Get ready for a volatile trading day as inventors anxiously wait for the release of the US CPI report for July that might influence the Federal Reserve’s decision on whether to increase the rate of 25 bps at the Sep. 20 meeting. Inflation has fallen from its June 2022 peak of 9.1 percent to 3 percent in June 2023, according to the Department of Labor's Consumer Price Index. Recently Fed Governor Michelle Bowman said that additional rate increases will likely be needed if data show that progress on inflation has stalled.
The July inflation data is set to be released at 12:30 GMT. The market participants expect the CPI to rise slightly in July to 3.3% on an annual basis, while the core rate may remain steady at 4.8%. However, If the data comes out higher than the expectation, the king dollar will extend the monthly gains while the precious metals and stock markets will fall because high inflation could force the FED to continue the interest rate hike in coming meetings, lending more support to the US dollar.
UK and European shares opened higher supported by stronger-than-expected earnings results while US stock futures trades unchanged ahead of the US CPI report. During the previous session, the major US indices ended lower after the Biden administration banned new US investment and expertise that supports Chinese development of sensitive technologies.
Crude oil futures slightly retreated from the nine-month high. However, the overall momentum remained bullish throughout this week despite a large crude draw. The latest EIA crude inventory report showed that US crude inventories rose by 5.85 million barrels last week, well above market expectations for a 0.56-million-barrel build.
In the currency market, the EURUSD recovered part of its loss after showing weakness in the first few days of this week. While the upside momentum was limited after the latest German inflation data slowed consumer prices in Europe's largest economy fell to 6.2% from 6.4% the prior month, suggesting that inflationary pressures in Europe's largest economy have further eased. On the other hand, the kind dollar slightly reversed from the 4-week highs. This dollar comeback is mostly because the Fed policymakers sounded a bit hawkish even as inflation has dropped in the past six straight months.
The safe-haven metal experienced a sharp decline this week as traders increased their bets on another rate hike in September following the hawkish comments from the FED policymakers and the release of a mixed US employment report. Moving ahead, gold traders across the globe waiting for the July US CPI data to get a clear picture of the metal’s long-term direction.
On the data front, as widely anticipated, the Reserve Bank of India (RBI0 has decided to keep the repo rates unchanged at 6.5%. This is the third time that the central bank has kept the basic rate unchanged. “After detailed deliberations on all relevant aspects, the Monetary Policy Committee unanimously decided to keep the policy repo rate unchanged at 6.5 per cent,” RBI Governor Shaktikanta Das said.
Moving ahead today, the important events to watch:
US – CPI: GMT – 12:30
US – Jobless claims: GMT – 12:30
Technical Outlook and Review
EURUSD: For today, if the pair continues to trade below 1.1000 in the coming hours, the euro is likely to extend its momentum toward the next resistance which stands at the 1.1100 level. Conversely, a confirmed break below the 1.0960 resistance can open the doors towards to 1.0920/00.
The important levels to watch for today: Support- 1.0990 and 1.0960 Resistance- 1.1050 and 1.1100.
GOLD: The metal hit a fresh monthly low of 1914 on Wednesday. However, the metal bounced back to above 1920 after it found support near the lower trendline. Moving ahead, If bulls manage to push the metal above 1924, the corrective advance could continue towards 1932 first, and then later up to 1938. More downside will be confirmed If the daily line closes below 1900.
The important levels to watch for today: Support- 1910 and 1900 Resistance- 1932 and 1940.
Quote of the day – “I have been trading for decades and I am still standing. I have seen a lot of traders come and go. They have a system or a program that works in some specific environments and fails in others. In contrast, my strategy is dynamic and ever-evolving. I constantly learn and change.” – Thomas Busby.