Markets turned wildly volatile from yesterday's North American session after the release of stronger-than-expected US economic data while the European Central Bank did not provide explicit forward guidance about future moves. Today the market participants and investors are now turning their eyes to the release of the US Personal Consumption Expenditures (PCE) price index data after the positive US preliminary GDP, the weekly Jobless Claims and Durable Goods Orders data increases the likelihood of more interest rate hikes by the Federal Reserve (Fed).
Early this week, the Fed hiked rates for the 11th time, 25 bps increase to 5.25-5.50% and FED chair Jerome Powell communicated that the FED will be data-dependent. The key PCE data tends to lead to significant moves for currencies, commodities, and Indices. US Core PCE Price Index — the Fed's most closely watched assessment of how quickly prices are rising across the economy. Therefore, today’s PCE data is very crucial which could influence expectations regarding the Fed’s next policy move.
The major indices of the US stock markets ended slightly lower on Thursday while the overall momentum remains bullish on hopes for less aggressive rate hikes from the US central bank. However, investors and market participants kept a close eye on a slew of upcoming U.S. economic data that could influence the next Federal Reserve monetary policy meeting outcome. Meantime, Japanese shares slid after the Bank of Japan changed its language to make its yield curve control policy more flexible.
Crude oil futures remain unchanged despite a strong dollar. The oil prices are expected to end on a positive note for the fifth consecutive week. The strong bullish sentiment was boosted by signs of tightening global supplies and an improving outlook in Chinese demand. The Chinese government’s plans to increase economic stimulus is a positive development that could lend more support to oil prices.
In the currency market, EURUSD plunged almost 200 pips from previous session highs after the expectations of future ECB rate hikes were trimmed somewhat. On Thursday, the ECB announced a 25bp rate hike, the ninth consecutive hike, as was widely expected although ECB said further decisions will continue to follow a data-dependent approach. ECB President Lagarde emphasizes uncertainty in outlook and weakening growth recently, with no guidance on the next meeting. As of this writing, the currency pair rebounded back to above 1.0990 and the further direction will depend on German inflation figures which will be released later today.
The precious metal traded flat on Friday morning following the previous session's sell-off as investors await further cues from the US Fed regarding its rate hike trajectory, as the US Personal Consumption Expenditures (PCE) Price Index data will be released today. Meanwhile, considering the recent strong bearish sentiment, the US dollar movement will continue to play a vital role in precious metals' future direction.
On the data front, the US GDP expanded by 2.4% in the second quarter, surpassing market expectations of a 1.8% increase, while durable goods orders jumped 4.7% month-over-month in June 2023, the most since July 2020, following an upwardly revised 2% rise in May. US Initial jobless claims fell more than expected to their lowest level since February, signaling continued strength in the labor market.
Moving ahead today, the important events to watch:
Germany – CPI: GMT – 12:00
US – PCE price index: GMT – 12:30
US – Michigan consumer sentiment: GMT – 14:00
Technical Outlook and Review
EURUSD: For today, the first nearest support level is located at 1.0930. In case it breaks below this level, it will head towards the next support level which is located near 1.0900. On the upside, 1.1000 will act as an immediate and strong hurdle while 1.1040 will be a critical resistance zone because, above this, bulls are likely to dominate.
The important levels to watch for today: Support- 1.0930 and 1.0900 Resistance- 1.1010 and 1.1040.
GOLD: For today, If the bearish momentum continues, then the next key support area to watch is $1942 then $1938. On the upper side, If the metal regains upside momentum and presses back above $1960 then the key resistance area to watch is $1965 and $1974.
The important levels to watch for today: Support- 1944 and 1938 Resistance- 1960 and 1974.
Quote of the day – “Always trust your intuition, which resembles a hidden supercomputer in the mind. It can help you do the right thing at the right time if you give it a chance.” - Michael Steinhardt.