After the release of the U.S. PCE data, equity markets responded positively, with Asian markets sharing the upbeat sentiment.

Last week’s release of the U.S. PCE data sparked optimism in the market, fueling demand for risky assets on expectations of further inflation moderation. Equity markets responded positively, with Asian markets sharing the upbeat sentiment at the beginning of this week. Despite the moderating inflation outlook, the dollar remained robust, supported by impressive GDP figures. On the other hand, the impact of OPEC+ oil supply cuts started to take effect, propelling oil prices to a significant monthly gain of over 14% in July. Meanwhile, the Bank of Japan’s (BoJ) recent announcement regarding a potential monetary policy tweak generated considerable attention. The BoJ revealed the removal of a strict 0.5% cap on long-term bond yields, signalling possible adjustments in the future. Interestingly, despite the hawkish statement, the Japanese Yen lost momentum and traded lower against the USD.

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Current rate hike bets on 26th July Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (0.2%) VS 25 bps (99.8%)   

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Market Overview

Economic Calendar

Market Movements

DOLLAR_INDX, H4

The US Dollar faced a sharp decline in the wake of disappointing inflation figures. The US Core PCE Price Index (YoY) fell from 4.6% to 4.1%, missing market expectations of 4.20%. This diminishing inflationary pressure is likely to reduce the probability of the Federal Reserve extending its tightening monetary cycle. Fed Chair Jerome Powell emphasised data dependency for future rate decisions, aiming to ensure sustained improvement before policy shifts.

The dollar index is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 50, suggesting the index might extend its gains after breakout since the RSI rebounded sharply from oversold territory.

Resistance level: 101.95, 104.80

Support level: 99.05, 94.95

XAU/USD, H4

Buoyed by the US Dollar’s depreciation post the downbeat inflation report, the gold market saw continued upward momentum. Investors are closely monitoring Friday’s jobs data, including the US Nonfarm Payroll and Unemployment reports, as they could potentially trigger further volatilities in the gold market.

Gold prices are trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 48, suggesting the commodity might extend its gains toward resistance level since the RSI rebounded sharply from oversold territory.  

Resistance level: 1970.00, 1985.00

Support level: 1945.00, 1930.00

EUR/USD，H4

Last week’s release of optimistic U.S. economic data sent shockwaves through the market, pressuring the euro to dip below its crucial psychological support level at 1.1000. The robust economic indicators fueled investor speculation of a potentially more hawkish monetary policy from the Federal Reserve. However, the market sentiment took a turn on Friday following the release of the U.S. PCE data, which indicated signs of further inflation moderation in the country. This development constrained the dollar’s strength, providing an opportunity for the euro to rebound and climb back above the 1.1000 level.

EUR/USD is trading in a bearish momentum and has hammered to below the psychological level at 1.1000. The RSI has rebounded before entering into the oversold zone while the MACD flows flat at below the zero line suggest the bearish momentum has eased slightly. 

Resistance level: 1.1060, 1.1245

Support level: 1.0842, 1.0676

AUD/USD，H4

The Australian dollar has witnessed a substantial pullback, nearly wiping out all of its monthly gains against the U.S. dollar, following the release of strong U.S. economic data that showcased the country’s resilience. The data fueled market expectations of a more hawkish approach from the Federal Reserve. However, the Aussie dollar found some respite amid its bearish momentum after the U.S. Personal Consumption Expenditures (PCE) data was unveiled last Friday. The U.S. inflation figures came in lower than market expectations, leading investors to bet on a potentially more dovish stance from the Fed in September. In addition, investors are also closely observing the upcoming interest rate decision by the RBA scheduled for Tuesday. 

The Aussie dollar has eased from the strong bearish momentum last Friday against the USD. The RSI continues to hover near the oversold zone while the MACD continues to decline, suggesting the pair is still trading in a bearish momentum. 

Resistance level: 0.6695,  0.6750

Support level: 0.6600, 0.6500

GBP/USD，H4

The Cable (GBP/USD) peaked for the year in mid-July, touching 1.3141 before experiencing a sharp decline subsequent to the Federal Reserve and European Central Bank’s simultaneous 25 bps interest rate hikes. The optimistic U.S. economic data further compounded the situation, resulting in a muted response from Cable, despite market expectations of an additional 50 bps interest rate increase from the Bank of England (BoE). All eyes are now on Thursday’s highly anticipated BoE interest rate announcement. Investors are keenly observing this crucial event to assess the strength of the Sterling and its potential impact on the currency’s future performance.

Despite the Cable is trading in a bearish momentum, the indicators suggest that there is a possible trend reversal for the Cable. The RSI has rebounded to the 50-level, while the MACD has the tendency to cross below the zero line. 

Resistance level: 1.2888, 1.3020

Support level: 1.2760, 1.2655

Nasdaq, H4

The US equity market, particularly Nasdaq, witnessed substantial gains as cooler-than-expected inflation data lowered the prospects of aggressive rate hikes. The US Core PCE Price Index (YoY) fell from 4.6% to 4.1%, missing market expectations of 4.20%. This diminishing inflationary pressure is likely to reduce the probability of the Federal Reserve extending its tightening monetary cycle. Additionally, better-than-expected financial results, such as Intel’s revenue forecast surpassing expectations, bolstered bullish momentum in the US equity market.

Nasdaq is trading higher while currently testing the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is at 64, suggesting the index might extend its gains after breakout since the RSI stays above the midline. 

Resistance level: 15880.00, 16585.00

Support level: 14725.00, 13710.00

USD/JPY, H4

The Japanese yen witnessed a tumultuous ride and a subsequent selloff in the aftermath of the Bank of Japan’s monetary policy announcement. Disappointment loomed among market participants who had anticipated a more decisive shift towards a hawkish stance. Despite the adjustment in yield curve control (YCC), the central bank dampened expectations by lowering longer-term inflation forecasts, signalling a willingness to continue easing measures.

USD/JPY is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 60, suggesting the pair might extend its gains after breakout since the RSI stays above the midline. 

Resistance level: 142.05, 146.00

Support level: 139.30, 136.50

CL OIL, H4

Oil prices kept climbing following China’s announcement of new measures to stimulate consumption and revive its economy. In light of weakened growth momentum in the second quarter, the Chinese government is introducing a series of policies to combat deflation risks, particularly in the property market, exports, and consumer spending.

Oil prices are trading higher while currently testing the resistance level. However, MACD has illustrated increasing bearish momentum, while RSI is at 67, suggesting the commodity might enter overbought territory.

Resistance level: 80.55, 83.20

Support level: 77.30, 73.70