Daily Market Updates
28 Jul 2022

EUR/USD resumed the upside and surpassed the 1.0200 barrier on the back of the resumption of the downside bias in the greenback.
 
Indeed, the buck saw its losses accelerated and the US Dollar Index (DXY) broke decisively below 107.00 after Chief Powell reiterated at his press conference that it is essential to bring inflation down, while he also noted that activity in housing has softened, labor demand looks strong and labour supply appears subdued. Powell suggested that the pace of further rate raises will hinge on incoming data and reiterated that decisions on rates will be on a meeting-by-meeting basis.
 
Earlier in the session, the Federal Reserve hiked the Fed Funds Target Range (FFTR) by 75 bps, as largely anticipated and according to the Fed’s statement, the vote to hike rates by 75 bps was unanimous. In addition, the Fed added that job creation remained robust while spending and production were softer. Furthermore, the unemployment remained low, while the Fed anticipates ongoing increases in interest rates. More from the Committee saw another pledge to bring inflation back to the Fed’s target and that the central bank stays ready to change policy as appropriate.
 
Following the FOMC event, US yields resumed the downside across the curve, which supported further the downbeat tone in the greenback eventually.
 
Other than the FOMC event, the US calendar saw MBA Mortgage Applications contract 1.8% in the week to July 22, Durable Goods Orders expand at a monthly 1.9% in June. Additionally, preliminary results saw the Goods Trade Balance post a $98.18B deficit in June and Pending Home Sales contract 20.0% in the year to June.
 
In the domestic calendar, Germany’s Consumer Confidence measured by GfK dropped to record lows for the month of August at -30.6, while the same gauge in France and Italy deteriorated to 80 and 94.8, respectively, in July.
 
Considering the recent price action, the immediate up barrier in EUR/USD remains at the post-ECB top at 1.0278 (July 21) followed by the 55-day SMA at 1.0438. The surpass of this area should open the door to the 5-month resistance line around 1.0480. Once cleared, the pair’s selling bias could lose strength and pave the way for a visit to the weekly peak at 1.0615 (June 27) before the June high at 1.0773 (June 9) and the May top at 1.0786 (May 30). If the pair breaches the parity level it could then aim at a test of the 2022 low at 0.9952 (July 14) prior to the December 2002 low at 0.9859 and the October 2002 low at 0.9685. The daily RSI gains further ground and tests 45 and above.
 
Resistance levels: 1.0257 1.0277 1.0382 (4H chart)
 
Support levels: 1.0107 1.0081 1.0006 (4H chart)

USD/JPY reversed two daily advances in a row and eased to the mid-136.00s in response to the renewed and strong selling pressure in the greenback in combination with the downtick in US yields following the FOMC interest rate decision.
 
Indeed, both the buck and US yields grinded lower after Chief Powell failed to lend extra details regarding another potential large rate hike at the upcoming meetings, all after the Fed delivered a much-anticipated 75 bps rate hike at its event on Wednesday.
 
In the Japanese calendar, final figures of the Coincident Index and the Leading Economic Index came at 94.9 and 101.2 in May (from 95.5 and 102.9, respectively).
 
The continuation of the rebound is expected to meet the next hurdle at the post-BoJ meeting at 138.87 (July 21 top), which is deemed as the last defense for a visit to the 2022 high at 139.38 (July 13). Extra advances should target the round level at 140.00 followed by the weekly peak at 145.41 (August 21 1998) and the all-time high at 147.67 (August 11 1998). In case sellers regain the initiative, there is initial support at the weekly low at 135.56 (July 22) ahead of the July low at 134.74 (July 1). If breached, then the pair could attempt a move to the 134.26 level (June 23 low) before the 55-day SMA at 133.53 and the weekly low at 131.49 (June 16), which is closely followed by the psychological 130.00 mark. The daily RSI ticks lower to the area below 53.
 
Resistance levels: 137.46 137.95 138.87 (4H chart)
 
Support levels: 136.32 136.16 135.57 (4H chart)

GBP/USD advanced to new multi-week highs well beyond 1.2100 the figure on Wednesday on the back of the intense post-Powell sell-off in the greenback.
 
Indeed, the dollar’s downside picked up extra pace and prompted the US Dollar Index (DXY) to give away the recent upside and refocus instead on the 106.00 zone following the 75 bps rate hike by the Fed midweek.
 
The extra recovery in the British pound came pari passu with a small bounce in the UK 10y Gilt yield to the area close to the 2.00% yardstick.
 
The UK calendar was empty on Wednesday.
 
Further upside in GBP/USD is expected to meet the next hurdle at the weekly top at 1.2143 (July 27) prior to the 55-day SMA at 1.2240. If the upside impulse picks up pace, then cable could revisit the weekly high at 1.2405 (June 16) ahead of the 100-day SMA at 1.2539. Next on the upside aligns the 1.2666 level (May 27) prior to the psychological 1.3000 yardstick. On the way south initially appears the 2022 low at 1.1759 (July 14) ahead of the 2020 low at 1.1409 (March 20). The daily RSI improves to the 57 region.
 
Resistance levels: 1.2179 1.2188 1.2332 (4H chart)
                                            
Support levels: 1.1963 1.1915 1.1889 (4H chart)

The US dollar saw its downside intensified and lent the high-beta currencies and the risk complex further oxygen, encouraging bulls to lift AUD/USD to new highs around the psychological 0.7000 mark on Wednesday.
 
