The Week Ahead – Stay the course – Orbex Forex Trading Blog

EURUSD rallies as ECB to keep hiking rates

The euro advances as the ECB is expected to maintain a hawkish stance. Even though inflation in the euro zone has been slashed by half from its peak of 10.6% last October, policymakers are convinced that it is still too soon to deserve a pat on the back, as consumer price growth is projected to remain high for the near future. While a 25bp hike in July seems to be a done deal, options remain open for September. With the US Fed about to deliver a final hike just before the ECB’s meeting, the rate differential would play in the single currency’s favour. The pair is on its way towards 1.1450 with 1.1000 as a fresh support.

USDJPY bounces as BoJ may stay dovish

The Japanese yen weakens as the BoJ may leave monetary policy unaltered. Even though inflation has exceeded its 2% target, Japan’s central bank is still reluctant to change its course, worrying about the sustainability of price growth which has been dependent on a never-ending ultra-loose policy. Governor Kazuo Ueda has reiterated his resolve to stay the course for the time being. However, given the market distortions, the upside risk for the yen would be if the BOJ tweaks its yield curve control and trims its huge bond buying. The greenback is recovering towards 145.00 and 137.50 is the closest support.

XAUUSD recovers as Fed may pause

Gold rises back as the US dollar licks its wound amid hopes that the Fed will stop hiking rates. Even the UK’s stubbornly high inflation has seen a surprise to the downside, prompting the most optimistic market participants to speculate that global disinflation has been engaged in a sustainable fashion. A peak in the Federal funds rate may ease pressure on the non-yielding metal and a tumbling dollar across the board would compound the bullish drive in bullion. Meanwhile, the safe haven feature of gold may also boost its appeal in high-rate and uncertain times. The price is bouncing towards 2080 with 1900 as a key support.

NAS 100 steadies over mixed quarterly results

The Nasdaq 100 pulls back over a slew of disappointing earnings reports from major tech names. Downbeat revenue and margins from Tesla to Netflix are a reminder of growing economic challenges consumers are facing in a high interest rate environment. Still, despite some doubt about valuations, the much-anticipated end of the Federal Reserve’s aggressive rate hike cycle combined with exuberance about the potential of artificial intelligence could continue to carry the index. As long as optimism is in the air, investors would see a correction as an opportunity to double down. The index is testing 16000 and 14700 is the first support.

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