the oversold of the pound sterling is already taking place in the short-term and intraday periods. Thus, a technical pullback in the market cannot be ruled out.