Markets navigated safely through a news-light week in the midst of the holiday season. Equities rallied moderately, driven by the solid tech stock earnings that propped up the Nasdaq. By the end of the week, an additional positive catalyst was the announced Trump's meeting with Putin, driving the positive sentiment.
The Bank of England's rate decision was the biggest driver of FX volatility this week. As expected, the bank cut the interest rate by 25 basis points to 4%. However, as with the latest Federal Reserve, the vote went bumpier than expected.
It was the first time in the bank's board 28-year history that it took two rounds of votes to reach a decision, as the rate cut prevailed with a 5-4 vote.
“The path continues to be downward,” Governor Andrew Bailey told Reuters. “There is, however, genuine uncertainty now about the course of that direction of rates.”
This uncertainty is what floated the pound higher despite the rate cut, as the market interpreted it as a potential “higher for longer.” So far, in August, the pound is up around 2% against the dollar, nearly 1% against the euro, and has almost fully erased the early-month losses against the Japanese yen. Next week will bring a rate decision from the Reserve Bank of Australia, which is expected to cut by 25 bps. Meanwhile, the US will digest the latest CPI, PPI, and retail sales data.
Key News
- Tuesday: AUD - Interest Rate decision, USD - CPI
- Wednesday: AUD - Wage Price Index
- Thursday: AUD - Unemployment, GBP - GDP, USD - PPI
- Friday: USD - Retail Sales
Pairs In Focus
1. CHF JPY
After a brief period of yen strength, the franc has held support around 181.800, indicating a potential for a pullback. A daily close above last week's resistance around 183.300 would offer a possibility of a broader trend continuation.
CHF/JPY Daily chart, Source: TradingView
The medium-term goal is for the price to return toward the equilibrium at 185.05.
2.GBP SGD
The pund's newfound strength drove its recovery against numerous currencies, including Singapore's dollar. A key level to observe is 1.73800. A close above this level would indicate the market is fully reversing.
GBP/SGD Daily chart, Source: TradingView
The important resistance above is 1.74300, and the June high is around 1.75200.
Notes:
- AUD NZD: Remains within the range established in July, but has kept an overall bullish bias.
- AUD CAD: Remains in an established range between 0.88750 and 0.90. The next week is likely going to resolve this consolidation, owing to a central bank decision.
- AUD CHF: Rallied to resistance, which sits around 0.52800. This level, which used to be support in May, will have to hold if the price continues with the long-term bearish trend.
- AUD JPY: Staged a liquidity grab under 95.250 before turning higher. It might have one more attempt to breach the resistance around 97.
- AUD SGD: Remains in a range, as the latest pullback failed to break intermediate resistance around 0.83800.
- CAD JPY: Finished the pullback, finding support around 107. As long as that level holds, the price is more likely to continue higher than reverse the trend.
- EUR AUD: Failed to take out the previous swing high from July 22. So far, the support around 1.78240 has held, and should give clues for further movement.
- EUR/JPY: The minor pullback after a major bullish move looks to have stalled. The key support below the market is at 170.
- EUR NZD: Established a marginally higher high before pulling back to the weekly support. Overall trend remains bullish.
- GBP AUD: Once again, the support round 2.045 has held. It will likely test the 2.07 resistance now.
- GBP JPY: After a crash, the price quickly found support around 195 before decisively resuming the bullish momentum. Yet another test of the strong resistance at 199.700 is likely.
- GBP NZD: Broke above the 2.25 value line, indicating a possible next bullish leg up. The key resistance to watch is around 2.27.
Note: Any opinions expressed in this article are not to be considered investment advice and are solely those of the authors. Singapore Forex Club is not responsible for any financial decisions based on this article's contents. Readers may use this data for information and educational purposes only.