Indeed, and weighed down by the somewhat dovish tone from Chief Powell at the FOMC event, the greenback reversed course and triggered a strong pullback, which helped spot and the commodity space as well.
 
On the latter, another positive move saw prices of the tonne of iron ore improve a tad above the $107.00 zone, extending the so far consolidative phase for yet another session midweek.
 
In the Aussie docket, the Inflation Rate rose 6.1% YoY in the April-June period and 1.8% vs. Q1.
 
Extra weakness in AUD/USD could well see the 2022 low at 0.6681 (July 14) revisited ahead of the May 2020 low at 0.6372 (May 4) and the weekly low at 0.6253 (April 21 2020). The immediate up barrier emerges at the July peak at 0.7000 (July 27). If the pair surpasses the latter, then the door could open to further gains to, initially, the weekly high at 0.7069 before the 100-day SMA at 0.7126 and the key 200-day SMA at 0.7177. The daily RSI gathers traction and flirts with the 60 level.
 
Resistance levels: 0.7000 0.7069 0.7137 (4H chart)
 
Support levels: 0.6912 0.6889 0.6878 (4H chart)

Gold prices reversed the weakness seen in the last couple of sessions and flirted with recent peaks in the $1,740 region per ounce troy, all in the wake of the FOMC gathering on Wednesday.
 
Indeed, bullion regained its balance despite the Federal Reserve hiked rates by 75 bps, as was widely telegraphed. However, Chief Powell failed to ignite further upside momentum in the greenback after he kind of dialed down the likelihood of more aggressive hikes at the next meetings.
 
The corrective downside in US yields across the curve also collaborated with the upbeat note in the precious metal.
 
All in all, the weekly high at $1,739 (July 22) now emerges as the immediate hurdle for gold bulls prior to the $1,752 level (July 8 peak), which precedes the key $1,800 zone. This resistance area also appears underpinned by the 55-day SMA ($1,802). Beyond the latter comes the 200-day SMA at $1,842 before the $1,857 level (June 16 top) and the June high at $1,879 (June 13). The resumption of the downtrend could well see the 2022 low at $1,680 (July 21) revisited ahead of the 2021 low at $1,1676 (March 8) and the June 2020 low at $1,670 (June 5).
 
Resistance levels: $1,740 $1,745 $1,752 (4H chart)
                                                              
Support levels: $1,711 $1,680 $1,670 (4H chart)

Prices of the American reference for the sweet light crude oil extended the erratic performance so far this week and advanced past the $97.00 mark per barrel on Wednesday.
 
The upside bias in the WTI picked up pace after the EIA reported a 4.523M barrel drop in US crude oil stockpiles in the week to July 22, while supplies at Cushing went up by 0.751M barrels and gasoline inventories shrank by 3.304M barrels.
 
Collaborating with the daily advance, traders continued to assess the deteriorating energy crisis in the old continent, which was particularly exacerbated after Russian giant Gazprom reduced the supply of gas to Europe in a context dominated by EU sanctions against Moscow and plans to cap prices of Russian oil.
 
A break above the psychological $100.00 mark per barrel should motivate WTI to challenge the weekly high at $104.44 (July 19). If cleared, then traders should attempt a challenge to the July peak at $111.42 (July 5) ahead of another weekly top at $114.00 (June 29). Up from here appears the June high at $123.66 (June 14) ahead of the 2022 peak at $129.42 (March 8) and the all-time top at $147.27 (July 11 2008). The reversion of the current bounce should put a test of the weekly low at $93.02 (July 25) back on the radar ahead of the July low at $90.58 (July 14). Further weakness should see the 81.94 level (low January 24) revisited before the 2022 low at $74.30 (January 3).
 
Resistance levels: $97.82 $98.98 $100.69 (4H chart)
                                                                                                                              
Support levels: $94.30 $93.00 $90.54 (4H chart)

US equities regained the smile and charted strong gains on Wednesday when measured by the three major stock indices. That said, the Dow Jones gained 1.41% at 32,208, the S&P500 advanced 2.52% at 4,019 and the tech-heavy Nasdaq Composite rose 3.85% at 12,008.
 
The optimism among investors was reignited after positive earnings reports from blue chips Microsoft and Alphabet, while extra legs to the tech sector came from Meta Platforms, Apple and Amazon.
 
In addition, stocks gathered extra upside traction after Chief Powell somewhat talked down the likelihood of further large rate hikes at upcoming gatherings, all after the Fed matched consensus and raised the Fed Funds Target Range by 75 bps on Wednesday.
 
Further gains in the Dow are expected to revisit the July top at 32,257 (July 27) just ahead of the temporary 100-day SMA at 32,737. The breakout of this level exposes the June high at 33,272 (June 1) prior to the May high at 34,117 (May 4). On the other hand, there are no support levels of note until the July low at 30,143 (July 14), which comes just ahead of the 2022 low at 29,653 (June 17). Down from here turns up the 28,902 level (low November 12 2020) ahead of the October 2020 low at 26,143 (October 30). The RSI leaps to the proximity of 60.
 
Top Performers: Microsoft, Salesforce.com, Walmart
 
Worst Performers: Travelers, 3M, Visa A
                                                                                                      
Resistance levels: 32,257 32,780 33,272 (4H chart)
                                                                                                                                                       
Support levels: 30,982 30,143 29,653 (4H chart)