The USD seems to strengthen somewhat, as Fed officials seem to lower the market’s dovish expectations. Fed Chair Powell stressed in a speech yesterday, the Fed’s independence from US President Trump, who is asking for extensive rate cuts. However also the Fed Chairman stated that many at FOMC see stronger case for more accommodation. In addition, it should be mentioned that St. Louis Fed President Bullard characterized a possible July cut as more of an “insurance” against a possible slowdown of the US economy. It should be noted, that also Atlanta Fed President Bostic had earlier stated his total agreement with Powell’s view. Should the market worry less about a possible rate cut by the Fed we could see the USD getting further support during the day. EUR/USD dropped yesterday breaking the upward trendline incepted since the 19th of June, as well as the 1.1380 (R1) support line (now turned to resistance). As the pair has broken both the upward trendline and the 1.1380 (R1) line, we switch our bullish bias, in favor of a bearish outlook for the pair. Should the pair remain under the selling interest of the market, we could see it breaking the 1.1340 (S1) support line and aim for the 1.1300 (S2) support barrier. Should the pair’s long positions be favored by the market, we could see it breaking the 1.1380 (R1) resistance line and aim for the 1.1415 (R2) resistance hurdle.
RBNZ remains on hold and the Kiwi strengthens
RBNZ remained on hold at 1.50%, however in its accompanying statement the bank stated that a lower Official Cash Rate (OCR) might be needed. The bank cited as reasons for a possible future rate cut the downside risks around the employment market’s and inflation’s outlook. It also stated that there is a weaker global economic outlook and a risk of an ongoing subdued domestic growth. Analysts, tend to note that the RBNZ signaled a stronger easing bias than it did in May, implying that the possibility of rate cut in the August meeting is extensive. Should one compare the Kiwi with other commodity currencies as well as the USD, we could say that the market may have expected the decision to be even more dovish. Hence, the market provided ultimately some support for the Kiwi, implying that the currency may strengthen a bit more in the near term. NZD/USD continuously tested and finally broke the 0.6650 (S1) resistance line (now turned to support). As the upward trendline was only momentarily broken and the pair maintained its upward momentum, we maintain our bullish bias for the pair. Should the bulls maintain control over the pair’s direction, we could see the pair breaking the 0.6685 (R1) resistance line aiming for higher grounds. On the flip side, should the bears dictate the pair’s direction, we could see it breaking the 0.6650 (S1) support line, the prementioned upward trendline and aim for the 0.6610 (S2) support barrier.
Other economic highlights, today and early tomorrow
Today during the European session, we get Germany’s GFK Consumer Sentiment indicator for July and later on from the Czech Republic, CNB’s interest rate decision. In the American session, we get the US durable goods orders growth rates for May and later on, the EIA crude oil inventories figure. In tomorrow’s Asian session, Japan’s retail sales growth rate for May are due out.
NZD/USD H4
Support: 0.6650 (S1), 0.6610 (S2), 0.6565 (S3)
Resistance: 0.6685 (R1), 0.6725 (R2), 0.6765 (R3)
EUR/USD H4
Support: 1.1340 (S1), 1.1300 (S2), 1.1280 (S3)
Resistance: 1.1380 (R1), 1.1415 (R2), 1.1460 (R3)
