Daily market analysis

Market awaits today’s FOMC meeting

July 26, 2022

Amidst the lowest intraday volatility and volume of the year and ahead of this week’s crucial Fed meeting, US stocks inched up on Monday amid a turbulent session. Large technology firms remained under bearish pressure as investors anticipate negative earnings report news. Despite recession fears, investors are awaiting the conclusion of Wednesday’s critical FOMC monetary policy meeting, which is likely to raise interest rates by 75 basis points. However, investors’ scepticism that the Federal Reserve can control inflation without triggering a recession could continue to dampen market sentiment. In the Eurozone, the German Ifo Business Climate Index sank to a two-year low of 88.6 in July, which was worse than expected and reflected the concern of a gas crisis among German businesses.

Monday was a positive day for the S&P 500 and Dow Jones Industrial Average as investors awaited earnings announcements from technology giants amid warnings from a hawkish Federal Reserve. The S&P 500 increased by 0.1% daily, while the Dow Jones Industrial Average increased by 0.3%. The Energy and Utilities sectors performed the best among all categories, advancing 3.71 % and 1.26%, respectively. Eight of eleven sectors remained in positive territory. The Nasdaq 100 fell the most on Monday with a loss of 0.5%, while the MSCI World index remained relatively unchanged.

Main Pairs Movement

On Monday, the US dollar fell below the 106.30 level, since it is largely anticipated that the Federal Reserve will hike interest rates by 75 basis points following its meeting on Wednesday. The DXY index fell the most on Monday, reaching a daily low of 106.2, before rebounding to surpass 106.6 during the US session. In addition to rate hikes, structural characteristics of the U.S. economy, particularly improved energy resilience, have propelled the dollar to multi-year highs.

GBP/USD increased by 0.37% on Monday, despite the US dollar’s weakness and the unpredictability of UK politics. At the start of the week, the cable pairs plummeted to a daily low of roughly 1.196, before gaining bullish momentum to surpass 1.208 during the late Asia session. Similarly, EUR/USD fell to a level of 1.018 at the start of yesterday and then rallied to a day high at 1.026. The pairings remain flat for the day as traders anticipate fresh hints, the US CB consumer confidence report for July and the FOMC meeting on Wednesday.

Gold began the week with a 0.46% loss, falling under intense selling pressure in late Asia and at the start of the US trading session when XAUUSD hit a daily low below the $1715 level. Awaiting the Fed’s interest rate policy decision, the price trend has now shifted to neutral. On Monday, WTI oil prices increased by 2.11% and reached almost $96.

Technical Analysis

XAUUSD(4-Hour Chart)

Gold initially attempted to rally early Monday, but turned around to show signs of weakness. Gold hovers around the $1,715 region during the American trading session. From the technical perspective, the intraday decline brings gold below the resistance of $1,722; the four-hour outlook turns downside following the trading pattern of the double-bottom formation. The RSI indicator has turned southward, suggesting that buyers are on the sideline and sellers are back in the market. If gold breaks below the midline of the Bollinger band, gold is likely to see further downward pressure and an acceleration of the downside. In order to regain positive traction, gold needs to climb above $1,722.

Resistance: 1722, 1748, 1769

Support: 1680.99

USDJPY (4-Hour Chart)

USDJPY turns upside as the US dollar rallied a bit during the trading session. From the technical aspect, the overall outlook of USDJPY is back to bullish after the pair trades within the ascending channel. The recovery frankly suggests that the corrective phase comes to an end. The acceptance above 136.52 would confirm the bullish stance of the pair. The upside is also supported by the RSI indicator, which turns upward, attracting some follow-through buyers back into the market. On the contrary, failure to stand above 136.52 and trade within the ascending channel would make the currency pair back in a bearish mood.

Resistance: 136.52, 137.06, 137.61

Support: 136.84, 134.75

EURUSD (4-Hour Chart)

EURUSD has gone back and forth during the course of sessions on Monday as markets continue to carefully monitor ahead of the FOMC meeting. Technically speaking, EURUSD shows that it keeps struggling to overcome the 20 SMA. The near-term outlook of EURUSD is neutral-to-bullish as the RSI slightly skews to the north while the MACD indicator tends to be bullish. The upside momentum remains limited if the pair cannot overcome the resistance of 1.0284, breaching the consolidation. On the flip side, if the EURUSD declines below the current support of 1.0205, then the outlook would turn bearish on the four-hour chart. Further price movement eyes on the FOMC meeting later this week.

Resistance: 1.0284, 1.0362

Support: 1.0284, 1.0109, 0.9952

Economic Data

CurrencyDataTime (GMT + 8)Forecast
USDCB Consumer Confidence (Jul)22:0097.2
USDNew Home Sales (Jun)22:00660K