Hi Traders!
Forex Weekly Recap for 14–18 August, 2023:
Fundamentals
The Reserve Bank of Australia (RBA) released the minutes of the August 2023 policy meeting, where the central bank kept the interest rate unchanged at 4.1%. The key notes from the meeting were:
The board considered raising rates by 25 basis points, although they saw a more credible path back to the inflation target with cash rates at the current 4.1%.
The need for further hikes would depend on data and the assessment of risks.
The board agreed it was possible some further tightening might be needed.
Inflation is heading in the right direction, though service inflation is still too high.
The Federal Reserve's Kashkari noted the steady progress on inflation in the US due to the positive inflation readings but stated that inflation is still too high and that he remains wary of the risks of letting go too early, as they do not want to make the same mistakes as they did in the 19070s when they stopped hiking interest rates too early. He did also note, however, that at some point next year, the Federal Reserve may need to lower rates and that the economy is currently exceeding expectations.
The Reserve Bank of New Zealand (RBNZ) kept the interest rate unchanged at 5.5%, as expected. Key notes from their policy statement were:
New Zealand's economy is progressing as anticipated.
Headline inflation and inflation expectations have declined, but measures of core inflation are still too high.
The Committee is confident that with interest rates remaining at a restrictive level for some time, consumer price inflation will return to within its target range of 1 to 3% per year.
In the following press conference, RBNZ Governor Orr noted that he is encouraged to see inflation fall, although it is still too high. He also noted that they are very comfortable with where the current interest rate is and that there was not much discussion of a rate cut; therefore, it was easy to reach consensus on the unchanged decision.
The Federal Reserve released the minutes of the July FOMC meeting. The key notes were:
Most participants said inflation risks could require further interest rate hikes.
A number of participants warned of the risks of accidentally tightening policy too much.
A couple of participants favoured holding interest rates steady at the July meeting.
Most participants said inflation was still 'unacceptably high,' and more evidence is needed to be confident that price pressures are diminishing.
They no longer see the economy entering a mild recession this year.
A number of participants said the labour market is still 'very tight,' although signs are emerging that labour demand is in better balance.
Key Data
Australian wage data for Q2 came in worse across the board:
The Wage Price Index Y/Y came in worse at 3.6% vs. 3.7% expected and 3.7% prior.
The Wage Price Index Q/Q came in worse at 0.8% vs. 1.0% expected and 0.8% prior.
The UK July Jobs Report showed another increase in wage growth, with the unemployment rate rising again.
The unemployment rate came in worse at 4.2% vs. 4.0% expected and 4.0% prior.
Average weekly earnings came in better at 8.2% vs. 7.3% and 7.2% prior (revised from 6.9%).
The US July retail sales came in better across the board:
Retail sales M/M came in better at 0.7% vs. 0.4% expected and 0.3% prior (revised from 0.2%).
Retail sales Y/Y came in better at 3.17% vs. 1.5% expected and 1.6% prior (revised from 1.49%).
The UK July CPI figures were mixed across the board:
CPI Y/Y came in expected at 6.8% and 7.9% prior.
CPI M/M came in worse at -0.4% vs. -0.5% expected and 0.1% prior.
Core CPI Y/Y came in better at 6.9% vs. 6.8% expected and 6.9% prior.
Core CPI M/M came in better at 0.3% vs. 0.2% expected and 0.2% prior.
The Australian Jobs Report figures came in worse across the board:
Employment change came in worse at -14.6K vs. 15.0K expected and 32.6K prior.
Full-time Employment came in worse at -24.2K vs. 39.3K prior.
The unemployment rate came in worse at 3.7% vs. 3.5% expected and 3.5% prior.
The US initial jobless claims came in better, while continuing claims came in worse.
Initial jobless claims came in better at 239K vs. 240K expected and 250K prior (revised from 248K).
Continuing jobless claims came in worse at 1716K vs. 1700K expected and 1684K prior.
Japan's CPI Y/Y came in better at 3.3% vs. 2.5% expected and 3.3% prior.
The UK retail sales came in worse across the board:
Retail sales M/M came in worse at -1.2% vs. -0.5% expected and 0.6% prior (revised from 0.7%).
Retail Sales Y/Y came in worse at -3.2% vs. -2.1% expected and -1.6% prior (revised from -1.0%).
Technicals
The US dollar had gained some ground against its major counterparts across the board this week.
AUDUSD 1W Chart
AUDUSD has broken its 2023 low at 0.64583 and is approaching its 2022 low at 0.61702. The symmetrical triangle on the 1W chart was broken to the downside, and if the 2022 low of 0.61702 is also broken, then the long-term target level will be the psychological level of 0.60000.
USDJPY 1W Chart
A strong start to the week for USDJPY as the pair broke the 145.073 resistance level and also broke 146 before finding resistance at 146.564. The market is now on a pullback and is trading back in the 145 area; 145.073 will most likely be support now.
EURUSD 1W Chart
EURUSD is approaching the bottom support line of the rising wedge. We are looking for swings with less momentum and for them to have lower highs and lower lows to show signs of possible reversal and break the wedge.
