Market Overview
- The US Dollar strengthened on Tuesday as the annualized headline CPI inflation rate reached 2.7% in June, reducing expectations of a Fed rate cut in September.
- The GBP/USD fell after US CPI showed rising price pressures, with the Pound Sterling down nearly 3% against the Greenback in July.
- The Dow Jones fell on Tuesday but remains within recent consolidation, as equities slid due to higher US CPI inflation and mixed large bank earnings.
- Gold prices slipped below $3,330 as the Consumer Price Index data reduced expectations of a near-term rate cut by the Federal Reserve.
Fundamental Analysis
- The US CPI rose to 2.7% YoY, the first significant increase in five months, while core inflation remained at 2.9%, supporting the Fed's cautious approach.
- Concerns about UK growth deepened as bets on two BoE rate cuts by year-end increased.
- China's GDP growth was solid at 5.2% y/y in Q2, but there are signs of softening. Investment growth slowed in June, particularly in housing investment.
- The US Dollar strengthened after the June CPI report, leading to reduced expectations of a Fed rate cut.
Technical Analysis
- EUR/USD: The pair fell on Tuesday as US CPI inflation rose. It is currently neutral to downward biased, with support levels at 1.3369 and 1.3300.
- GBP/USD: The pair extended its losses for four consecutive days after the US inflation report, trading below 1.3400.
- USD/JPY: Reached a new yearly high above 173.00 during the American trading session, driven by factors such as wide interest rate differentials, import-driven inflation, and political uncertainty in Japan.
- Gold (XAU/USD): Prices slipped below $3,330 as bullish momentum faded near prior triangle resistance. The technical analysis showed Gold trading defensively below $3,335, with a potential downside towards $3,228 and $3,200.
Conclusion
- The market is currently experiencing volatility due to rising inflation and mixed economic data.
- Investors are closely watching the Federal Reserve's actions and upcoming economic data releases for potential trading opportunities.
- Despite the recent downturn, there are still opportunities for savvy traders who can navigate the current market conditions.
