What we are looking for

  • USD stays firm: Recent strengthening was questioned yesterday but the USD gains are once more being seen. 
  • Indices are tentative: Once more, early signs of caution in the European session. However, previous days have continually seen weakness bought into during the US session. With markets having run a long way higher, if the buying fails to materialise, there could be a temptation to take profits.
  • Commodities mixed: Oil has rebounded slightly after more losses yesterday. However, precious metals are continuing to point to a corrective drift lower.
  • Data trading: Data traders will first be watching Eurozone GDP. With no revision expected, any surprises would impact EUR. The big mover for USD will be the US Retail Sales. A positive surprise would be USD positive, but may also help to support risk appetite. Fed minutes later will also be watched.


There is a growing sense of the USD regaining strength. This comes as signs of negative growth (and perhaps even stagflation) continue to be reflected in major economies around the world. This is leading to a risk-negative bias across forex and indices. Initially, there was a deterioration in the Chinese economic data on Monday. The German ZEW Economic Sentiment then reflected the continued slide of the Eurozone economy yesterday. This morning we have had UK inflation jumping into double digits and much higher than forecast. The job of the Bank of England gets ever harder to curb inflation without significantly damaging economic prospects. This is all driving flow towards the safe haven USD.

However, there is a continued anomaly with the strength of major indices, with Wall Street continually finding buyers into weakness and pushing further in the recovery. However, there is also a big caveat in that US indices are increasingly overbought and the temptation to lock in profits will be growing. For now, that temptation is being resisted but moves can be quick when they happen. Traders will need to be ready.

There is Eurozone growth and US retail sales on the economic calendar. The second reading of Eurozone Q2 GDP is not forecast to show any revision, so may be of limited impact. The big announcement for the day is US Retail Sales. Adjusted sales are forecast to fall marginally in July. This would be the first decline in seven months. The Fed minutes will also be watched for hawkish signals. The emphasis on fighting inflation over protecting growth would be USD positive.

Today’s news

Market sentiment is cautious: USD gains on forex, with commodities mixed. US futures are slipping back.

Treasury yields moving higher: Yields are higher this morning (2yr +5bps, 10yr +3bps) as the bias towards higher yields starts to threaten again.

Reserve Bank of New Zealand with a “hawkish hike”: The RBNZ increased its interest rate (the OCR) by +50 basis points to 3.00%. This was in line with expected, but also came with an increase in its OCR projection. In December 2022 the RBNZ sees the OCR now at 3.69% (previously at 3.41%). Also at 4.10% in September 2023 (up from 3.95%). NZD initially gained on the announcement but has since given this all back.

UK inflation jumps into double digits: Headline CPI has risen more than expected to 10.1% in July (from 9.4% in June). This was more than the 9.8% forecast. Core CPI also jumped higher to 6.2% (from 5.8%) above forecasts of 5.9%. Despite this, GBP is falling.

Cryptocurrencies drifting lower again: Recent sessions have seen lower closes and intraday rallies being sold into. Bitcoin is around -0.5% lower again today, around $23800. 

Fed speaker due: The FOMC’s Michelle Bowman (permanent voter, leans hawkish) speaks twice today at 13:30 GMT and 18:20 GMT.

Economic Data:

  • Eurozone GDP – Q2 Prelim (at 09:00 GMT) – The second estimate of Q2 GDP is expected to be unrevised from the Flash GDP, with growth of +0.7% (+0.5% Q1 final)
  • US Retail Sales – MoM ex-autos (at 12:30 GMT) – Adjusted sales are expected to fall by -0.1% in July (after +1.0% in June)
  • FOMC minutes (at 18:00 GMT) 

Major markets outlook

Broad outlook: A USD positive and mild risk-negative bias 

Forex: USD is performing well again, with AUD and NZD underperforming. GBP is holding up relatively well after UK CPI.

  • EUR/USD held up yesterday to firm support between 1.0095/1.0120. This marks the bottom of a month-long range. However, with a mild rebound yesterday falling over under the mid-range resistance band 1.0200/1.0250 there is a corrective bias forming on the 4-hour chart. This suggests pressure on 1.0095. A closing break under 1.0095 opens parity again. 
  • GBP/USD has survived a test of the support at 1.2000 for now. However, there is a growing corrective bias forming on both daily and four-hour charts. This has been accentuated by the reaction to UK CPI this morning with a bull failure at 1.2142. There is a sense that intraday rallies are struggling and this will add to pressure back on 1.2000. A close below 1.2000 opens 1.1890 and possibly 1.1760.
  • AUD/USD has continued the decisive correction this morning and is now at risk of breaking the recovery uptrend channel of the past five weeks. A move below the support at 0.6945 would break the channel. Seeing the RSI below 50 would be a warning sign too. We are neutral for now, but turn more positive if the Aussie can break back above 0.7040. 

Commodities: Precious metals continue to roll over, whilst oil is struggling to sustain any intraday recovery.

  • Gold has posted another close lower where the market has been unable to reclaim the old support at $1783. This is increasingly becoming resistance near term now. Momentum indicators on intraday charts are showing a growing corrective configuration and intraday rallies are struggling to hold now. A move below the higher low at $1765 would add to near-term corrective momentum. The key resistance is growing at $1795/$1807.
  • Silver has posted another negative candle as the market backs away from the resistance band of $20.45/$20.90. The daily RSI dropping back below 50 suggests that corrective momentum is mounting, something that the 4-hour chart also reflects. Resistance is built initially between $20.24/$20.50. Reaction to the key support (which is the higher low) at $19.54 will be an important gauge now. 
  • Brent Crude oil has broken below support at $95.90 and has been unable to hold any intraday recovery in recent sessions. Once more this is being seen this morning. This is opening a move back towards the next support at $90.45. The daily RSI is again back around levels where previous sell-offs have rebounded for a couple of days, but we look to use any near-term strength as a chance to sell. There is initial resistance at $97.40/$99.25.

Indices: Wall Street is increasingly overstretched and this could weigh on European indices.

  • S&P 500 futures have closed higher for five straight sessions, but an early move lower today is threatening this run. It comes as the futures have become increasingly stretched, with the daily RSI hitting 75. This is a rare occurrence and raises the prospect of profit-taking. The uptrend is at 4205 with good support between 4170/4200. Initial support is at 4248 with a higher low not having been breached on the four-hour chart since late July. Initial resistance is now 4327.

  • German DAX has been following a trend higher over the past four weeks with weakness being bought into. There have been instances of single session declines before the buyers have returned. Subsequently, reaction to an early decline today will be interesting. The uptrend comes in at 13660 today. There is good initial support between 13730/13795. Initial resistance is 13970, with the next important resistance area around 14250/14300.
  • FTSE 100 continues to find buyers into weakness within the four-week uptrend (which is supportive around 7490 today). There is solidly strong momentum with daily RSI in the 60s which reflects the positive configuration. Initial support is around 7490/7512, whilst the support at 7457 is growing in importance near term. Initial resistance 7572 with the next important resistance area at around 7635/7650. 

This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.