GBPUSD 1W Chart
GBPUSD's potential head and shoulders pattern is still forming on the 1W chart; the head and left shoulder have been formed, and the right shoulder is now forming very well. The market has now reached the 20 EMA support; therefore, the reversal of the bullish trend may come quicker than expected. The 1.26800 support has not had a close under it for 2 months, so for the potential reversal to occur, there must be a break and close under 1.26800.
The key focus for the upcoming trading week will be:
Wednesday: New Zealand Retail Sales, Global PMIs, Canada Retail Sales
Thursday: US Jobless Claims
We will be back with another Forex Weekly Recap report next week.
Best of luck for the upcoming trading week ahead. Trade safely and responsibly.
BluetonaFX
Forex Weekly Recap for 14–18 August, 2023:
Fundamentals
The Reserve Bank of Australia (RBA) released the minutes of the August 2023 policy meeting, where the central bank kept the interest rate unchanged at 4.1%. The key notes from the meeting were:
The board considered raising rates by 25 basis points, although they saw a more credible path back to the inflation target with cash rates at the current 4.1%.
The need for further hikes would depend on data and the assessment of risks.
The board agreed it was possible some further tightening might be needed.
Inflation is heading in the right direction, though service inflation is still too high.
The Federal Reserve's Kashkari noted the steady progress on inflation in the US due to the positive inflation readings but stated that inflation is still too high and that he remains wary of the risks of letting go too early, as they do not want to make the same mistakes as they did in the 19070s when they stopped hiking interest rates too early. He did also note, however, that at some point next year, the Federal Reserve may need to lower rates and that the economy is currently exceeding expectations.
The Reserve Bank of New Zealand (RBNZ) kept the interest rate unchanged at 5.5%, as expected. Key notes from their policy statement were:
New Zealand's economy is progressing as anticipated.
Headline inflation and inflation expectations have declined, but measures of core inflation are still too high.
The Committee is confident that with interest rates remaining at a restrictive level for some time, consumer price inflation will return to within its target range of 1 to 3% per year.
In the following press conference, RBNZ Governor Orr noted that he is encouraged to see inflation fall, although it is still too high. He also noted that they are very comfortable with where the current interest rate is and that there was not much discussion of a rate cut; therefore, it was easy to reach consensus on the unchanged decision.
The Federal Reserve released the minutes of the July FOMC meeting. The key notes were:
Most participants said inflation risks could require further interest rate hikes.
A number of participants warned of the risks of accidentally tightening policy too much.
A couple of participants favoured holding interest rates steady at the July meeting.
Most participants said inflation was still 'unacceptably high,' and more evidence is needed to be confident that price pressures are diminishing.
They no longer see the economy entering a mild recession this year.
A number of participants said the labour market is still 'very tight,' although signs are emerging that labour demand is in better balance.
Key Data
Australian wage data for Q2 came in worse across the board:
The Wage Price Index Y/Y came in worse at 3.6% vs. 3.7% expected and 3.7% prior.
The Wage Price Index Q/Q came in worse at 0.8% vs. 1.0% expected and 0.8% prior.
The UK July Jobs Report showed another increase in wage growth, with the unemployment rate rising again.
The unemployment rate came in worse at 4.2% vs. 4.0% expected and 4.0% prior.
Average weekly earnings came in better at 8.2% vs. 7.3% and 7.2% prior (revised from 6.9%).
The US July retail sales came in better across the board:
Retail sales M/M came in better at 0.7% vs. 0.4% expected and 0.3% prior (revised from 0.2%).
Retail sales Y/Y came in better at 3.17% vs. 1.5% expected and 1.6% prior (revised from 1.49%).
The UK July CPI figures were mixed across the board:
CPI Y/Y came in expected at 6.8% and 7.9% prior.
CPI M/M came in worse at -0.4% vs. -0.5% expected and 0.1% prior.
Core CPI Y/Y came in better at 6.9% vs. 6.8% expected and 6.9% prior.
Core CPI M/M came in better at 0.3% vs. 0.2% expected and 0.2% prior.
The Australian Jobs Report figures came in worse across the board:
Employment change came in worse at -14.6K vs. 15.0K expected and 32.6K prior.
Full-time Employment came in worse at -24.2K vs. 39.3K prior.
The unemployment rate came in worse at 3.7% vs. 3.5% expected and 3.5% prior.
The US initial jobless claims came in better, while continuing claims came in worse.
Initial jobless claims came in better at 239K vs. 240K expected and 250K prior (revised from 248K).
Continuing jobless claims came in worse at 1716K vs. 1700K expected and 1684K prior.
Japan's CPI Y/Y came in better at 3.3% vs. 2.5% expected and 3.3% prior.
The UK retail sales came in worse across the board:
Retail sales M/M came in worse at -1.2% vs. -0.5% expected and 0.6% prior (revised from 0.7%).
Retail Sales Y/Y came in worse at -3.2% vs. -2.1% expected and -1.6% prior (revised from -1.0%).
Technicals
The US dollar had gained some ground against its major counterparts across the board this week.
AUDUSD 1W Chart
USDJPY 1W Chart
EURUSD 1W Chart
GBPUSD 1W Chart
The key focus for the upcoming trading week will be:
Wednesday: New Zealand Retail Sales, Global PMIs, Canada Retail Sales
Thursday: US Jobless Claims
We will be back with another Forex Weekly Recap report next week.
Best of luck for the upcoming trading week ahead. Trade safely and responsibly.
BluetonaFX